Lands' End plots physical expansion as sales jump 11%

Dive Brief:

Lands' End on Thursday posted its best quarterly performance in three years. Net revenue in the fourth quarter rose 11.3% year over year to $510.6 million, including $25.9 million from an extra week of trading. It was the third consecutive quarter of growth, following 11 straight quarters of sales declines, according to CEO Jerome Griffith. Same-store sales rose 5%, according to a company press release.
Revenue from the direct segment rose 14.3% to $455.6 million. Retail net revenue fell 8.7% to $55.1 million, primarily due to the closing of Lands' End Shops at Sears. Overall gross margin inched up 30 basis points to 38.9%, but retail gross margin fell to 31.6%, mainly from discounts and a negative selling mix, according to CFO James Gooch.
Profits in the quarter swelled from a tax benefit of $21.9 million, or 88 cents per share, the company said. Net income was $39.8 million, up from a net loss of $94.8 million a year ago. Adjusted earnings before interest, taxes, depreciation and amortization was $37.3 million, up more than 20% from $30.7 million last year.

Dive Insight:

Under Griffith, Lands' End is returning to its merchandise roots, moving away from the style changes attempted under Federica Marchionni, who stepped down in September.

The stylish dresses and tops from Canvas, which Marchionni tried to revive, have been swept away in favor of outerwear and basics, which did especially well in the quarter, Griffith told analysts, according to a transcript from Seeking Alpha.

Several items sold out over the holidays, with outerwear, flannel shirts and flannel sleepwear performing especially well. "As we look ahead, we will continue to focus on driving these key categories forward," Griffith said, adding that he thought the company could capitalized on current trends such as "matching family Christmas pajamas."

The company is also bolstered by its uniform sales to American Airlines, Delta and schools, he added. A test program to outfit 51,000 American Airlines employees gets underway in October, with a full rollout for airport customer service, premium customer service and flight attendants by late 2019, executives said. Lands' End is also getting a boost from a new tie-up with The Weather Channel to showcase products, according to Griffith, who said that the company's outerwear has been regularly featured on air.

As it moves away from its in-store relationship with Sears, Lands' End plans to expand its brick-and-mortar footprint. Lands' End expects to open its first Chicago store in the second quarter and plans to open four to six stores this year.

Over the next five years, the plan is to open 40 to 60 locations, based on traffic, convenience, analytics and where the retailer enjoys strong brand recognition, according to Griffith. The move represents a branching out from Lands' End's pure play roots, and also runs against widespread assumptions that brick-and-mortar is being overtaken by e-commerce.

But the company is also focused online, making improvements to its website and mobile operations, as well as partnering with third-party marketplaces, including Amazon, Griffith said.