Lands' End, Incorporated
LANDS' END, INC. (Form: 8-K, Received: 08/31/2017 06:41:21)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 31, 2017

LANDS' END, INC.
( Exact Name of Registrant as Specified in its Charter)

 
Delaware
 
001-09769
 
36-2512786
 
 
 
 
 
(State or Other Jurisdiction of
Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
1 Lands’ End Lane
Dodgeville, Wisconsin
 
53595
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (608) 935-9341
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (See General Instructions A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 2.02     Results of Operations and Financial Condition.

On August 31, 2017 , Lands’ End, Inc. (the “Company”) announced its financial results for its quarter ended July 28, 2017 . A copy of the Company’s press release containing this information is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.    

The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
 
Item 9.01    Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number
 
Description
99.1
 
Press Release of Lands’ End, Inc. dated August 31, 2017










SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LANDS' END, INC.
Date:
August 31, 2017
By:
/s/ James F. Gooch
 
 
 
James F. Gooch
 
 
 
Title: Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer
(Principal Financial Officer)







EXHIBIT INDEX
Exhibit No.
 
Description
99.1
 
Press Release of Lands’ End, Inc. dated August 31, 2017




Exhibit 99.1

LANDS' END ANNOUNCES SECOND QUARTER FISCAL 2017 RESULTS
DODGEVILLE, Wis., August 31, 2017 (GLOBE NEWSWIRE) - Lands' End, Inc. (NASDAQ:LE) today announced financial results for the second quarter ended July 28, 2017 .

Second Quarter Fiscal 2017 Highlights:

Net revenue for the second quarter was $302.2 million as compared to $292.0 million in the second quarter last year. Direct segment net revenue increased 5.5% to $259.9 million , as compared to the same period last year. Retail segment net revenue decreased 7.4% to $42.2 million , as compared to the same period last year, primarily due to fewer Lands' End Shops at Sears. Same store sales for the quarter increased 3.8% .

Gross margin was 44.4% as compared to 46.6% in the second quarter last year.

Net loss was $3.9 million , or $0.12 per diluted share, as compared to Net loss of $2.0 million , or $0.06 per diluted share, in the second quarter of fiscal 2016.

Adjusted EBITDA (1) was $6.8 million compared to $7.3 million in the second quarter of fiscal 2016.

Jerome S. Griffith, Chief Executive Officer, stated, "We are pleased with the continued progress that we made during the second quarter, as we once again drove positive results across a number of key metrics. Performance in our U.S. consumer business improved, with double digit increases in our U.S. eCommerce sales, growth in our customer files, and positive same store sales in our retail segment."

Mr. Griffith continued, "As we look ahead, we are focused on further enhancing our assortment, ensuring that we are delivering the comfort, fit, fashion, and function that our customers are looking for, all at a great value. In addition, we are working to better leverage and analyze our customer data to ensure that we are best engaging with our consumers through both our merchandise and marketing initiatives, as well as through a reimagined and enhanced omni-channel shopping experience. Finally, we are focused on enhancing our inventory management in order to better position us to deliver a constant flow of newness and more relevant product. Overall, we are pleased with the progress that we continue to make in the business, and believe that we remain well-positioned to drive growth over the long-term."
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $177.0 million on July 28, 2017 , compared to $210.7 million on July 29, 2016 . Net cash used in operations was $13.2 million for the 26 weeks ended July 28, 2017 , compared to net cash provided by operations of $2.1 million for the same period last year.
Inventory was $370.5 million as of July 28, 2017 , and $354.7 million as of July 29, 2016 .
The Company had $164.6 million of availability under its asset-based senior secured credit facility and had $488.1 million of Long-term debt, net as of July 28, 2017 .
Conference Call
The company will host a conference call on Thursday, August 31, 2017 , at 8:30 a.m. ET to review its second quarter financial results and related matters. The call may be accessed through the Investor Relations section of the Company's website at http://investors.landsend.com .
About Lands' End, Inc.
Lands' End, Inc. (NASDAQ:LE) is a leading multi-channel retailer of casual clothing, accessories, footwear and home products. We offer products through catalogs, online at www.landsend.com and affiliated specialty and international websites, and through retail locations, primarily at Lands' End Shops at Sears® and standalone Lands' End Inlet® Stores. We are a classic American lifestyle brand with a passion for quality, legendary service and real value, and seek to deliver timeless style for women, men, kids and the home.



Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements about our initiatives, including enhancing our product assortment, addressing customer preferences for comfort, fit, fashion, function and value, use of customer data to engage in better marketing and an improved shopping experience, and enhancing inventory management to deliver newness and relevant product, and expectations of future growth over the long-term. All statements other than statements of historical fact, including without limitation, those with respect to the Company's goals, plans, expectations and strategies set forth herein are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: our ability to offer merchandise and services that customers want to purchase; changes in customer preference from our branded merchandise; customers' use of our digital platform, including customer acceptance of our efforts to enhance our e-commerce websites; customer response to our marketing efforts across all types of media; our maintenance of a robust customer list; our dependence on information technology and a failure of information technology systems, including with respect to our e-commerce operations, or an inability to upgrade or adapt our systems; the success of our ERP implementation; fluctuations and increases in costs of raw materials; impairment of our relationships with our vendors; our failure to maintain the security of customer, employee or company information; our failure to compete effectively in the apparel industry; the performance of our “store within a store” business; if Sears Holdings Corporation sells or disposes of its retail stores, including pursuant to the recapture rights granted to Seritage Growth Properties, and other parties or if its retail business does not attract customers or does not adequately provide services to the Lands’ End Shops at Sears; legal, regulatory, economic and political risks associated with international trade and those markets in which we conduct business and source our merchandise; our failure to protect or preserve the image of our brands and our intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide us with services in connection with certain aspects of our business to perform their obligations; our failure to timely and effectively obtain shipments of products from our vendors and deliver merchandise to our customers; reliance on promotions and markdowns to encourage customer purchases; our failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the seasonal nature of our business; the adverse effect on our reputation if our independent vendors do not use ethical business practices or comply with applicable laws and regulations; assessments for additional state taxes; incurrence of charges due to impairment of goodwill, other intangible assets and long-lived assets; the impact on our business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; the impact of increased costs due to a decrease in our purchasing power following our separation from Sears Holdings (“Separation”) and other losses of benefits associated with being a subsidiary of Sears Holdings; the failure of Sears Holdings or its subsidiaries to perform under various transaction agreements or our failure to have necessary systems and services in place when certain of the transaction agreements expire; our agreements related to the Separation and certain agreements related to our continuing relationship with Sears Holdings were negotiated while we were a subsidiary of Sears Holdings and we may have received better terms from an unaffiliated third party; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement; the ability of our principal shareholders to exert substantial influence over us; adverse effects of the Separation on our business; potential liabilities under fraudulent conveyance and transfer laws and legal capital requirements; and other risks, uncertainties and factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended January 27, 2017. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.

CONTACTS:
Lands' End, Inc.
James Gooch
Chief Operating Officer and Chief Financial Officer
(608) 935-9341

Investor Relations:
ICR, Inc.



Jean Fontana
(646) 277-1214
Jean.Fontana@icrinc.com






-Financial Tables Follow-





LANDS’ END, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
 
July 28, 2017
 
July 29, 2016
 
January 27, 2017 *
ASSETS
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
176,955

 
$
210,736

 
$
213,108

Restricted cash
 
3,300

 
3,300

 
3,300

Accounts receivable, net
 
24,632

 
29,287

 
39,284

Inventories, net
 
370,470

 
354,739

 
325,314

Prepaid expenses and other current assets
 
36,216

 
31,781

 
26,394

Total current assets
 
611,573

 
629,843

 
607,400

Property and equipment, net
 
126,825

 
112,682

 
122,836

Goodwill
 
110,000

 
110,000

 
110,000

Intangible asset, net
 
257,000

 
430,000

 
257,000

Other assets
 
17,007

 
15,913

 
17,155

TOTAL ASSETS
 
$
1,122,405

 
$
1,298,438

 
$
1,114,391

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Accounts payable
 
$
181,685

 
$
174,940

 
$
162,408

Other current liabilities
 
85,415

 
82,212

 
86,446

Total current liabilities
 
267,100

 
257,152

 
248,854

Long-term debt, net
 
488,146

 
491,941

 
490,043

Long-term deferred tax liabilities
 
91,015

 
155,451

 
90,467

Other liabilities
 
14,144

 
16,539

 
13,615

TOTAL LIABILITIES
 
860,405

 
921,083

 
842,979

Commitments and contingencies
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Common stock, par value $0.01- authorized: 480,000,000 shares; issued and outstanding: 32,087,532, 32,029,359 and 32,029,359, respectively
 
320

 
320

 
320

Additional paid-in capital
 
345,139

 
345,598

 
343,971

Retained (deficit) earnings
 
(72,172
)
 
41,590

 
(60,453
)
Accumulated other comprehensive loss
 
(11,287
)
 
(10,153
)
 
(12,426
)
Total stockholders’ equity
 
262,000

 
377,355

 
271,412

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,122,405

 
$
1,298,438

 
$
1,114,391









* Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 27, 2017 .



LANDS’ END, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
13 Weeks Ended
 
26 weeks ended
(in thousands, except per share data)
 
July 28, 2017
 
July 29, 2016
 
July 28, 2017
 
July 29, 2016
Net revenue
 
$
302,190

 
$
292,010

 
$
570,555

 
$
565,443

Cost of sales (excluding depreciation and amortization)
 
168,025

 
155,858

 
313,748

 
299,621

Gross profit
 
134,165

 
136,152

 
256,807

 
265,822

 
 
 
 
 
 
 
 
 
Selling and administrative
 
127,336

 
128,892

 
248,682

 
257,926

Depreciation and amortization
 
6,175

 
4,488

 
12,683

 
8,624

Other operating expense, net
 
480

 
60

 
1,988

 
46

Operating income (loss)
 
174

 
2,712

 
(6,546
)
 
(774
)
Interest expense
 
6,167

 
6,174

 
12,292

 
12,344

Other income, net
 
(494
)
 
(528
)
 
(1,236
)
 
(981
)
Loss before income taxes
 
(5,499
)
 
(2,934
)
 
(17,602
)
 
(12,137
)
Income tax benefit
 
(1,619
)
 
(954
)
 
(5,883
)
 
(4,398
)
NET LOSS
 
$
(3,880
)
 
$
(1,980
)
 
$
(11,719
)
 
$
(7,739
)
NET LOSS PER COMMON SHARE
 
 
 
 
 
 
 
 
Basic:
 
$
(0.12
)
 
$
(0.06
)
 
$
(0.37
)
 
$
(0.24
)
Diluted:
 
$
(0.12
)
 
$
(0.06
)
 
$
(0.37
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
 
32,079

 
32,024

 
32,054

 
32,013

Diluted weighted average common shares outstanding
 
32,079

 
32,024

 
32,054

 
32,013






 

Use and Definition of Non-GAAP Financial Measures
(1) Adjusted EBITDA - In addition to our Net income, for purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), which is adjusted to exclude certain significant items as set forth below.
Our management uses Adjusted EBITDA to evaluate the operating performance of our business, as well as for executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and is useful to investors, because:
EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax costs or benefits.
Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations.
Transfer of corporate functions - severance associated with a transition of certain corporate activities from our New York office to our Dodgeville headquarters.
Gain or loss on the sale of property and equipment - management considers the gains or losses on disposal of assets to result from investing decisions rather than ongoing operations.

Reconciliation of Non-GAAP Financial Information to GAAP
(Unaudited)


 
 
13 Weeks Ended
 
26 weeks ended
 
 
July 28, 2017
 
July 29, 2016
 
July 28, 2017
 
July 29, 2016
(in thousands)
 
$’s
 
% of Net revenue
 
$’s
 
% of Net revenue
 
$’s
 
% of Net revenue
 
$’s
 
% of Net revenue
NET LOSS
 
$
(3,880
)
 
(1.3
)%
 
$
(1,980
)
 
(0.7
)%
 
$
(11,719
)
 
(2.1
)%
 
$
(7,739
)
 
(1.4
)%
Income tax benefit
 
(1,619
)
 
(0.5
)%
 
(954
)
 
(0.3
)%
 
(5,883
)
 
(1.0
)%
 
(4,398
)
 
(0.8
)%
Other income, net
 
(494
)
 
(0.2
)%
 
(528
)
 
(0.2
)%
 
(1,236
)
 
(0.2
)%
 
(981
)
 
(0.2
)%
Interest expense
 
6,167

 
2.0
 %
 
6,174

 
2.1
 %
 
12,292

 
2.2
 %
 
12,344

 
2.2
 %
Operating income (loss)
 
174

 
0.1
 %
 
2,712

 
0.9
 %
 
(6,546
)
 
(1.1
)%
 
(774
)
 
(0.1
)%
Depreciation and amortization
 
6,175

 
2.0
 %
 
4,488

 
1.5
 %
 
12,683

 
2.2
 %
 
8,624

 
1.5
 %
Transfer of corporate functions
 
480

 
0.2
 %
 

 
 %
 
1,926

 
0.3
 %
 

 
 %
Loss on disposal of property and equipment
 

 
 %
 
60

 
 %
 
62

 
 %
 
46

 
 %
Adjusted EBITDA (1)
 
$
6,829

 
2.3
 %
 
$
7,260

 
2.5
 %
 
$
8,125

 
1.4
 %
 
$
7,896

 
1.4
 %





LANDS’ END, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
26 Weeks Ended
(in thousands)
 
July 28, 2017
 
July 29, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net loss
 
$
(11,719
)
 
$
(7,739
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
 
Depreciation and amortization
 
12,683

 
8,624

Amortization of debt issuance costs
 
856

 
856

Loss on disposal of property and equipment
 
62

 
46

Stock-based compensation
 
1,800

 
1,752

Deferred income taxes
 
(88
)
 
(1,387
)
Change in operating assets and liabilities:
 
 
 
 
Inventories
 
(43,493
)
 
(25,983
)
Accounts payable
 
22,434

 
34,472

Other operating assets
 
5,603

 
(4,015
)
Other operating liabilities
 
(1,333
)
 
(4,552
)
Net cash (used in) provided by operating activities
 
(13,195
)
 
2,074

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Proceeds from sale of property and equipment
 

 
44

Purchases of property and equipment
 
(20,223
)
 
(18,017
)
Net cash used in investing activities
 
(20,223
)
 
(17,973
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Payments on term loan facility
 
(2,575
)
 
(2,575
)
Payments of employee withholding taxes on share-based compensation
 
(629
)
 
(396
)
Net cash used in financing activities
 
(3,204
)
 
(2,971
)
Effects of exchange rate changes on cash
 
469

 
1,238

NET DECREASE IN CASH AND CASH EQUIVALENTS
 
(36,153
)
 
(17,632
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
 
213,108

 
228,368

CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
176,955

 
$
210,736

SUPPLEMENTAL CASH FLOW DATA
 
 
 
 
Unpaid liability to acquire property and equipment
 
$
4,438

 
$
2,297

Income taxes paid, net of refunds
 
$
3,082

 
$
3,067

Interest paid
 
$
11,257

 
$
11,291






Financial information by segment is presented in the following tables for the 13 Weeks Ended and 26 Weeks Ended July 28, 2017 , and July 29, 2016 .

 
 
13 Weeks Ended
 
26 weeks ended
(in thousands)
 
July 28, 2017
 
July 29, 2016
 
July 28, 2017
 
July 29, 2016
Net revenue:
 
 
 
 
 
 
 
 
Direct
 
$
259,938

 
$
246,395

 
$
488,228

 
$
478,580

Retail
 
42,166

 
45,521

 
82,213

 
86,737

Corporate / other
 
86

 
94

 
114

 
126

Total net revenue
 
$
302,190

 
$
292,010

 
$
570,555

 
$
565,443


 
 
13 Weeks Ended
 
26 weeks ended
(in thousands)
 
July 28, 2017
 
July 29, 2016
 
July 28, 2017
 
July 29, 2016
Adjusted EBITDA (1) :
 
 
 
 
 
 
 
 
Direct
 
$
13,080

 
$
14,780

 
$
24,918

 
$
27,612

Retail
 
1,773

 
450

 
(1,402
)
 
(3,480
)
Corporate / other
 
(8,024
)
 
(7,970
)
 
(15,391
)
 
(16,236
)
Total Adjusted EBITDA (1)
 
$
6,829

 
$
7,260

 
$
8,125

 
$
7,896