Lands’ End(LE) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total company revenue decreased slightly to $340 million compared to $341.6 million in the same period last year, reflecting 89 fewer Lands' End Shops at Sears and a slower start to the heavier outerwear business [32] - Adjusted EBITDA grew nearly 20% to $18.8 million, within the guidance range of $17 million to $20 million [10][39] - Gross margin increased approximately 110 basis points to 45.3%, driven by more disciplined promotional strategies and analytics optimization [37] Business Line Data and Key Metrics Changes - U.S. e-commerce sales grew 7.4%, while company-operated retail stores delivered strong comparable sales growth of 8.3% [10][34] - The denim business saw double-digit growth, reflecting a favorable response to a refreshed assortment [14] - The school uniform business experienced profitability improvement with higher gross margins despite reduced promotions [36] Market Data and Key Metrics Changes - The company faced sales headwinds due to unseasonably warm temperatures earlier in the quarter, but saw an uptick in selling trends as colder weather arrived [11] - The company ended the quarter with 36 Shops at Sears, all in liquidation, impacting overall retail sales [35] Company Strategy and Development Direction - The company is focused on a digitally-led strategy, improving business processes, and enhancing customer relationships through product offerings [12][30] - Plans to expand presence in third-party marketplaces and pursue licensing agreements to create new high-margin revenue streams [27] - The company aims to reduce exposure to China to approximately 20% of total shipments, mitigating tariff impacts [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving long-term financial targets despite challenges, emphasizing the importance of data analytics in decision-making [11][12] - The company anticipates further gross margin expansion in the fourth quarter based on current trends [37] - Management highlighted the successful launch of the American Airlines partnership, expecting significant revenue contribution in the fourth quarter [36] Other Important Information - The company was recognized by Newsweek as one of America's Best Customer Service online apparel retailers [29] - The mobile experience was enhanced with a 75% reduction in load time on product detail pages, significantly increasing mobile conversion rates [19] Q&A Session Summary Question: Performance during Cyber Week - Management noted strong performance in gift-giving categories, with turtlenecks and personalized items selling particularly well [53] Question: Mitigating factors for tariffs next year - Management discussed ongoing efforts to reduce reliance on China and the expectation of continued vendor negotiations to mitigate tariff impacts [55] Question: Leveraging data analytics for inventory management - Management explained the use of AI-based dynamic promotions to maximize gross margins and sales volume, with ongoing improvements expected [56] Question: Confidence in inventory composition - Management expressed confidence in the inventory composition, stating it is seasonally appropriate and expected to normalize by the end of the fourth quarter [62]