Lands’ End(US:LE)2022-12-01 17:15Financial Data and Key Metrics Changes - Total revenue for Q3 2022 decreased by 1% to $371 million compared to the previous year, missing guidance due to a slowdown in consumer demand [26] - Adjusted EBITDA was $16.7 million, below expectations of $20 million to $24 million, and down from $29.8 million in 2021, primarily due to gross margin pressure [32] - The company reported a net loss of $4.7 million or $0.14 per share, compared to a net income of $7.4 million or $0.22 per share in 2021 [31] Business Line Data and Key Metrics Changes - Global e-commerce sales decreased by 5% year-over-year, with U.S. e-commerce sales fairly flat, down 1%, while international sales dropped by 20% due to inflation and geopolitical issues [27] - Revenue from the third-party business increased by 60% compared to Q3 2021, driven by strong performance at Kohl's and other marketplaces [28] - The outfitters business saw a 6% decrease in sales, attributed to the normalization of travel-related purchases after last year's accelerated demand [28] Market Data and Key Metrics Changes - Inventory at the end of the quarter was $565 million, an 18% increase from $480 million a year ago, primarily due to early receipts for the holiday season [33] - The company expects inventory levels to normalize by the end of spring/summer 2023 [33] Company Strategy and Development Direction - The company is focusing on strategic growth pillars including product, digital, unit channel distribution, and infrastructure [14] - There is an emphasis on enhancing customer engagement through improved search capabilities and social media presence [18] - The company plans to leverage data-driven strategies to optimize margins and remain competitive in a highly promotional environment [20] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer behavior is shifting towards seeking promotions due to inflationary pressures, impacting discretionary spending [7][48] - The company anticipates a highly promotional environment in the fourth quarter, with margin pressures from increased freight and supply chain costs [34] - Management expressed confidence in the brand's long-term resilience, supported by a loyal customer base with an average tenure of 18 years [38] Other Important Information - The company announced the appointment of Andrew McLean as CEO-Designate, who will succeed Jerome Griffith at the end of the fiscal year [39] - The company is also focusing on improving supply chain capabilities with new appointments in key positions [41][42] Q&A Session Summary Question: Can you expand on the customer environment, both digitally and in your third-party business? - Management noted continued growth in third-party business, particularly with Amazon and Kohl's, and highlighted that customers are looking for promotions due to rising costs [47][48] Question: Can you expand on inventory levels and supply chain costs for 2023? - Management indicated that while inventory is up 18%, the quality is satisfactory, and they expect normalization by spring/summer 2023 [53] Question: What is the expectation for the promotional environment in the fourth quarter? - Management expects a highly promotional environment, particularly post-Christmas, with potential clearance sales in January due to inventory gluts [59][60] Question: When will the benefits of reduced container costs be seen in gross margins? - Management stated that benefits from reduced shipping costs will start to be realized towards the end of spring and summer 2023 [63] Question: Was the sales increase during Thanksgiving and Cyber Week a pleasant surprise? - Management noted that while Cyber Week is important, the current week is also significant, with traffic patterns resembling pre-pandemic trends [65]