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): June 2, 2020

LANDS' END, INC.

(Exact Name of Registrant as Specified in its Charter)

 

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):

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

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 2.02Results of Operations and Financial Condition.

 

On June 2, 2020, Lands’ End, Inc. (the “Company”) announced its preliminary financial results for its first quarter ended May 1, 2020. 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 8.01Other Events.

 

The Company is also filing this Current Report on Form 8-K pursuant to the Securities and Exchange Commission (the “SEC”) Order Under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, SEC Release No. 34-88465, dated March 25, 2020 (the “Order”).

 

Delay in Filing 10-Q

 

In reliance on the Order, the Company will delay the filing of its Quarterly Report on Form 10-Q for the quarter ended May 1, 2020 (the “Quarterly Report”), originally due on June 10, 2020. The Company anticipates filing the Quarterly Report with the SEC no later than July 24, 2020.

 

The Company requires additional time to finalize its Quarterly Report due to circumstances related to the coronavirus disease 2019 (COVID-19) pandemic. Areas such as impairment review of goodwill and long-lived assets, inventory reserves, lease accounting, other contingencies and accounting for the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) are complexities due to the impact of the COVID-19 pandemic that the Company anticipates reviewing further prior to the finalization of the financial statements.  Among other factors, the furlough of a majority of its corporate staff through May 26, 2020 and the “Safer at Home” order that was in effect for the State of Wisconsin from March 26, 2020 to May 14, 2020 materially impacted the Company’s employees, including employees who assist in preparing the Quarterly Report.  In addition, since mid-March, management of the Company has been focused on responding to the pandemic and implementing programs and changes at the Company, including those regarding furloughs, workforce reductions, inventory management, liquidity management and financial flexibility, reductions in capital investment, store closures and re-opening plans, and the safety and wellness of employees in operations that have remained operational on its campus (primarily its distribution and customer care centers).  

 

Risk Factors

 

In addition, the Company is supplementing the risk factors previously disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 with the following risk factors, which should be read in conjunction with the other risk factors presented in the Annual Report on Form 10-K.

 

Risks Related to Our Financial Performance and Condition

 

The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic have significantly disrupted and will continue to disrupt our business, which has and could continue to materially affect our financial condition and operating results for an extended period of time.

 

The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic, as well as our responses to the outbreak, have significantly disrupted and will continue to disrupt our business. In the United States and other regions, social distancing restrictions have been enacted, and in many areas, individuals are restricted from non-essential movements outside of their homes. In response to the COVID-19 pandemic and these changing conditions, we temporarily closed our 26 retail stores starting March 16, 2020.  Once these locations are allowed to and we deem it appropriate to reopen, which we anticipate will occur starting in June 2020, we will be operating under restrictions designed to preserve the safety and wellness of our employees and our retail customers, which could decrease customer traffic and adversely impact sales.

 

Our operations could be further disrupted if any of our corporate staff or distribution center personnel is diagnosed with COVID-19, which could require the quarantine of some or all of the employees who come into contact with the infected individual and the temporary closure of our facilities.  During the last week of May, the Company learned that several of its employees had tested positive for COVID-19.   If a significant percentage of our workforce is unable to work, due to COVID-19 illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations. Our vendors, manufacturers and

 

---

 

other suppliers could be similarly adversely impacted by the COVID-19 outbreak, and our operations and sales could be adversely impacted by such supply chain interruptions.

 

Additionally, an outbreak or perceived outbreak of COVID-19 connected to one or more of our offices, distribution facilities or retail locations could cause negative publicity directed at our brand and cause customers to avoid our products or retail locations. We cannot predict how long the pandemic will last or whether it will reoccur, what additional restrictions may be enacted, or if individuals will be comfortable visiting our stores during or following social distancing protocols. Similarly, we cannot predict the effects the COVID-19 pandemic will have on the apparel or retail industry as a whole. We expect that as retail locations reopen, across the industry, we will face a highly promotional environment, as our competitors aggressively price their products in order to raise cash and clear excess inventory.  All of these factors could materially adversely affect our financial performance.

 

Our efforts to address our rent obligations for our retail locations during the COVID-19 pandemic are ongoing, and our ability to obtain rent concessions will vary by landlord. While we continue to engage in discussions with our landlords, certain of our landlords have alleged that we are in default of our leases with them. If we are unable to reach an agreement with these landlords, we may face eviction proceedings, which could be expensive to litigate and may jeopardize our ability to continue operations at the impacted location. The COVID-19 pandemic has also adversely affected our ability to open new stores, and we have paused construction of five new stores since mid-March. These changes may materially adversely affect our ability to grow our business, particularly if these construction pauses are in place for a significant amount of time.

 

In addition, while we have taken actions to manage our liquidity position in response to COVID-19, we may need to seek additional sources of liquidity, and we are actively seeking to refinance our Term Loan B debt, which matures on April 4, 2021. The COVID-19 pandemic is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be available on favorable or acceptable terms, or at all, especially the longer the COVID-19 pandemic lasts or if it were to reoccur.

 

 

The impact global and domestic economic conditions have on consumer discretionary spending and on our business-to-business customers could materially adversely affect our financial performance.

 

Apparel purchases are discretionary expenditures that historically have been influenced by domestic and global economic conditions. The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic have led to a national and global economic downturn.  Consumer discretionary spending has weakened, and some experts are predicting that it will continue to weaken. Reduced discretionary spending could influence our sales both online and in retail locations, as well as customer traffic in retail locations where our products are sold, which in turn could have a material impact on our financial performance.

 

Global and domestic conditions, including as a result of the COVID-19 pandemic, that have an effect on consumer discretionary spending include, but may not be limited to: unemployment, general and industry-specific inflation, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policy. Material changes to governmental policy related to domestic and international fiscal concerns, and/or changes in central bank policies with respect to monetary policy, also could affect consumer discretionary spending. Any of these additional factors affecting consumer discretionary spending may further influence our customers’ purchasing preferences, potentially having a further material impact on our financial performance.

 

In addition, approximately 60% of our national accounts business-to-business sales, made by Lands’ End Outfitters, are to travel-related companies.  These customers’ businesses have been adversely impacted by COVID-19, and therefore, we have experienced a dramatic decrease in uniform sales to this sector.  Should these travel-related companies continue to be adversely impacted, our sales to them would be adversely impacted. Similarly, our small and mid-size business customers’ businesses have been adversely impacted, resulting in a decrease in sales to those organization.  The timing of the recovery of our small to mid-size business customers will impact our sales to those organizations.  Finally, with the closure of schools during the pandemic, our sales of school uniforms have been reduced.  Should schools fail to reopen in the Fall of 2020, school uniform sales would continue to be adversely impacted.

 

Item 9.01Financial Statements and Exhibits.

 

(d) Exhibits

 

 

---

 

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.

 

 

 

 

Exhibit 99.1

 

Lands' End Announces Preliminary First Quarter Fiscal 2020 Results

 

Strong revenue and profit trends disrupted by mid-quarter effects of COVID-19

Global eCommerce revenue grew double digits in May compared to the same period last year

Provided second quarter fiscal 2020 net revenue outlook

 

DODGEVILLE, Wis., June 2, 2020, (GLOBE NEWSWIRE) - Lands' End, Inc. (NASDAQ: LE) today announced preliminary financial results for the first quarter ended May 1, 2020 and commented on its business trends. Finalization of the results is pending the completion of the Company’s quarterly procedures and preparation and filing of its Quarterly Report on Form 10-Q, which will require additional time this quarter due to COVID-19.  

 

First Quarter Fiscal 2020 Highlights:

 

 

 

 

 

 

COVID-19 Actions

 

 

---

 

 

Jerome Griffith, Chief Executive Officer and President, stated, “While COVID-19 has created a complex environment on many fronts we believe that our business model provides the flexibility to mitigate many of the challenges this has created across the industry. Following strong trends early in the first quarter, we saw the impact of COVID-19 in mid-March. Beginning in mid-April, we were pleased to see a rebound in our global eCommerce channel, which accelerated to double digit growth in May.  We believe these trends demonstrate the resiliency of our business and we are no less optimistic about our future for several reasons.  First, we are a digitally driven company with approximately 80% of our business in direct-to-consumer eCommerce. Second, we provide key item basics at great value with great service, at a time when we are seeing growing demand for our offerings. Third, we have demonstrated the adeptness and agility to appropriately adjust our cost structure as we reset for the new normal.  And finally, we see opportunities to expand our customer base through more recent strategies, including the planned launch of Lands’ End on kohls.com and in 150 Kohl’s retail stores this coming fall. With our resilient e-commerce business and casual and value-oriented product assortment, combined with our lean operating structure and liquidity, we are positioned to capitalize on the opportunities ahead. While we expect the environment to remain difficult, we are excited about the future of Lands’ End.”

 

Balance Sheet and Cash Flow Highlights

 

Cash and cash equivalents were $59.1 million as of May 1, 2020, compared to $40.2 million as of May 3, 2019.

 

Net cash used in operations was $80.2 million for the 13 weeks ended May 1, 2020, compared to $36.3 million for the 13 weeks ended May 3, 2019.

 

Inventories, net, was $383.2 million as of May 1, 2020, and $319.3 million as of May 3, 2019.

 

The Company had borrowings of $75.0 million and $116.3 million of availability under its asset-based senior secured credit facility at May 1, 2020 and other short-term debt of $384.1 million at May 1, 2020.

 

Outlook

 

Jim Gooch, Chief Operating Officer and Chief Financial Officer, stated, “While the pandemic had an adverse impact on our results in the quarter, we believe that our business model is resilient, particularly our eCommerce channel and we expect all our segments to recover, albeit at different rates. We remain optimistic about our future and will remain focused on preserving liquidity and maintaining agility as we continue to execute our strategies through this challenging environment. While we remain confident in our ability to achieve our long-term targets, which were on track prior to COVID-19, we now expect these objectives to be met later than we initially planned.”

 

The following outlook does not incorporate a potential second wave of COVID-19 or additional government-mandated closures.

 

 

---

 

For the second quarter of fiscal 2020 the Company expects:

 

For the second half of fiscal 2020 the Company expects:

 

Conference Call

 

The Company will host a conference call on Tuesday, June 2, 2020, at 8:30 a.m. ET to review its preliminary first quarter 2020 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 or by dialing (866) 753-5836.

 

About Lands' End, Inc.

 

Lands' End, Inc. (NASDAQ:LE) is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. We offer products online at www.landsend.com, on third party online marketplaces and through retail locations. 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 regarding the Company’s assessment of its ability to mitigate COVID-19 challenges and optimism for the future; the planned launch and expected benefits of the Kohl’s relationship; the Company’s assessment of its e-commerce business and product assortment, operating structure and liquidity, and how those position it going forward; the Company’s expectations as to the recovery of its various business segments; the Company’s focus on preserving liquidity and maintaining agility while it executes its strategies; the Company’s expectations as to planned store openings and re-openings; and the Company’s outlook and expectations as to net revenue, gross margin and SG&A in the second quarter of fiscal 2020 and for the second half of the year, and expectations regarding the achievement and timing related to its long-term targets. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the finalization of the Company’s financial statements as of and for the 13 weeks ended May 1, 2020, which will involve, among other things, further review of impairment of goodwill and long-lived assets, inventory reserves, lease accounting, other contingencies and accounting for the CARES Act; the impact of COVID-19 on customer demand and the Company’s supply chain, as well as its consolidated results of operation,

 

---

 

financial position and cash flows; the Company may be unsuccessful in implementing its strategic initiatives, or its initiatives may not have their desired impact on its business; the Company’s ability to obtain additional financing on commercially acceptable terms or at all, including, the condition of the lending and debt markets, as the Company seeks to refinance its term loan; the Company’s ability to offer merchandise and services that customers want to purchase; changes in customer preference from the Company’s branded merchandise; the Company’s results may be materially impacted if tariffs on imports from China increase and it is unable to offset the increased costs from current or future tariffs through pricing negotiations with its 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 the Company’s digital platform, including customer acceptance of its efforts to enhance its e-commerce websites; customer response to the Company’s marketing efforts across all types of media; the Company’s maintenance of a robust customer list; the Company’s retail store strategy may be unsuccessful and it may be unable to open retail stores in locations and on terms that are acceptable to it; the Company’s dependence on information technology and a failure of information technology systems, including with respect to its e-commerce operations, or an inability to upgrade or adapt its systems; fluctuations and increases in costs of raw materials; impairment of the Company’s relationships with its vendors; the Company’s failure to maintain the security of customer, employee or company information; the Company’s failure to compete effectively in the apparel industry; legal, regulatory, economic and political risks associated with international trade and those markets in which the Company conducts business and sources its merchandise; the Company’s failure to protect or preserve the image of its brands and its intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide the Company with services in connection with certain aspects of its business to perform their obligations; the Company’s failure to timely and effectively obtain shipments of products from its vendors and deliver merchandise to its customers; reliance on promotions and markdowns to encourage customer purchases; the Company’s failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the adverse effect on the Company’s reputation if its 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 the Company’s business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement in connection with the Company’s separation from Sears Holdings; the ability of the Company’s principal shareholders to exert substantial influence over the Company; 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 the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020, and in the Company’s Current Report on Form 8-K dated June 2, 2020. The Company intends the forward-looking statements to speak only as of the time made and does 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.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 

---

 

LANDS’ END, INC.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

---

 

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.

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.  

 

While Adjusted EBITDA¹ is a non-GAAP measurement, management believes that they are important indicators of operating performance, and useful to investors, because:

 

Reconciliation of Preliminary Non-GAAP Financial Information to GAAP

(Unaudited)

 

 

 

 

 

---

 

 

LANDS’ END, INC.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)