UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
-OR-
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
As of September 3, 2024, the registrant had
LANDS’ END, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED AUGUST 2, 2024
TABLE OF CONTENTS
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Item 1. |
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1 |
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1 |
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Condensed Consolidated Statements of Comprehensive Operations |
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2 |
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3 |
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4 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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33 |
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Item 4. |
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34 |
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35 |
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Item 1. |
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35 |
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Item 1A. |
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36 |
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Item 2. |
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37 |
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Item 5. |
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37 |
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Item 6. |
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38 |
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39 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANDS’ END, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
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13 Weeks Ended |
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26 Weeks Ended |
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(in thousands, except per share data) |
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August 2, |
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July 28, |
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August 2, |
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July 28, 2023 |
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Net revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of sales (exclusive of depreciation and amortization) |
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Gross profit |
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Selling and administrative |
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Depreciation and amortization |
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Other operating expense, net |
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Operating income |
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Interest expense |
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Other (income), net |
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Loss before income taxes |
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Income tax (benefit) expense |
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NET LOSS |
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$ |
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$ |
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$ |
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$ |
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NET LOSS PER COMMON SHARE |
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Basic: |
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Diluted: |
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$ |
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$ |
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Basic weighted average common shares outstanding |
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Diluted weighted average common shares outstanding |
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See accompanying Notes to Condensed Consolidated Financial Statements.
1
LANDS’ END, INC.
Condensed Consolidated Statements of Comprehensive Operations
(Unaudited)
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13 Weeks Ended |
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26 Weeks Ended |
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(in thousands) |
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August 2, 2024 |
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July 28, 2023 |
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August 2, 2024 |
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July 28, 2023 |
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NET LOSS |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Foreign currency translation adjustments |
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COMPREHENSIVE LOSS |
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$ |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
2
LANDS’ END, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data) |
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August 2, 2024 |
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July 28, 2023 |
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February 2, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Goodwill |
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— |
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Intangible asset |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Current portion of long-term debt |
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$ |
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$ |
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$ |
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Accounts payable |
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Lease liability – current |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Long-term borrowings under ABL Facility |
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Long-term debt, net |
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Lease liability – long-term |
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Deferred tax liabilities |
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Other liabilities |
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TOTAL LIABILITIES |
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STOCKHOLDERS’ EQUITY |
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Common stock, par value $ |
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Additional paid-in capital |
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(Accumulated deficit) Retained earnings |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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( |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
3
LANDS’ END, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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26 Weeks Ended |
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(in thousands) |
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August 2, 2024 |
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July 28, 2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance costs |
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Loss on disposal of property and equipment |
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Stock-based compensation |
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Deferred income taxes |
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Long-lived asset impairment |
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— |
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Other |
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( |
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( |
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Change in operating assets and liabilities: |
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Accounts receivable, net |
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Inventories, net |
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( |
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Accounts payable |
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( |
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Other operating assets |
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( |
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Other operating liabilities |
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( |
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( |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Sales of property and equipment |
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— |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from borrowings under ABL Facility |
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Payments of borrowings under ABL Facility |
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( |
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( |
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Payments on term loan |
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( |
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( |
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Payments of debt issuance costs |
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( |
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( |
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Payments for taxes related to net share settlement of equity awards |
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( |
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( |
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Purchases and retirement of common stock, including excise tax paid |
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( |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Effects of exchange rate changes on cash, cash equivalents and restricted cash |
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( |
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NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND |
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( |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH, |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL CASH FLOW DATA |
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Unpaid liability to acquire property and equipment |
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$ |
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$ |
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Income taxes paid (refunded) |
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$ |
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$ |
( |
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Interest paid |
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$ |
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$ |
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Operating lease right-of-use-assets obtained in exchange for lease liabilities |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
LANDS’ END, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the 26 weeks ended August 2, 2024
(Unaudited)
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Common Stock Issued |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at February 2, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Cumulative translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted shares |
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— |
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— |
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— |
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— |
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— |
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Common stock withheld related to net share |
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( |
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— |
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( |
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— |
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— |
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( |
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Purchases and retirement of common stock |
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( |
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( |
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( |
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( |
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— |
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( |
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Balance at May 3, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Cumulative translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted shares |
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( |
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— |
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— |
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— |
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Common stock withheld related to net share |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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Purchases and retirement of common stock, including excise tax |
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( |
) |
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( |
) |
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( |
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( |
) |
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— |
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( |
) |
Balance at August 2, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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For the 26 weeks ended July 28, 2023
(Unaudited)
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Common Stock Issued |
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Additional |
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(Accumulated Deficit) Retained |
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Accumulated |
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Total |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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Balance at January 27, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Cumulative translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted shares |
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( |
) |
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— |
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— |
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— |
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Common stock withheld related to net share |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Purchases and retirement of common stock |
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( |
) |
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( |
) |
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( |
) |
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— |
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( |
) |
|
Balance at April 28, 2023 |
|
|
|
|
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
|
|||||
Net loss |
|
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— |
|
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— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Cumulative translation adjustment, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Vesting of restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Purchases and retirement of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance at July 28, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
LANDS’ END, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BACKGROUND AND BASIS OF PRESENTATION
Description of Business
Lands’ End, Inc. (“Lands’ End” or the “Company”) is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms. Lands’ End offers products online at www.landsend.com, through third-party distribution channels, our own Company Operated stores and third-party license agreements. Lands’ End also offers products to businesses and schools, for their employees and students, through the Outfitters distribution channel. Lands’ End is a classic American lifestyle brand that creates solutions for life’s every journey. References to www.landsend.com do not constitute incorporation by reference of the information at www.landsend.com, and such information is not part of this Quarterly Report on Form 10-Q or any other filings with the SEC, unless otherwise explicitly stated.
Terms that are commonly used in the Company’s Notes to Condensed Consolidated Financial Statements are defined as follows:
6
Basis of Presentation
The Condensed Consolidated Financial Statements include the accounts of Lands’ End, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Dollar amounts are reported in thousands, except per share data, unless otherwise noted. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Lands’ End Annual Report on Form 10-K filed with the SEC on April 3, 2024.
Macroeconomic Challenges
Macroeconomic issues which impact consumer discretionary spending, such as realized inflation-based price increases and high interest rates have continued to have an impact on our business. Apparel purchases historically have been influenced by domestic and global economic conditions, which may negatively impact customer demand and may require higher levels of promotion in order to attract and retain customers. Additionally, the variable interest rates associated with our Debt Facilities are negatively affected by higher interest rate environments. Macroeconomic challenges may lead to increased cost of raw materials, packaging materials, labor, energy, fuel, debt and other inputs necessary for the production and distribution of our products.
Restructuring
During Fiscal 2023, the Company reduced approximately
The Company incurred $
Long-lived Asset Impairment Analysis
Property and equipment are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”) the Company reviewed the long-lived asset groups for impairment as of August 2, 2024.
During the 13 weeks ended August 2, 2024, the Company considered management’s decision to replace the existing information technology infrastructure with an enterprise resource planning (“ERP”) software system within the next 18 to 24 months to be a triggering event. The Company determined that certain long-lived assets, primarily capitalized internal-use software projects and computer software, would no longer be utilized or have future benefit with the planned ERP platform and recognized impairment in the amount of $
The Company Operated store long-lived asset group, including Operating right-of-use assets, are regularly reviewed for impairment indicators. Impairment is assessed at the individual store level which is the lowest level of identifiable cash flows and considers the estimated undiscounted cash flows over the asset’s remaining life. If estimated undiscounted cash flows are insufficient to recover the investment, an impairment loss is recognized equal to the difference between the estimated fair value of the asset and its
7
carrying value, net of salvage, and any costs of disposition. The fair value estimate is generally the discounted amount of estimated store-specific cash flows.
The Company reviewed the remaining long-lived asset groups for impairment as of August 2, 2024. The Company assessed the recoverability of our long-lived asset groups by comparing their projected undiscounted cash flows associated over remaining estimated useful lives of the primary asset in the long-lived asset group against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. As a result of the testing, the undiscounted cash flows of the remaining asset groups exceeded their respective carrying amounts resulting in no impairment as of August 2, 2024.
NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company is currently assessing the impact of ASU 2023-07 on the Company’s Condensed Consolidated Financial Statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. ASU 2023-09 is effective for the annual periods beginning after December 15, 2024. The Company is currently assessing the impact of ASU 2023-09 on the Company’s Condensed Consolidated Financial Statement disclosures.
In March 2024, FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements (“ASU 2024-02”), which is intended to simplify the Codification and draw a distinction between authoritative and non-authoritative literature. ASU 2024-02 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company is currently assessing the impact of ASU 2024-02 on the Company’s Condensed Consolidated Financial Statements.
NOTE 3. LOSS PER SHARE
The numerator for both basic and diluted earnings (loss) per share is net income (loss) attributable to the Company. The denominator for basic earnings (loss) per share is based upon the number of weighted average shares of the Company’s common stock outstanding during the reporting periods. The denominator for diluted earnings (loss) per share is based upon the number of weighted average shares of the Company’s common stock and common stock equivalents outstanding during the reporting periods using the treasury stock method in accordance with ASC 260, Earnings Per Share. Potentially dilutive securities for the diluted earnings (loss) per share calculations consist of non-vested equity shares of common stock and in-the-money outstanding options where the current stock price exceeds the option strike price.
8
The following table summarizes the components of basic and diluted loss per share:
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
(in thousands, except per share amounts) |
|
August 2, 2024 |
|
|
July 28, 2023 |
|
|
August 2, 2024 |
|
|
July 28, 2023 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive impact of stock awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive shares excluded from diluted loss per common share calculation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock awards are considered anti-dilutive based on the application of the treasury stock method or in the event of a net loss.
NOTE 4. OTHER COMPREHENSIVE LOSS
Other comprehensive income (loss) encompasses all changes in equity other than those arising from transactions with stockholders and is comprised solely of foreign currency translation adjustments. Our foreign subsidiaries use their foreign currency as their functional currency. Functional currency assets and liabilities are translated into U.S. Dollars using exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates during the period. Resulting translation gains and losses are reported in other comprehensive income (loss), until the substantial liquidation of a subsidiary, at which time accumulated transactions gains or losses are reclassified into net income.
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
(in thousands) |
|
August 2, 2024 |
|
|
July 28, 2023 |
|
|
August 2, 2024 |
|
|
July 28, 2023 |
|
||||
Beginning balance: Accumulated other comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments (net of tax of ($ |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Ending balance: Accumulated other comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
NOTE 5. DEBT
ABL Facility
The Company’s $
9
is calculated from Eligible Inventory, Trade Receivables and Credit Card Receivables, all foregoing capitalized terms not defined herein are as defined in the ABL Facility.
The following table summarizes the Company’s ABL Facility borrowing availability:
|
|
August 2, 2024 |
|
July 28, 2023 |
|
February 2, 2024 |
||||||||||||
(in thousands) |
|
Amount |
|
|
Interest Rate |
|
Amount |
|
|
Interest Rate |
|
Amount |
|
|
Interest Rate |
|||
ABL Facility limit |
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|||
Borrowing Base |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Outstanding borrowings |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
||||
Outstanding letters of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
ABL Facility utilization at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
ABL Facility borrowing availability |
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|||
Effective with the Fourth Amendment to the ABL Facility executed May 12, 2023, the benchmark interest rate was changed from LIBOR to SOFR plus an adjustment of
The ABL Facility fees include (i) commitment fees of
Long-Term Debt
On December 29, 2023, the Company entered into the Current Term Loan Facility which provides borrowings of $
The Current Term Loan Facility will mature on
10
The Company’s long-term debt consisted of the following:
|
|
August 2, 2024 |
|
July 28, 2023 |
|
February 2, 2024 |
||||||||||||
(in thousands) |
|
Amount |
|
|
Interest Rate |
|
Amount |
|||||||||||