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| Statement |
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| This is contributing to strong performance in our layering products and transitional outerwear solutions, which gives us confidence that we will be able to continue this trajectory more consistently in the months and years ahead |
| Our results were characterized by strong execution of our solutions-based strategy to deliver quality for our customers and value to our shareholders |
| We will be able to drive without a top line, we will be able to drive a better profit, a better net income number from a licensing arrangement than selling a lot of product at clearance that we tended to do in the past |
| The margin improvement was primarily driven by new products across the brand, strength in transitional outerwear and adjacent product categories, reduction in sales of clearance inventory and improvements in supply chain costs |
| Building on the theme we discussed before, our customers are responding positively to freshness across categories |
| Our deliberate strategy to improve development of our solution-driven products generated more profitable sales, resulting in gross margin and profit expansion and adjusted EBITDA of $17 million above the high end of our guidance range |
| As I have previously noted, we are executing a deliberate strategy to drive higher quality sales with a larger portion of our sales occurring with no or lower levels of promotions rather than simply prioritizing moving units so we can enhance gross margin and deliver increased cash flows |
| Gross margin in the third quarter was 47% and an approximately 700 basis point improvement from the third quarter of 2022 |
| Q3 marked our third successive quarter of significant inventory and margin improvement, with a 25% reduction and 700 basis points of improvement respectively |
| We are confident that we have found a winning formula, increasing churns of merchandise while maintaining lower, more efficient inventory due to our targeted customer cohorts |
| And then you also received benefit as you have saw are in the announcement that we also have announced a number of license with kids, our licensing arrangements will also have a benefit to reducing our inventories |
| Our customers are responding exceptionally well to this approach |
| And this is a really great margin story that we have in Lands’ End at the moment and really a re-elevation of our product |
| And the discounting, we have started with women’s and like women’s is where we have seen the most progress as we expand that thinking there to other categories, we see that we will be able to continue that momentum as well |
| We saw good performance in men’s and actually even products like Hub last year |
| So, very pleased with how warehouse performance has been, but how women’s has performed |
| We are continuing to improve our site experience for more targeted marketing to present our customers with relevant and engaging content to drive quality sales |
| As a result, we have got increased traffic and engagement from social media and with repeat exposure we expect our social media prospects to continue growing nicely |
| Fundamental to these results is our conscious decision to focus on profitability and balance sheet efficiency versus solely on revenue, which has improved gross profit dollars and markets |
| We brought in a pricing [indiscernible] but it’s the best program that’s been very successful |
| Our authority in outerwear solutions was a key driver of our strong performance this quarter, both in the U.S |
| We drove sales in key adjacencies, especially bottoms and sweaters, where new styles in key fabrics like corduroy, denim and velvet and new colors contributed to the strong performance |
| Moving to our third-party business we saw a nice improvement in the quality of the demand, thanks to the deliberate approach we took to better tailor our assortment to each marketplace and lead into successful categories with a focus on quality of sales, improving gross margin, better inventory turn and freshness |
| We have seen very successful acceptance of our products in those categories |
| We’re working with our partners at Salesforce to enable a stronger data-driven sales process and also implementing marketing automation technology to improve customer communication create better defined customer journeys from outreach and lead generation and more effectively engage with existing and prospective customers |
| We built on our momentum from Q2, further improved our inventory position, injected newness across our assortment and continued to prioritize gross margin improvement to drive incremental gross profit dollars |
| Our partnership with Macy’s, which launched this year, is performing very well, driven by strong sales in women’s, swim and apparel |
| e-commerce business, our largest direct-to-consumer channel delivered a second consecutive quarter of great margin performance due to our more targeted approach to promotions and improved inventory management |
| As we continue to play to our strengths and improve operational efficiencies across the business, we’re well positioned to finish strong through the year |
| We continue to see schools as a key pipeline for our outfitters business and having achieved a 92% satisfactory rate among our existing school partners this season, we believe we are well positioned to capture additional market share |
| Statement |
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| Sales from Lands’ End outfitters were down 8% from the third quarter of 2022 |
| Revenue for our third-party business was down 22% compared to the prior year, primarily driven by weaker performance at Kohl’s, partially offset by strong performance at Macy’s and Target |
| However, we remain cautious given that we set and the additional weekend between Black Friday and Christmas, which could push some business later and beyond our shipping cat loss |
| Globally, e-commerce sales decreased 13% from last year or 10% when adjusted for Japan |
| For the third quarter, total revenue performance came in slightly below our guidance range at $325 million, a decrease of 12.5% compared to last year or 9% when adjusting for our Japan e-commerce business which closed in 2022 and accounted for $10 million of revenue in the third quarter of last year and excluding the $4 million difference in year-over-year revenue from Delta |
| During the third quarter, we took a $107 million impairment of goodwill due to the decline of our stock price and the resulting market capitalization, which led to a net loss for the quarter of $112 million or $3.52 per share compared to a net loss of $5 million or $0.14 per share in 2022 |
| We primarily due to approximately 400 basis points of deleverage from lower revenues at 145 basis points due to higher incentive-based personnel costs |
| Excluding the $4 million difference in year-over-year revenue from Delta, the outfitters business was down 3%, primarily driven by high single-digit growth in both our national accounts and midsized customers more than offset by school uniform due to timing shifts in back-to-school deliveries last year related to supply chain disruptions from the second quarter to the third quarter |
| Excluding the non-cash goal impairment, our adjusted net loss was $4 million or $0.11 per share |
| The continuation of the lower inventories, I think down 30% in the second quarter, down 25% now in the third quarter |
| An adjusted diluted loss per share of $0.16 to $0.07 |
| While our U.S |
| But yes, I think what really is important for us when we talk about licensing, that’s one of the strategies that will reduce our current sales |
| Answering your question about categories, as we so worried, but not worried, we took some – we made some changes in how we approached outerwear |
| There was about pent-up demand waiting for it |
| In terms of our debt, at the end of the third quarter, our term loan balance was $234 million and our $275 million ABL had $110 million of borrowings outstanding which was $50 million lower than the third quarter last year |
| I remember this very clearly, we were discounting Hub very heavily |
| Despite lower borrowings outstanding on the ABL, we continue to have elevated interest expense driven by higher market rates |
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