Document



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 2, 2019

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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.01 per share
LE
The NASDAQ Stock Market LLC






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).
 
Emerging growth company    ¨

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 September 5, 2019, Lands’ End, Inc. (the “Company”) announced its financial results for its quarter ended August 2, 2019. 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
 
Press Release of Lands’ End, Inc. dated September 5, 2019










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:
September 5, 2019
By:
/s/ James F. Gooch
 
 
 
James F. Gooch
 
 
 
Title: Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer
(Principal Financial Officer)






Exhibit
Exhibit 99.1

LANDS' END ANNOUNCES SECOND QUARTER FISCAL 2019 RESULTS

Exceeds Revenue and EPS guidance
Global eCommerce Revenue Increases 7.3%
Comparable Sales for U.S. Company Operated Stores Rises 7.5%
Continues to Execute Strategic Initiatives to Deliver Long-Term Revenue and EBITDA Growth

DODGEVILLE, Wis., September 5, 2019 (GLOBE NEWSWIRE) - Lands' End, Inc. (NASDAQ:LE) today announced financial results for the Second Quarter ended August 2, 2019.

Net revenue for the second quarter decreased 3.1% to $298.3 million as compared to the same period last year reflecting 110 fewer Lands’ End Shops at Sears, which resulted in a net revenue decline from Sears operations of $19.9 million. Excluding the impact from the Delta Air Lines launch last year and Sears operations, revenue would have increased by 5.5%.

Global eCommerce revenue growth of 7.3% was driven by greater demand for key items and a high-teens increase in new customer acquisitions.
Same store sales for U.S. Company operated stores increased by 7.5%.

Gross margin was 43.3% as compared to 44.4% in the second quarter last year.

Selling and administrative expenses were 41.0% of total net revenue compared to 41.9% in the second quarter last year.

Net loss was $3.0 million, or $0.09 loss per diluted share, as compared to Net loss of $5.3 million, or $0.16 loss per diluted share, in the second quarter of fiscal 2018.

Adjusted EBITDA(1) was $6.8 million compared to $7.7 million in the second quarter of fiscal 2018.

Earlier today, announced the opening of a Lands’ End buying office in Hong Kong with the transition plan to be completed by the Spring 2020 season.

Remain on track to launch American Airlines program in the fourth quarter.

Jerome S. Griffith, Chief Executive Officer and President, stated, “We were pleased to have delivered sales and net income above our expectations and adjusted EBITDA at the high end of our range, illustrating the strong progress we are making across our strategic initiatives. Product continued to resonate with consumers as we leverage data analytics to align our key item offerings with consumer demand. We believe our enhancements to our product offering combined with our marketing efforts are yielding overall growth in our customer file, which reflects high-teens growth in new customers. We are also very pleased with our retail expansion strategy with U.S. stores operating at or above expectations. Looking ahead, we remain committed to the continued advancements of our growth strategies centered on getting the product right, operating as a digitally-led company, executing a uni-channel strategy and improving business processes and infrastructure. We believe the execution of these strategies positions us to achieve double-digit EBITDA growth annually beginning in fiscal 2020 and puts us on track to achieve our stated long-term financial objectives.”
  
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $82.6 million as of August 2, 2019, compared to $194.4 million as of August 3, 2018 primarily due to the $100 million voluntary prepayment of long term debt. Net cash provided by operations was $17.0 million for the 26 weeks ended August 2, 2019, compared to net cash provided by operations of $24.8 million for the same period last year.




Inventory was $405.8 million as of August 2, 2019, and $349.6 million as of August 3, 2018. This increase was primarily driven by accelerated shipments prior to the implementation of anticipated tariffs.

As of August 2, 2019, the Company had $165.5 million of availability under its asset-based senior secured credit facility and had $380.6 million of Long-term debt, net, compared to long-term debt, net, of $484.4 million for the same period last year.

Fiscal 2019 Outlook

Jim Gooch, Chief Operating Officer and Chief Financial Officer, stated, “We are pleased to see the progress we are making to deliver better than expected financial results. Based on our strong performance in the first half of this year and confidence that our efforts will continue to yield results, we are raising our full year EPS outlook.”

For the third quarter of fiscal 2019 the Company expects:

Net revenue to be between $345 million and $355 million.
Net income to be between $1.5 million and $4.0 million, and diluted earnings per share to be between $0.05 and $0.12.
Adjusted EBITDA(1) in the range of $17.0 to $20.0 million.

For fiscal 2019 the Company expects:

Net revenue to be between $1.45 billion and $1.50 billion.
Net income to be between $12.0 million and $17.0 million, and diluted earnings per share to be between $0.37 and $0.52.
Adjusted EBITDA(1) in the range of $70.0 million to $80.0 million.
Capital Expenditures of approximately $40 million.

Conference Call

The Company will host a conference call on September 5, 2019, at 8:30 a.m. ET to review its second quarter fiscal 2019 financial results. The call may be accessed through the Investor Relations section of the Company's website at http://investors.landsend.com or by dialing (866) 753-5836.

About Lands' End, Inc.

Lands' End, Inc. (NASDAQ:LE) is a leading multi-channel retailer of casual clothing, accessories, and footwear, as well as home products. Lands' End offers products online at www.landsend.com, on international websites, on third-party online marketplaces, and through retail locations. We are a classic American lifestyle brand with a passion for delivering quality products, legendary service and real value to our customers and we 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 regarding the Company’s expectations with respect to Net revenue, Net income, earnings per share and Adjusted EBITDA for the third quarter of fiscal 2019 and Net revenue, Net income, earnings per share, Adjusted EBITDA and Capital Expenditures for the full year of fiscal 2019; expectations as to and assessment of progress toward its long-term revenue and EBITDA margin objectives, and its expected EBITDA growth rate starting in 2020; expectations as to the timing and benefits of opening its own Hong Kong buying office and transition from prior operation; expectations as to the American Airlines launch; and the continued progress and results of the execution of our strategic growth initiatives of focusing on our product, operating as a digitally-led company, executing our uni-channel distribution strategy and improving our business processes and infrastructure. The following



important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: we may be unsuccessful in implementing our strategic initiatives, or our initiatives may not have their desired impact on our business; our ability to offer merchandise and services that customers want to purchase; changes in customer preference from our branded merchandise; our results may be materially impacted if tariffs on imports from China increase and we are unable to offset the increased costs from current or future tariffs through pricing negotiations with our vendor base, moving production out of China, passing through a portion of the cost increases to the customer, or other savings opportunities; 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 retail store strategy may be unsuccessful and we may be unable to open retail stores in locations and on terms that are acceptable to us; 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 and Enterprise Order Management systems implementations; 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; if Sears Holdings Corporation or its successor sells or disposes of its retail stores, including as part of the Chapter 11 proceedings instituted by Sears Holdings Corporation on October 15, 2018 or 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 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 failure of Sears Holdings or its subsidiaries or their successors to perform under various agreements or our failure to have necessary systems and services in place when such agreements expire; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement in connection with our separation from Sears Holdings; the ability of our principal shareholders to exert substantial influence over us; 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 February 1, 2019, and Quarterly Reports on Form 10-Q. 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)
 
August 2, 2019
 
August 3, 2018
 
February 1, 2019*
ASSETS
 
 
 

 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
82,616

 
$
194,391

 
$
193,405

Restricted cash
 
1,826

 
1,953

 
1,948

Accounts receivable, net
 
24,632

 
25,925

 
34,549

Inventories, net
 
405,793

 
349,597

 
321,905

Prepaid expenses and other current assets
 
39,391

 
40,967

 
36,574

Total current assets
 
554,258

 
612,833

 
588,381

Property and equipment, net
 
153,933

 
142,261

 
149,894

Operating lease right-of-use asset
 
28,980

 

 

Goodwill
 
110,000

 
110,000

 
110,000

Intangible asset, net
 
257,000

 
257,000

 
257,000

Other assets
 
5,333

 
8,349

 
5,636

TOTAL ASSETS
 
$
1,109,504

 
$
1,130,443

 
$
1,110,911

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Accounts payable
 
$
230,158

 
$
186,207

 
$
123,827

Lease liability - current
 
6,997

 

 

Other current liabilities
 
92,957

 
91,747

 
117,424

Total current liabilities
 
330,112

 
277,954

 
241,251

Long-term debt, net
 
380,555

 
484,350

 
482,453

Lease liability - long-term
 
26,911

 

 

Long-term deferred tax liabilities
 
55,516

 
58,420

 
58,670

Other liabilities
 
4,145

 
10,494

 
5,826

TOTAL LIABILITIES
 
797,239

 
831,218

 
788,200

Commitments and contingencies
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Common stock, par value $0.01 authorized: 480,000,000 shares; issued and outstanding: 32,369,978, 32,212,290 and 32,220,080, respectively
 
324

 
320

 
320

Additional paid-in capital
 
356,324

 
349,338

 
352,733

Accumulated deficit
 
(28,732
)
 
(36,665
)
 
(17,159
)
Accumulated other comprehensive loss
 
(15,651
)
 
(13,768
)
 
(13,183
)
Total stockholders’ equity
 
312,265

 
299,225

 
322,711

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,109,504

 
$
1,130,443

 
$
1,110,911


*Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2019.



LANDS’ END, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
13 Weeks Ended
 
26 Weeks Ended
(in thousands, except per share data)
 
August 2, 2019
 
August 3, 2018
 
August 2, 2019
 
August 3, 2018
Net revenue
 
$
298,267

 
$
307,945

 
$
560,700

 
$
607,770

Cost of sales (excluding depreciation and amortization)
 
169,182

 
171,179

 
311,741

 
337,979

Gross profit
 
129,085

 
136,766

 
248,959

 
269,791

 
 
 
 
 
 
 
 
 
Selling and administrative
 
122,260

 
129,041

 
239,104

 
253,041

Depreciation and amortization
 
7,408

 
6,897

 
15,026

 
13,058

Other operating (income) expense, net
 
(22
)
 
(47
)
 
126

 
290

Operating (loss) income
 
(561
)
 
875

 
(5,297
)
 
3,402

Interest expense
 
6,235

 
7,001

 
14,069

 
13,913

Other (income) expense, net
 
(608
)
 
(412
)
 
(1,475
)
 
3,452

Loss before income taxes
 
(6,188
)
 
(5,714
)
 
(17,891
)
 
(13,963
)
Income tax benefit
 
(3,174
)
 
(429
)
 
(8,059
)
 
(6,048
)
NET LOSS
 
$
(3,014
)
 
$
(5,285
)
 
$
(9,832
)
 
$
(7,915
)
NET LOSS PER COMMON SHARE
 
 
 
 
 
 
 
 
Basic:
 
$
(0.09
)
 
$
(0.16
)
 
$
(0.30
)
 
$
(0.25
)
Diluted:
 
$
(0.09
)
 
$
(0.16
)
 
$
(0.30
)
 
$
(0.25
)
 
 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
 
32,368

 
32,212

 
32,314

 
32,168

Diluted weighted average common shares outstanding
 
32,368

 
32,212

 
32,314

 
32,168




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 for comparable periods, and as an executive compensation metric. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. 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

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 the following items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations.
Gain or loss on property and equipment - management considers the gains or losses on asset valuation, including impairments, to result from investing decisions rather than ongoing operations.

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

 
 
13 Weeks Ended
 
26 Weeks Ended
 
 
August 2, 2019
 
August 3, 2018
 
August 2, 2019
 
August 3, 2018
(in thousands)
 
$’s
 
% of Net revenue
 
$’s
 
% of Net revenue
 
$’s
 
% of Net revenue
 
$’s
 
% of Net revenue
NET LOSS
 
$
(3,014
)
 
(1.0
)%
 
$
(5,285
)
 
(1.7
)%
 
$
(9,832
)
 
(1.8
)%
 
$
(7,915
)
 
(1.3
)%
Income tax benefit
 
(3,174
)
 
(1.1
)%
 
(429
)
 
(0.1
)%
 
(8,059
)
 
(1.4
)%
 
(6,048
)
 
(1.0
)%
Other (income) expense, net
 
(608
)
 
(0.2
)%
 
(412
)
 
(0.1
)%
 
(1,475
)
 
(0.3
)%
 
3,452

 
0.6
 %
Interest expense
 
6,235

 
2.1
 %
 
7,001

 
2.3
 %
 
14,069

 
2.5
 %
 
13,913

 
2.3
 %
Operating (loss) income
 
(561
)
 
(0.2
)%
 
875

 
0.3
 %
 
(5,297
)
 
(0.9
)%
 
3,402

 
0.6
 %
Depreciation and amortization
 
7,408

 
2.5
 %
 
6,897

 
2.2
 %
 
15,026

 
2.7
 %
 
13,058

 
2.1
 %
Other Operating Expense
 
0

 
 %
 
2

 
 %
 
207

 
 %
 
184

 
 %
(Gain) loss on property and equipment
 
(22
)
 
 %
 
(49
)
 
 %
 
(81
)
 
 %
 
106

 
 %
Adjusted EBITDA (1)
 
$
6,825

 
2.3
 %
 
$
7,725

 
2.5
 %
 
$
9,855

 
1.8
 %
 
$
16,750

 
2.8
 %

Fiscal 2019 Guidance
 
13 Weeks Ended
 
52 Weeks Ended
(in millions)
 
November 1, 2019
 
January 31, 2020
Net (loss) income
 
$1.5
-
$4
 
$12
-
$17
Depreciation, interest, other income, taxes and other adjustments
 
15.5
-
16
 
58
-
63
Adjusted EBITDA (1)
 
$17
-
$20
 
$70
-
$80




LANDS’ END, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
26 Weeks Ended
(in thousands)
 
August 2, 2019
 
August 3, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net loss
 
$
(9,832
)
 
$
(7,915
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
15,026

 
13,058

(Gain) loss on property and equipment
 
(141
)
 
284

Amortization of debt issuance costs
 
864

 
965

Stock-based compensation
 
4,303

 
2,696

Noncash lease impacts
 
830

 

Deferred income taxes
 
(1,877
)
 
128

Change in operating assets and liabilities:
 
 
 
 
Inventories
 
(86,350
)
 
(20,223
)
Accounts payable
 
111,427

 
33,678

Other operating assets
 
6,358

 
18,545

Other operating liabilities
 
(23,570
)
 
(16,384
)
Net cash provided by operating activities
 
17,038

 
24,832

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Purchases of property and equipment
 
(24,843
)
 
(22,203
)
Net cash used in investing activities
 
(24,843
)
 
(22,203
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Payments on term loan facility
 
(102,575
)
 
(2,575
)
Payments of employee withholding taxes on share-based compensation
 
(708
)
 
(533
)
Net cash used in financing activities
 
(103,283
)
 
(3,108
)
Effects of exchange rate changes on cash, cash equivalents and restricted cash
 
177

 
(1,114
)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
(110,911
)
 
(1,593
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD
 
195,353

 
197,937

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
 
$
84,442

 
$
196,344

SUPPLEMENTAL CASH FLOW DATA
 
 
 
 
        Unpaid liability to acquire property and equipment
 
$
5,222

 
$
4,990

        Income taxes paid, net of refunds
 
$
3,036

 
$
1,349

        Interest paid
 
$
12,702

 
$
12,938






Net revenue is presented by product channel in the following tables for the 13 Weeks Ended and 26 weeks ended August 2, 2019, and August 3, 2018.

 
 
13 Weeks Ended
 
26 Weeks Ended
(in thousands)
 
August 2, 2019
 
August 3, 2018
 
August 2, 2019
 
August 3, 2018
eCommerce
 
$
218,651

 
$
203,796

 
$
427,552

 
$
402,565

Outfitters
 
65,452

 
72,806

 
108,536

 
147,410

Retail
 
14,164

 
31,343

 
24,612

 
57,795

Total net revenue
 
$
298,267

 
$
307,945

 
$
560,700

 
$
607,770