Lands' End Swings to Q2 Loss After Gross Margin Drops

Scott Peters
01 Sep, 2022
New York City

Lands' End, Inc declined 14% to $11.87 after the apparel retailer said quarterly loss narrowed but expenses and inventories rose.   

For the second quarter, net revenue fell 8.6% to $351.2 million from $384.1 million a year ago. 

Online sales declined 16% in the second quarter driven by 14.4% fall in the U.S. sales and 23.9% drop in international sales. 

Gross margin decreased approximately 530 basis points to 41.0% from 46.3%, driven by $11.7 million higher transportation expenses and higher promotional activities. 

Net Inventories increased to $569.2 million at the end of the quarter from $464.3 million last year. 

The company swung to a net loss of $2.2 million or 7 cents a diluted share compared to net income of $16.2 million or 48 cents a diluted share last year. 

 

Cash Flow 

Earlier receipt of goods for fall and holiday seasons negatively impacted cash flows. 

In the second quarter, net cash used in operations was $117.5 million compared to net cash provided by operations of $30.5 million. 

 

Stock Repurchase Program 

During the second quarter, the company repurchased $2.4 million of its common stock under its previously announced $50 million share repurchase program.

Guidance and Outlook

For fiscal 2022, the apparel retailer guided revenue to be between $1.60 billion and $1.64 billion and net income between $16.5 million and $23.5 million, and diluted earnings per share between $0.49 and $0.70.

For the third quarter of fiscal 2022, the retailer guided net revenues in the range between $375 million and $390 million and  net income between $1 million and $4 million and diluted earnings per share between 3 cents and 12 cents. 

Approximately $9 million and $35 million expenses in the third quarter and full-year outlooks are due to incremental transportation expenses linked to supply chain disruption and the rising share of air freight.