Lands’ End(LE) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Lands' End's unaudited condensed consolidated financial statements for Q2 and YTD 2025, covering operations, balance sheets, cash flows, equity, and detailed notes Condensed Consolidated Statements of Operations The company reported a net loss for both the 13 and 26 weeks ended August 1, 2025, which worsened year-over-year for the 26-week period, despite a slight improvement in gross profit margins for the 13-week period Condensed Consolidated Statements of Operations (13 Weeks Ended, in thousands) | Metric | 13 Weeks Ended Aug 1, 2025 (in thousands) | 13 Weeks Ended Aug 2, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net revenue | $294,079 | $317,173 | | Gross profit | $143,418 | $151,885 | | Operating income | $3,983 | $2,486 | | Interest expense | $9,262 | $10,447 | | NET LOSS | $(3,667) | $(5,251) | | Loss per common share (Basic & Diluted) | $(0.12) | $(0.17) | Condensed Consolidated Statements of Operations (26 Weeks Ended, in thousands) | Metric | 26 Weeks Ended Aug 1, 2025 (in thousands) | 26 Weeks Ended Aug 2, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net revenue | $555,287 | $602,644 | | Gross profit | $276,144 | $290,865 | | Operating income | $1,613 | $4,719 | | Interest expense | $18,527 | $20,783 | | NET LOSS | $(11,929) | $(11,693) | | Loss per common share (Basic & Diluted) | $(0.39) | $(0.37) | Condensed Consolidated Statements of Comprehensive Operations The company reported a comprehensive loss for both the 13 and 26 weeks ended August 1, 2025, with foreign currency translation adjustments impacting the loss Condensed Consolidated Statements of Comprehensive Operations (13 Weeks Ended, in thousands) | Metric | 13 Weeks Ended Aug 1, 2025 (in thousands) | 13 Weeks Ended Aug 2, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | NET LOSS | $(3,667) | $(5,251) | | Foreign currency translation adjustments | $(565) | $299 | | COMPREHENSIVE LOSS | $(4,232) | $(4,952) | Condensed Consolidated Statements of Comprehensive Operations (26 Weeks Ended, in thousands) | Metric | 26 Weeks Ended Aug 1, 2025 (in thousands) | 26 Weeks Ended Aug 2, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | NET LOSS | $(11,929) | $(11,693) | | Foreign currency translation adjustments | $933 | $(214) | | COMPREHENSIVE LOSS | $(10,996) | $(11,907) | Condensed Consolidated Balance Sheets Total assets slightly decreased year-over-year but increased compared to January 31, 2025, with current assets decreasing due to lower inventories and prepaid expenses, while total liabilities remained stable and stockholders' equity decreased Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | August 1, 2025 | August 2, 2024 | January 31, 2025 | | :------------------------------------ | :------------- | :------------- | :--------------- | | Total current assets | $405,062 | $414,764 | $370,480 | | Inventories | $301,797 | $312,014 | $265,132 | | Property and equipment, net | $117,205 | $106,758 | $115,618 | | Intangible asset | $257,000 | $257,000 | $257,000 | | TOTAL ASSETS | $800,641 | $802,516 | $765,481 | | Total current liabilities | $250,539 | $253,427 | $227,623 | | Long-term borrowings under ABL Facility | $35,000 | $20,000 | $— | | Long-term debt, net | $219,550 | $230,227 | $224,888 | | TOTAL LIABILITIES | $575,517 | $576,002 | $526,259 | | TOTAL STOCKHOLDERS' EQUITY | $225,124 | $226,514 | $239,222 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased year-to-date 2025, while net cash used in investing activities and net cash provided by financing activities both increased Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :------------------------------------ | :------------------------- | :------------------------- | | Net cash provided by operating activities | $469 | $4,909 | | Net cash used in investing activities | $(17,152) | $(11,450) | | Net cash provided by financing activities | $22,074 | $6,890 | | Net increase in cash, cash equivalents and restricted cash | $4,734 | $597 | | Cash, cash equivalents and restricted cash, end of period | $23,546 | $27,887 | - Purchases of property and equipment increased to $17.2 million in Year-to-Date 2025 from $11.5 million in Year-to-Date 2024[19] - Proceeds from borrowings under ABL Facility increased to $68.0 million in Year-to-Date 2025 from $49.0 million in Year-to-Date 2024[19] Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased from $239.2 million at January 31, 2025, to $225.1 million at August 1, 2025, primarily due to net losses and common stock repurchases Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Jan 31, 2025 | Balance at Aug 1, 2025 | | :------------------------------------ | :---------------------- | :--------------------- | | Total Stockholders' Equity | $239,222 | $225,124 | | Net loss (26 weeks) | N/A | $(11,929) | | Purchases and retirement of common stock (26 weeks) | N/A | $(4,502) | | Stock-based compensation expense (26 weeks) | N/A | $2,250 | | Cumulative translation adjustment, net of tax (26 weeks) | N/A | $933 | Notes to Condensed Consolidated Financial Statements Detailed notes cover the company's business, accounting policies, loss per share, debt, equity, accrued liabilities, fair value, income taxes, commitments, segment reporting, and revenue recognition NOTE 1. BACKGROUND AND BASIS OF PRESENTATION Lands' End is a digital retailer facing macroeconomic challenges, and has incurred restructuring charges, including a 6% reduction in corporate office positions, to optimize operations - Lands' End, Inc. is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products, and uniforms, operating through online, third-party, company-operated stores, and Outfitters channels[23] - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP for interim financial information and with instructions to Form 10-Q, and should be read in conjunction with the Annual Report on Form 10-K filed on March 27, 2025[26] - Macroeconomic issues such as inflation and high interest rates continue to impact consumer discretionary spending, potentially leading to lower customer demand, higher promotion levels, increased costs for raw materials, labor, and debt, and supply chain disruptions due to trade policy uncertainty[27] - The Company incurred restructuring charges, primarily severance and benefit costs, related to cost optimization and strategic initiatives, including a reduction of approximately 6% of its corporate office positions to align with evolving business needs and invest in key growth areas[28] Total Restructuring Costs (in thousands) | Period | August 1, 2025 | August 2, 2024 | | :------------------- | :------------- | :------------- | | 13 Weeks Ended | $2,434 | $2,338 | | 26 Weeks Ended | $5,766 | $2,680 | Accrued Restructuring Costs as of August 1, 2025 (in thousands) | Category | Amount | | :----------------------------- | :----- | | Employee Severance and Benefit Costs | $626 | | Strategic Alternatives and Other Costs | $2,596 | | Total Restructuring | $3,222 | NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED The company is assessing the impact of three recently issued FASB Accounting Standards Updates (ASUs) on financial instruments, expense disaggregation, and income tax disclosures - ASU 2025-05, 'Financial Instruments—Credit Losses,' effective for annual periods beginning after December 15, 2025, provides targeted relief for estimating expected credit losses on short-term receivables[32] - ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,' effective for annual periods beginning after December 15, 2026, requires public entities to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion[33] - ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, requires specific categories in the rate reconciliation table and disaggregation of income/loss and tax expense/benefit between domestic and foreign[34] NOTE 3. LOSS PER SHARE The company reported basic and diluted loss per share of $(0.12) for the 13 weeks and $(0.39) for the 26 weeks ended August 1, 2025, with stock awards considered anti-dilutive Loss Per Share (13 Weeks Ended) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss (in thousands) | $(3,667) | $(5,251) | | Basic weighted average common shares outstanding (in thousands) | 30,743 | 31,376 | | Diluted weighted average common shares outstanding (in thousands) | 30,743 | 31,376 | | Basic Loss per share | $(0.12) | $(0.17) | | Diluted Loss per share | $(0.12) | $(0.17) | | Anti-dilutive shares excluded (in thousands) | 736 | 509 | Loss Per Share (26 Weeks Ended) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss (in thousands) | $(11,929) | $(11,693) | | Basic weighted average common shares outstanding (in thousands) | 30,721 | 31,407 | | Diluted weighted average common shares outstanding (in thousands) | 30,721 | 31,407 | | Basic Loss per share | $(0.39) | $(0.37) | | Diluted Loss per share | $(0.39) | $(0.37) | | Anti-dilutive shares excluded (in thousands) | 703 | 806 | - Stock awards were considered anti-dilutive based on the application of the treasury stock method or in the event of a net loss[36] NOTE 4. OTHER COMPREHENSIVE LOSS Other comprehensive loss is primarily driven by foreign currency translation adjustments, with no reclassifications out of Accumulated other comprehensive loss during the periods - Other comprehensive income (loss) encompasses all changes in equity other than those from transactions with stockholders and is solely comprised of foreign currency translation adjustments[37] Foreign Currency Translation Adjustments (net of tax, in thousands) | Period | August 1, 2025 | August 2, 2024 | | :------------------- | :------------- | :------------- | | 13 Weeks Ended | $(565) | $299 | | 26 Weeks Ended | $933 | $(214) | - No amounts were reclassified out of Accumulated other comprehensive loss during any of the periods presented[38] NOTE 5. DEBT The company's debt facilities include a $225.0 million ABL Facility and a Term Loan Facility, with $35.0 million outstanding under the ABL and $240.5 million under the Term Loan as of August 1, 2025, and the company was in compliance with all covenants - The ABL Facility is a $225.0 million committed revolving credit agreement, with a $35.0 million sublimit for letters of credit, available for working capital and general corporate liquidity needs[39] ABL Facility Summary (in thousands) | Metric | August 1, 2025 | August 2, 2024 | January 31, 2025 | | :----------------------------- | :------------- | :------------- | :--------------- | | ABL Facility limit | $225,000 | $275,000 | $275,000 | | Outstanding borrowings | $35,000 | $20,000 | $— | | Outstanding letters of credit | $10,911 | $8,101 | $10,888 | | ABL Facility borrowing availability | $87,625 | $117,519 | $129,314 | - The Fifth Amendment to the ABL Facility, dated March 28, 2025, reduced aggregate commitments from $275 million to $225 million and extended the maturity date to March 28, 2030 (or September 29, 2028 if the Term Loan Facility is not refinanced)[41][42] Long-Term Debt Summary (in thousands) | Metric | August 1, 2025 | August 2, 2024 | January 31, 2025 | | :----------------------------- | :------------- | :------------- | :--------------- | | Term Loan Facility (Amount) | $240,500 | $253,500 | $247,000 | | Term Loan Facility (Interest Rate) | 12.71% | 13.70% | 12.66% | | Long-term debt, net | $219,550 | $230,227 | $224,888 | - The Term Loan Facility matures on December 29, 2028, and amortizes at 1.25% per quarter, with mandatory prepayments based on the Company's Total Leverage Ratio and prepayment premiums for voluntary prepayments within certain periods[43] - All obligations under the Debt Facilities are unconditionally guaranteed by Lands' End, Inc. and its subsidiaries, secured by first and second priority security interests in working capital and certain fixed assets[46][47] - The Debt Facilities contain various restrictive covenants, including financial covenants such as a quarterly maximum total leverage ratio test and a monthly minimum liquidity test for the Term Loan Facility, and a minimum fixed charge coverage ratio for the ABL Facility if excess availability falls below certain thresholds[48][49][51] - As of August 1, 2025, the Company was in compliance with its financial covenants[51] NOTE 6. STOCK-BASED COMPENSATION The company grants Deferred Awards, Performance Awards, and Option Awards to employees, expensing their fair value over the requisite service period, with total stock-based compensation expense for the 26 weeks ended August 1, 2025, at $2.25 million - The Company expenses the fair value of all stock awards (Deferred, Performance, and Option Awards) over their requisite service period, adjusting for estimated forfeitures and recognizing expense on a straight-line basis for service-only awards[53][56][57] Total Stock-Based Compensation Expense (in thousands) | Award Type | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :----------------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Deferred awards | $934 | $943 | $1,752 | $1,865 | | Performance awards | $292 | $385 | $290 | $585 | | Option awards | $104 | $104 | $208 | $208 | | Total | $1,330 | $1,432 | $2,250 | $2,658 | - Total unrecognized stock-based compensation expense for unvested Deferred Awards was approximately $5.5 million as of August 1, 2025, expected to be recognized over a weighted average period of 2.0 years[59] - Total unrecognized stock-based compensation expense for unvested Performance Awards was approximately $2.1 million as of August 1, 2025, expected to be recognized over a weighted average period of 2.0 years[60] - An additional $3.6 million for Performance Awards with event criteria is not recognized until the event is probable[60] - Total unrecognized stock-based compensation expense for Option Awards expected to vest was approximately $0.1 million as of August 1, 2025, expected to be recognized over a weighted average period of 0.3 years[62] NOTE 7. STOCKHOLDERS' EQUITY The Board authorized a $25.0 million share repurchase program through March 31, 2026, with $8.8 million remaining available and $4.5 million in repurchases during the 26 weeks ended August 1, 2025 - On March 15, 2024, the Board of Directors authorized a $25.0 million share repurchase program (the "2024 Share Repurchase Program") through March 31, 2026[63] - As of August 1, 2025, an additional $8.8 million could be purchased under the 2024 Share Repurchase Program[63] Share Repurchases (in thousands, except per share cost) | Period | Number of Shares Repurchased | Total Cost | Average Per Share Cost | | :------------------- | :--------------------------- | :--------- | :--------------------- | | 13 Weeks Ended Aug 1, 2025 | 199 | $1,731 | $8.71 | | 13 Weeks Ended Aug 2, 2024 | 254 | $3,731 | $14.70 | | 26 Weeks Ended Aug 1, 2025 | 490 | $4,502 | $9.20 | | 26 Weeks Ended Aug 2, 2024 | 339 | $4,744 | $13.99 | - All repurchased shares were retired, with the par value charged against Common stock and the remaining purchase price allocated between Additional paid-in capital and Retained earnings, or directly against Additional paid-in capital[64] NOTE 8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities totaled $85.1 million as of August 1, 2025, a decrease from prior periods, primarily comprising deferred gift card revenue, employee compensation, and sales return reserves Accrued Expenses and Other Current Liabilities (in thousands) | Category | August 1, 2025 | August 2, 2024 | January 31, 2025 | | :------------------------------------ | :------------- | :------------- | :--------------- | | Deferred gift card revenue | $33,236 | $34,179 | $34,746 | | Accrued employee compensation and benefits | $16,692 | $20,238 | $26,105 | | Reserve for sales returns and allowances | $13,669 | $14,907 | $15,156 | | Deferred revenue | $8,822 | $9,302 | $6,584 | | Accrued property, sales and other taxes | $6,174 | $7,412 | $6,338 | | Accrued interest | $2,385 | $685 | $2,662 | | Other | $4,106 | $4,467 | $7,145 | | Total | $85,084 | $91,190 | $98,736 | NOTE 9. FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND LIABILITIES Cash and cash equivalents are reported at fair value using Level 1 inputs, while long-term debt is a Level 3 instrument, with a carrying amount of $240.5 million and fair value of $241.0 million as of August 1, 2025 - Cash and cash equivalents and restricted cash are reflected on the Condensed Consolidated Balance Sheets at fair value based on Level 1 inputs[67] Long-Term Debt (including current portion) Fair Value (in thousands) | Metric | August 1, 2025 | August 2, 2024 | January 31, 2025 | | :----------------------------- | :------------- | :------------- | :--------------- | | Carrying Amount | $240,500 | $253,500 | $247,000 | | Fair Value | $240,980 | $246,160 | $251,690 | - The valuation of long-term debt at fair value is considered a Level 3 instrument, utilizing the Black-Derman-Toy (BDT) model and market inputs from management, particularly relevant due to the Term Loan Facility's optional redemption provision[68] NOTE 10. INCOME TAXES The company recorded an income tax benefit for both the 13 and 26 weeks ended August 1, 2025, with effective tax rates of 30.5% and 29.4% respectively, influenced by state taxes and non-deductible expenses Effective Income Tax Rate | Period | August 1, 2025 | August 2, 2024 | | :------------------- | :------------- | :------------- | | 13 Weeks Ended | 30.5% | 33.4% | | 26 Weeks Ended | 29.4% | 26.4% | - The effective tax rates vary from the U.S. statutory rate of 21% primarily due to state taxes and non-deductible expenses[70] - The One Big Beautiful Bill Act (H.R. 1), signed into law on July 4, 2025, which includes changes to corporate taxation, did not have a material impact on the Company's financial statements for the 13 and 26 weeks ended August 1, 2025[71][72] NOTE 11. COMMITMENTS AND CONTINGENCIES The company is involved in various legal proceedings, but management believes their ultimate resolution will not materially adversely affect financial results or position - The Company is party to various claims, legal proceedings and investigations arising in the ordinary course of business[73] - Management believes that the ultimate resolution of these pending claims, proceedings, and investigations should not have a material adverse effect on results of operations, cash flows, or financial position taken as a whole[73] NOTE 12. SEGMENT REPORTING Lands' End operates through U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing, and Retail segments, with U.S. Digital aggregating U.S. eCommerce, Outfitters, and Third Party, and segment performance assessed by variable profit - Lands' End's operating segments consist of U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing, and Retail, following internal organizational changes in Fourth Quarter 2024[74] - The U.S. eCommerce, Outfitters, and Third Party operating segments are aggregated into the U.S. Digital segment due to similar economic and qualitative characteristics[76] - Segment performance is assessed based on variable profit, defined as net revenue minus cost of sales and variable selling expenses, which is a non-GAAP financial measure[75] U.S. Digital Segment Net Revenue (in thousands) | Period | August 1, 2025 | August 2, 2024 | | :------------------- | :------------- | :------------- | | 13 Weeks Ended | $255,254 | $270,361 | | 26 Weeks Ended | $483,006 | $499,089 | U.S. Digital Segment Variable Profit (in thousands) | Period | August 1, 2025 | August 2, 2024 | | :------------------- | :------------- | :------------- | | 13 Weeks Ended | $56,690 | $62,810 | | 26 Weeks Ended | $109,584 | $117,686 | Net Revenue by Distribution Channel (13 Weeks Ended, in thousands) | Channel | August 1, 2025 | % of Net Revenue | August 2, 2024 | % of Net Revenue | | :----------------------------- | :------------- | :--------------- | :------------- | :--------------- | | U.S. eCommerce | $167,268 | 56.9% | $188,336 | 59.4% | | Outfitters | $66,424 | 22.6% | $63,159 | 19.9% | | Third Party | $21,562 | 7.3% | $18,866 | 6.0% | | Europe eCommerce | $19,639 | 6.7% | $22,950 | 7.2% | | Licensing and Retail | $19,186 | 6.5% | $23,862 | 7.5% | | Total Net Revenue | $294,079 | | $317,173 | | Net Revenue by Distribution Channel (26 Weeks Ended, in thousands) | Channel | August 1, 2025 | % of Net Revenue | August 2, 2024 | % of Net Revenue | | :----------------------------- | :------------- | :--------------- | :------------- | :--------------- | | U.S. eCommerce | $338,016 | 60.9% | $358,868 | 59.5% | | Outfitters | $109,346 | 19.7% | $105,836 | 17.6% | | Third Party | $35,644 | 6.4% | $34,385 | 5.7% | | Europe eCommerce | $37,490 | 6.7% | $47,918 | 8.0% | | Licensing and Retail | $34,791 | 6.3% | $55,637 | 9.2% | | Total Net Revenue | $555,287 | | $602,644 | | NOTE 13. REVENUE Revenue is recognized when control of merchandise passes to customers, net of promotions and estimated returns, and includes royalty revenue from licensing trademarks, with contract liabilities recognized upon delivery or redemption - Revenue includes sales of merchandise and delivery revenue, recognized when control of product passes to customers (upon receipt for most channels, at sale for retail), and is presented net of promotions, sales returns, discounts, and other incentives[80] Net Revenue by Geographic Location (in thousands) | Region | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | United States | $271,626 | $291,041 | $512,689 | $548,548 | | Europe | $20,169 | $23,330 | $38,488 | $48,638 | | Other | $2,284 | $2,802 | $4,110 | $5,458 | | Total Net Revenue | $294,079 | $317,173 | $555,287 | $602,644 | - The Company generates royalty revenue from licensing its trademarks to third parties, with revenue recognized based on contractually guaranteed minimums or when related sales occur[82][83] Deferred Revenue Activity (in thousands) | Metric | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :------------------------------------ | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Deferred revenue beginning of period | $5,049 | $9,340 | $6,584 | $4,314 | | Deferred revenue recognized in period | $(4,834) | $(9,125) | $(6,370) | $(4,100) | | Revenue deferred in period | $8,607 | $9,087 | $8,608 | $9,088 | | Deferred revenue end of period | $8,822 | $9,302 | $8,822 | $9,302 | Gift Card Liability Activity (in thousands) | Metric | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :------------------------------------ | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Balance as of beginning of period | $33,364 | $35,119 | $34,746 | $35,604 | | Gift cards issued | $15,693 | $14,562 | $30,305 | $29,617 | | Gift cards redeemed | $(10,785) | $(14,019) | $(26,095) | $(28,212) | | Gift card breakage | $(5,036) | $(1,483) | $(5,720) | $(2,830) | | Balance as of end of period | $33,236 | $34,179 | $33,236 | $34,179 | - Refund liabilities, primarily for product sales returns, were $13.7 million as of August 1, 2025, estimated based on historical experience and recorded as a reduction to Net revenue[86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance and condition, detailing decreased net revenue and increased net loss year-to-date, channel performance, gross profit, operating expenses, liquidity, macroeconomic challenges, and restructuring efforts, with non-GAAP reconciliations Executive Overview Lands' End is a digital retailer operating through six channels, facing macroeconomic challenges and undertaking restructuring initiatives, including a 6% reduction in corporate office positions, incurring $5.8 million in restructuring costs year-to-date 2025 - Lands' End is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms, operating through online, third-party, company-operated stores, and Outfitters channels[89] - The company's operating segments are U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing, and Retail, with U.S. eCommerce, Outfitters, and Third Party aggregated into the U.S. Digital segment[90][91] - Macroeconomic issues, including inflation and high interest rates, continue to negatively impact consumer discretionary spending, potentially leading to lower customer demand, increased promotional activity, and higher costs for raw materials, labor, and debt[92] - The company incurred restructuring charges, primarily severance and benefit costs, related to cost optimization and strategic initiatives, including a 6% reduction in corporate office positions[93][94][95] - Restructuring costs were $2.4 million for Q2 2025 and $5.8 million for Year-to-Date 2025[95] - The company experiences seasonal fluctuations, with a significant portion of net revenue and earnings historically realized in the fourth fiscal quarter, and working capital requirements typically increasing in Q2 and Q3[97][98] Results of Operations This section details the company's operating results, showing decreased net revenue and varied profitability for both the second quarter and year-to-date periods, alongside changes in gross margin and adjusted EBITDA Selected Income Statement Data (13 Weeks Ended, in thousands) | Metric | August 1, 2025 | % of Net Revenue | August 2, 2024 | % of Net Revenue | | :------------------------------------ | :------------- | :--------------- | :------------- | :--------------- | | Net revenue | $294,079 | 100.0% | $317,173 | 100.0% | | Gross profit | $143,418 | 48.8% | $151,885 | 47.9% | | Selling and administrative | $129,356 | 44.0% | $135,510 | 42.7% | | Operating income | $3,983 | 1.4% | $2,486 | 0.8% | | Interest expense | $9,262 | 3.1% | $10,447 | 3.3% | | Loss before income taxes | $(5,276) | (1.8)% | $(7,877) | (2.5)% | | NET LOSS | $(3,667) | (1.2)% | $(5,251) | (1.7)% | Selected Income Statement Data (26 Weeks Ended, in thousands) | Metric | August 1, 2025 | % of Net Revenue | August 2, 2024 | % of Net Revenue | | :------------------------------------ | :------------- | :--------------- | :------------- | :--------------- | | Net revenue | $555,287 | 100.0% | $602,644 | 100.0% | | Gross profit | $276,144 | 49.7% | $290,865 | 48.3% | | Selling and administrative | $252,818 | 45.5% | $262,911 | 43.6% | | Operating income | $1,613 | 0.3% | $4,719 | 0.8% | | Interest expense | $18,527 | 3.3% | $20,783 | 3.4% | | Loss before income taxes | $(16,900) | (3.0)% | $(15,892) | (2.6)% | | NET LOSS | $(11,929) | (2.1)% | $(11,693) | (1.9)% | Adjusted Net Loss and Diluted Loss Per Share (13 Weeks Ended, in thousands, except per share amounts) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss | $(3,667) | $(5,251) | | Corporate restructuring | $2,434 | $2,338 | | Long-lived asset impairment | $— | $2,805 | | Exit costs | $— | $687 | | Tax effects on adjustments | $(619) | $(1,297) | | ADJUSTED NET LOSS | $(1,852) | $(718) | | ADJUSTED DILUTED LOSS PER SHARE | $(0.06) | $(0.02) | Adjusted Net Loss and Diluted Loss Per Share (26 Weeks Ended, in thousands, except per share amounts) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss | $(11,929) | $(11,693) | | Corporate restructuring | $5,766 | $2,680 | | Exit costs | $257 | $687 | | Long-lived asset impairment | $— | $2,805 | | Tax effects on adjustments | $(1,365) | $(1,384) | | ADJUSTED NET LOSS | $(7,271) | $(6,905) | | ADJUSTED DILUTED LOSS PER SHARE | $(0.24) | $(0.22) | Adjusted EBITDA (13 Weeks Ended, in thousands) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss | $(3,667) | $(5,251) | | Income tax benefit | $(1,609) | $(2,626) | | Interest expense | $9,262 | $10,447 | | Depreciation and amortization | $7,656 | $8,692 | | Corporate restructuring | $2,434 | $2,338 | | Exit costs | $— | $687 | | Long-lived asset impairment | $— | $2,805 | | (Gain) loss on disposal of property and equipment | $(11) | $53 | | Adjusted EBITDA | $14,062 | $17,061 | Adjusted EBITDA (26 Weeks Ended, in thousands) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------------------ | :------------- | :------------- | | Net loss | $(11,929) | $(11,693) | | Income tax benefit | $(4,971) | $(4,199) | | Interest expense | $18,527 | $20,783 | | Depreciation and amortization | $15,947 | $17,697 | | Corporate restructuring | $5,766 | $2,680 | | Exit costs | $257 | $687 | | Long-lived asset impairment | $— | $2,805 | | Loss on disposal of property and equipment | $— | $52 | | Adjusted EBITDA | $23,583 | $28,640 | Second Quarter 2025 compared with Second Quarter 2024 Q2 2025 net revenue decreased by 7.3% to $294.1 million, with mixed channel performance, while gross margin improved by 90 basis points to 48.8%, leading to increased operating income and an improved net loss - Gross Merchandise Value (GMV) was approximately flat compared to Second Quarter 2024[110] - Net revenue decreased by $23.1 million (7.3%) to $294.1 million in Q2 2025 from $317.2 million in Q2 2024[111] Net Revenue by Channel (Q2, in millions) | Channel | Q2 2025 | Q2 2024 | Change (%) | | :------------------- | :------ | :------ | :--------- | | U.S. eCommerce | $167.3 | $188.3 | -11.2% | | Outfitters | $66.4 | $63.2 | +5.1% | | Third Party | $21.6 | $18.9 | +14.3% | | Europe eCommerce | $19.6 | $23.0 | -14.8% | | Licensing and Retail | $19.2 | $23.9 | -19.7% | - Gross profit decreased by $8.5 million (5.6%) to $143.4 million, but gross margin increased by 90 basis points to 48.8% in Q2 2025, driven by improved promotional productivity and licensing business expansion[117] - Operating income increased to $4.0 million in Q2 2025 from $2.5 million in Q2 2024[121] - Net loss improved to $3.7 million in Q2 2025 from $5.3 million in Q2 2024, with diluted loss per share improving from $(0.17) to $(0.12)[125] - Adjusted EBITDA decreased to $14.1 million in Q2 2025 from $17.1 million in Q2 2024[127] Year-to-Date 2025 compared with Year-to-Date 2024 Year-to-Date 2025 net revenue decreased by 7.8% to $555.3 million, or 5.8% excluding licensing impact, with U.S. eCommerce down 5.8%, while Outfitters and Third Party channels increased, and gross margin improved by 140 basis points to 49.7%, resulting in decreased operating income and a slightly worsened net loss - Gross Merchandise Value (GMV) decreased low-single digits, but increased low-single digits excluding the $12.7 million impact of transitioning kids and footwear inventory to licensees in Q1 2024[131] - Net revenue decreased by $47.3 million (7.8%) to $555.3 million for Year-to-Date 2025, or 5.8% excluding the impact of transitioning kids and footwear inventory to licensees[132] Net Revenue by Channel (YTD, in millions) | Channel | YTD 2025 | YTD 2024 | Change (%) | | :------------------- | :------- | :------- | :--------- | | U.S. eCommerce | $338.0 | $358.9 | -5.8% | | Outfitters | $109.3 | $105.8 | +3.3% | | Third Party | $35.6 | $34.4 | +3.5% | | Europe eCommerce | $37.5 | $47.9 | -21.7% | | Licensing and Retail | $34.8 | $55.6 | -37.4% | - Gross profit decreased by $14.8 million (5.1%) to $276.1 million, but gross margin increased by 140 basis points to 49.7% for Year-to-Date 2025, driven by improved promotional productivity and licensing business expansion[138] - Operating income decreased to $1.6 million in Year-to-Date 2025 from $4.7 million in Year-to-Date 2024[142] - Net loss slightly worsened to $11.9 million in Year-to-Date 2025 from $11.7 million in Year-to-Date 2024, with diluted loss per share increasing from $(0.37) to $(0.39)[146] - Adjusted EBITDA decreased to $23.6 million in Year-to-Date 2025 from $28.6 million in Year-to-Date 2024[148] Liquidity and Capital Resources The company's liquidity is primarily used for working capital, debt payments, and capital expenditures, funded by cash on hand, cash flows from operations, and the ABL Facility, with $25.0 million planned for capital expenditures in Fiscal 2025 - Primary liquidity needs are for working capital, debt payments, capital expenditures, and general corporate purposes, funded by cash on hand, cash flows from operations, and the ABL Facility[152] - As of August 1, 2025, the ABL Facility had $35.0 million outstanding borrowings and $87.6 million in borrowing availability[153] - Net cash provided by operating activities decreased to $0.5 million during Year-to-Date 2025 from $4.9 million in Year-to-Date 2024, primarily due to a decrease in adjusted EBITDA[168] - Net cash used in investing activities increased to $17.2 million during Year-to-Date 2025 from $11.5 million in Year-to-Date 2024, primarily for investments in digital information technology infrastructure[169] - Net cash provided by financing activities increased to $22.1 million during Year-to-Date 2025 from $6.9 million in Year-to-Date 2024, primarily due to increased borrowings under the ABL Facility[170] - For Fiscal 2025, the company plans to invest approximately $25.0 million in capital expenditures for strategic investments and infrastructure, primarily in technology and general corporate needs[169] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to foreign currency exchange risk, primarily from its Europe eCommerce channel, and interest rate risk due to variable rates on its Term Loan Facility and ABL Facility - The Company's international subsidiaries operate with functional currencies other than the U.S. dollar, exposing it to foreign currency exchange risk, particularly from the Europe eCommerce distribution channel (7% of Year-to-Date 2025 Net revenue)[179] - A 10% change in foreign currency exchange rates would have increased or decreased Net revenue for Year-to-Date 2025 by approximately $3.7 million[179] - The Company is subject to interest rate risk with its Term Loan Facility and ABL Facility, which have variable interest rates[181] - Each one percentage point change in interest rates (above the 2.00% SOFR floor) on the Term Loan Facility would result in a $2.4 million change in annual cash interest expenses[181] - Assuming the ABL Facility was fully drawn to $225.0 million, each one percentage point change in interest rates would result in a $2.3 million change in annual cash interest expense[181] Item 4. Controls and Procedures As of August 1, 2025, management concluded that the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - As of August 1, 2025, the Company's disclosure controls and procedures were evaluated by management, with the participation of the CEO and CFO, and concluded to be effective[183] - There have been no material changes in the Company's internal controls over financial reporting during the fiscal quarter ended August 1, 2025[184] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, but management believes their ultimate resolution will not have a material adverse effect on the company's financial position - The Company is party to various claims, legal proceedings and investigations arising in the ordinary course of business[186] - Management is of the opinion that the ultimate resolution of these proceedings should not have a material adverse effect on the company's results of operations, cash flows, or financial position[186] - There have been no material developments to the legal proceedings disclosed in the Company's Annual Report on Form 10-K for the year ended January 31, 2025[186] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended January 31, 2025, or its Quarterly Report on Form 10-Q for the quarter ended May 2, 2025 - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended January 31, 2025, and its Quarterly Report on Form 10-Q for the quarter ended May 2, 2025[187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 198,751 shares for $1.73 million under its 2024 Share Repurchase Program, with $8.8 million remaining available Issuer Purchases of Equity Securities (Second Quarter 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------- | :------------------------------- | :--------------------------- | | May 3 - May 30 | 168,751 | $8.78 | | May 31 - July 4 | 30,000 | $8.33 | | July 5 - August 1 | — | $— | | Total | 198,751 | $8.71 | - As of August 1, 2025, approximately $8.8 million remained available for repurchase under the 2024 Share Repurchase Program, which authorizes repurchases up to $25.0 million through March 31, 2026[189] - All shares of common stock repurchased during the period were retired[189] Item 5. Other Information None of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the fiscal quarter ended August 1, 2025 - None of the Company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the fiscal quarter ended August 1, 2025[190] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications from the Principal Executive Officer and Principal Financial Officer - Exhibits filed include the Amended and Restated Certificate of Incorporation, Second Amended and Restated Bylaws, Certifications of Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL Taxonomy Extension documents[191] Signatures The report is duly signed on behalf of Lands' End, Inc. by Bernard McCracken, Chief Financial Officer and Treasurer, on September 9, 2025 - The report is signed by Bernard McCracken, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) of Lands' End, Inc. on September 9, 2025[195]