Lands' End Announces First Quarter of Fiscal 2014 Results

Lands' End Announces First Quarter of Fiscal 2014 Results

DODGEVILLE, Wis., June 12, 2014 (GLOBE NEWSWIRE) -- Lands' End, Inc.
(Nasdaq:LE) today announced financial results for the first quarter ended May
2, 2014.

First Quarter Highlights:

  *The Lands' End separation from Sears Holdings Corporation was completed on
    April 4, 2014.
    
  *Merchandise sales and services, net increased 3.6% to $330.5 million from
    the first quarter last year. This was comprised of an increase in the
    Direct segment of 4.8% to $276.0 million and a decrease in the Retail
    segment of 2.3% to $54.4 million; same store sales increased 3.4%.
    
  *Gross margin increased approximately 60 basis points to 49.0% from the
    first quarter last year.
    
  *Selling and administrative expenses increased 0.9% to $138.2 million and
    included approximately $1.0 million of stand-alone public company related
    costs as compared to the first quarter last year. As a percentage of
    Merchandise sales and services, net, Selling and administrative expenses
    decreased 110 basis points to 41.8% compared to the first quarter last
    year.
    
  *Operating income increased 57.1% to $18.8 million compared to $12.0
    million last year.
    
  *Net income increased 48.1% to $10.9 million compared to $7.3 million last
    year.
    
  *Diluted earnings per share increased 48.1% to $0.34 from $0.23 last year.
    
  *Adjusted EBITDA^1 increased 35.2% to $23.8 million compared to $17.6
    million last year.

Edgar Huber, Lands' End's President and Chief Executive Officer, stated, "We
are very pleased with our first quarter results and our progress towards
growing the business and building Lands' End into a global lifestyle brand.
We are encouraged by the positive customer response to our merchandising and
marketing strategies and remain focused on improving the contemporary
relevance of the Lands' End brand.Despite a very challenging retail apparel
environment, we drove strong earnings growth through an improved merchandise
assortment architecture, more targeted promotions, improved inventory
management and continued expense controls. In the first quarter, merchandise
sales and services revenue increased 3.6% to $330.5 million while gross margin
improved approximately 60 basis points to 49.0% and operating income increased
57.1% to $18.8 million. We are excited to be operating, once again, as an
independent public company and believe we are well positioned to execute
against our strategic initiatives to drive sales and earnings growth."

First Quarter Results

Merchandise sales and services, net increased 3.6% to $330.5 million in the
first quarter of 2014 from $319.0 million in the first quarter of 2013.
Merchandise sales and services, net in the Direct segment increased 4.8% to
$276.0 million and was driven by growth in the U.S. consumer business.
Merchandise sales and services, net in the Retail segment decreased 2.3% to
$54.4 million driven by a decrease in the number of Lands' End Shops at Sears
and a decrease in Shop Your Way redemption credits resulting from the
commercial agreements entered into with Sears Holdings Corporation and its
subsidiaries as part of the Company's separation, partially offset by an
increase in same store sales. Same store sales in the Retail segment increased
3.4%, driven by higher sales in the Company's Lands' End Shops at Sears. On
May 2, 2014, the Company operated 251 Lands' End Shops at Sears and 14
independent Inlet stores.

Gross margin increased 4.8% to $162.0 million and increased approximately 60
basis points to 49.0% in the first quarter of 2014 compared to the first
quarter of 2013. The increase in Gross margin was driven primarily by an
increase in Gross margin in the Direct segment, which improved 160 basis
points to 49.6%, and was fueled by significantly higher Gross margin in the
U.S. consumer business attributable to improved merchandise assortment
architecture and more targeted promotions. Gross margin in the Retail segment
decreased approximately 450 basis points to 46.1% driven primarily by lower
gross margins associated with an increased mix of clearance units and by
incremental net costs associated with the Shop Your Way program.

Selling and administrative expenses increased 0.9% to $138.2 million in the
first quarter of 2014 compared to the first quarter of 2013 primarily due to
approximately $1.0 million of stand-alone public company related expenses. As
a percentage of Merchandise sales and services, net, Selling and
administrative expenses decreased 110 basis points to 41.8%.

Depreciation and amortization expense decreased 11.5% to $5.0 million in the
first quarter of 2014 from $5.7 million in the first quarter of 2013 primarily
attributable to an increase in fully depreciated assets.

As a result of the above factors, Operating income in the first quarter of
2014 increased 57.1% to $18.8 million compared to $12.0 million in the first
quarter of 2013.

Interest expense was $1.9 million in the first quarter and was attributable to
higher debt levels and costs related to the issuance of the term loan used to
pay a $500 million dividend to a subsidiary of Sears Holdings Corporation
immediately prior to the separation.

Income tax expense was $6.1 million for the first quarter of 2014 compared to
$4.6 million in the first quarter of 2013. The effective tax rate was 36.1% in
the first quarter of 2014 compared to 38.7% in the first quarter of 2013. The
change in our effective tax rate was primarily due to decreased effective
state tax rates and one-time separation related items.

Net income increased 48.1% to $10.9 million, or $0.34 per diluted share, in
the first quarter of 2014 compared to $7.3 million, or $0.23 per diluted
share, in the first quarter of 2013.

Adjusted EBITDA^1 increased 35.2% to $23.8 million in the first quarter of
2014 from $17.6 million in the first quarter of 2013.

Cash flow generated from operating activities was $31.4 million for the first
quarter of 2014 compared to $19.5 million in the first of quarter of 2013. The
increase was primarily attributable to more efficient inventory management and
an increase in Net income.

Balance Sheet Highlights

Cash was $65.0 million on May 2, 2014 compared to $21.8 million on May 3,
2013. The increase in cash was driven by our retention of cash beginning with
our separation April 4, 2014 from Sears Holdings Corporation, more efficient
inventory management and an increase in Net income.

The Company had $160.2 million of availability under its asset-based senior
secured credit facility and had long-term debt of $509.9 million as of May 2,
2014. Inventory decreased 5.4% to $327.0 million and Accounts receivable
increased 43.1% to $39.8 million on May 2, 2014 from Inventory of $345.6
million and Accounts receivable of $27.8 million on May 3, 2013. The increase
in Accounts receivable was primarily related to amounts owed from Sears
Holdings Corporation following the separation, and the timing of sales in the
Lands' End Business Outfitters business. 

About Lands' End, Inc.

Lands' End® is a classic American lifestyle brand with a passion for quality,
legendary service, real value and a simple two-word promise to stand behind
everything it sells: Guaranteed. Period.® Lands' End delivers timeless style
for Men, Women, Kids and the Home at landsend.com, 1-800-800-5800, Lands' End
Shops at Sears, Lands' End Inlets and around the world. Lands' End is
publicly traded and listed on NASDAQ under the trading symbol (LE).

Forward-Looking Statements

Certain statements in this press release and oral statements made from time to
time by representatives of the Company are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. In
particular, statements regarding the Company's guidance, outlook, future
financial and operating results and any other statements about the Company's
future expectations, beliefs or prospects expressed by management are
forward-looking statements. These forward-looking statements are based on
management's current expectations and beliefs, but they involve a number of
risks and uncertainties that could cause actual results or events to differ
materially from those indicated by such forward-looking statements.Statements
preceded or followed by, or that otherwise include, the words "believes,"
"expects," "anticipates," "intends," "project," "estimates," "plans,"
"forecast," "is likely to" and similar expressions or future or conditional
verbs such as "will," "may," "would," "should" and "could" are generally
forward-looking in nature and not historical facts. Such statements are based
upon the current beliefs and expectations of our management and are subject to
significant risks and uncertainties. Actual results may differ materially from
those set forth in the forward-looking statements.

Important factors that could cause actual results to differ materially from
expectations are disclosed under the "Risk Factors" section of the 10-K for
the fiscal year ended January 31, 2014, filed with the Securities and Exchange
Commission on March 25, 2014, and in the Company's Form 10 filed with the
Securities and Exchange Commission on March 17, 2014. Readers are urged not to
place undue reliance on these forward-looking statements, which speak only as
of the date such statements are made. While we believe that our forecasts and
assumptions are reasonable, we caution that actual results may differ
materially. If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be incorrect, actual
results may vary materially from what we projected. Consequently, actual
events and results may vary significantly from those included in or
contemplated or implied by our forward-looking statements. The Company does
not undertake any obligation to update or alter any forward-looking
statements, whether as a result of new information, future events or
otherwise.

                          -Financial Tables Follow-

                                      



LANDS' END, INC.
Condensed Consolidated and Combined Balance Sheets
(Unaudited)

(in thousands, except share data)          May 2,      May 3,      January 31,
                                           2014       2013       2014
ASSETS                                                           
Current assets                                                   
Cash                                       $ 64,976    $ 21,755    $ 22,411
Restricted cash                            3,300       3,300       3,300
Accounts receivable, net                   39,800      27,819      33,617
Inventories, net                           326,973     345,606     369,928
Prepaid expenses and other current assets  29,663      28,217      21,993
Total current assets                       464,712     426,697     451,249
Property and equipment                                           
Land, buildings and improvements           105,266     103,043     104,812
Furniture, fixtures and equipment          78,260      71,088      75,625
Computer hardware and software             64,942      62,724      65,810
Leasehold improvements                     12,347      12,668      12,517
Gross property and equipment               260,815     249,523     258,764
Less accumulated depreciation              162,159     144,530     157,668
Total property and equipment, net          98,656      104,993     101,096
Goodwill                                   110,000     110,000     110,000
Intangible assets, net                     530,683     533,314     531,342
Other assets                               23,703      725         588
TOTAL ASSETS                               $ 1,227,754 $ 1,175,729 $ 1,194,275
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities                                              
Accounts payable                           $ 76,091    $ 70,967    $ 115,387
Deferred tax liabilities                   3,732       3,171       4,019
Other current liabilities                  108,776     98,026      83,955
Total current liabilities                  188,599     172,164     203,361
Long-term debt                             509,850     —           —
Long-term deferred tax liabilities         168,349     195,579     195,534
Other liabilities                          15,630      3,086       3,066
TOTAL LIABILITIES                          882,428     370,829     401,961
Commitments and contingencies                                    
STOCKHOLDERS' EQUITY                                             
Common stock, par value $0.01- authorized:
480,000,000 shares; issued and             320         —           —
outstanding: 31,956,521
Additional paid-in capital                 340,176     —           —
Retained earnings                          5,946       —           —
Net parent company investment              —           808,866     794,309
Accumulated other comprehensive loss       (1,116)     (3,966)     (1,995)
Total stockholders' equity                 345,326     804,900     792,314
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,227,754 $ 1,175,729 $ 1,194,275



LANDS' END, INC.
Condensed Consolidated and Combined Statements of Comprehensive Operations
(Unaudited)

                                          13 Weeks Ended
(in thousands except per share data)       May 2, 2014       May 3, 2013
REVENUES                                                    
Merchandise sales and services, net        $ 330,483         $ 319,035
COSTS AND EXPENSES                                          
Cost of sales (excluding depreciation and  168,461           164,447
amortization)
Selling and administrative                 138,206           136,976
Depreciation and amortization              5,002             5,652
Other operating expense, net               20                —
Total costs and expenses                   311,689           307,075
Operating income                           18,794            11,960
Interest expense                           1,925             —
Other income, net                          137               1
Income before income taxes                 17,006            11,961
Income tax expense                         6,138             4,625
NET INCOME                                 $ 10,868          $ 7,336
Other comprehensive income (loss), net of                   
tax
Foreign currency translation adjustments   879               (805)
COMPREHENSIVE INCOME                       $ 11,747          $ 6,531
NET INCOME PER COMMON SHARE ATTRIBUTABLE                    
TO STOCKHOLDERS
Basic:                                     $ 0.34            $ 0.23
Diluted:                                   $ 0.34            $ 0.23
                                                           
Basic weighted average common shares       31,957            31,957
outstanding^(a)
Diluted weighted average common shares     31,957            31,957
outstanding^(a)

(a) On April4, 2014, Sears Holdings Corporation distributed 31,956,521 shares
of Lands' End common stock. The computation of basic and diluted shares for
all periods through April 4, 2014 were calculated using the shares distributed
on April4, 2014.


Use and Definition of Non-GAAP Financial Measures

^1Adjusted EBITDA—In addition to our Net income determined in accordance with
accounting principles generally accepted in the United States ("GAAP"), for
purposes of evaluating operating performance, we use an Adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"),
which is adjusted to exclude certain significant items as set forth below. Our
management uses Adjusted EBITDA to evaluate the operating performance of our
business, as well as for executive compensation metrics, for comparable
periods. Adjusted EBITDA should not be used by investors or other third
parties as the sole basis for formulating investment decisions as it excludes
a number of important cash and non-cash recurring items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it
is an important indicator of operating performance, and useful to investors,
because:

  *EBITDA excludes the effects of certain on-going financing and investing
    activities from earnings by eliminating the effects of interest and
    depreciation costs.
    
  *Other significant items, while periodically affecting our results, may
    vary significantly from period to period and have a disproportionate
    effect in a given period, which affects comparability of results. We have
    adjusted our results for these items to make our statements more
    comparable and therefore more useful to investors as the items are not
    representative of our ongoing operations. For the 13 weeks ended May 2,
    2014, we excluded the loss on disposal of property and equipment as
    management considers the gains or losses on disposal of assets to result
    from investing decisions rather than ongoing operations.



LANDS' END, INC.
Adjusted EBITDA Reconciliation
(Unaudited)
                                      
                                      13 Weeks Ended
                                      May 2, 2014        May 3, 2013
(in thousands)                         $'s      % of      $'s      % of
                                                NetSales          NetSales
Net income                             $ 10,868 3.3%      $ 7,336  2.3%
Income tax expense                     6,138    1.9%      4,625    1.4%
Other income, net                      (137)    —%        (1)      —%
Interest expense                       1,925    0.6%      —        —%
Operating income                       18,794   5.7%      11,960   3.7%
Depreciation and amortization          5,002    1.5%      5,652    1.8%
Loss on disposal of property and       20       —%        —        —%
equipment
Adjusted EBITDA                        $ 23,816 7.2%      $ 17,612 5.5%

                                      



LANDS' END, INC.
Condensed Consolidated and Combined Statements of Cash Flows
(Unaudited)

                                                                 
                                                      13 Weeks Ended
(in thousands)                                         May 2, 2014 May 3, 2013
CASH FLOWS FROM OPERATING ACTIVITIES                              
Net income                                             $ 10,868    $ 7,336
Adjustments to reconcile net income to net cash                   
provided by operating activities:
Depreciation and amortization                          5,002       5,652
Amortization of debt issuance costs                    155         —
Loss on disposal of property and equipment             20          —
Deferred income taxes                                  2,774       (204)
Change in operating assets and liabilities:                       
Inventories                                            44,135      31,972
Accounts payable                                       (39,543)    (36,617)
Other operating assets                                 (7,344)     (3,102)
Other operating liabilities                            15,310      14,438
Net cash provided by operating activities              31,377      19,475
CASH FLOWS FROM INVESTING ACTIVITIES                              
Purchases of property and equipment                    (1,548)     (818)
Net cash used in investing activities                  (1,548)     (818)
CASH FLOWS FROM FINANCING ACTIVITIES                              
Contributions from / (distributions to) parent         8,784       (24,868)
company, net
Proceeds from issuance of long-term debt               515,000     —
Debt issuance costs                                    (11,311)    —
Dividend paid to a subsidiary of Sears Holdings        (500,000)   —
Corporation
Net cash provided by (used in) financing activities    12,473      (24,868)
Effects of exchange rate changes on cash               263         (291)
NET INCREASE (DECREASE) IN CASH                        42,565      (6,502)
CASH, BEGINNING OF PERIOD                              22,411      28,257
CASH, END OF PERIOD                                    $ 64,976    $ 21,755
SUPPLEMENTAL INFORMATION:                                         
Supplemental Cash Flow Data:                                      
Unpaid liability to acquire property and equipment     $ 391       $ 1,196
Income taxes paid                                      $ 2,079     $ 1,325
                                                                 

Financial information by segment is presented in the following tables for the
13 weeks ended May2, 2014 and May3, 2013.

SUMMARY OF SEGMENT DATA



LANDS' END, INC.
Segment Financial Information
(Unaudited)


(in thousands)                     Direct      Retail   Corporate/ Total
                                                        Other
13 Weeks Ended May 2, 2014                                      
Merchandise sales and services,    $ 276,041   $ 54,430 $ 12       $ 330,483
net
Costs and expenses:                                             
Cost of sales (excluding           139,112     29,349   —          168,461
depreciation and amortization)
Selling and administrative         107,666     22,755   7,785      138,206
Depreciation and amortization      4,015       644      343        5,002
Other operating expense, net       —           —        20         20
Total costs and expenses           250,793     52,748   8,148      311,689
Operating income (loss)            25,248      1,682    (8,136)    18,794
Interest expense                   —           —        1,925      1,925
Other income, net                  —           —        137        137
Income (loss) before income taxes  25,248      1,682    (9,924)    17,006
Interest expense                   —           —        1,925      1,925
Other income, net                  —           —        137        137
Depreciation and amortization      4,015       644      343        5,002
Loss on disposal of property and   —           —        20         20
equipment
Adjusted EBITDA                    $29,263    $2,326  $(7,773)  $23,816
Total assets                       $ 1,077,769 $ 66,808 $ 83,177   $ 1,227,754

                                      

LANDS' END, INC.
Segment Financial Information
(Unaudited)
                                                               
(in thousands)                     Direct      Retail   Corporate/ Total
                                                        Other
13 Weeks Ended May 3, 2013                                      
Merchandise sales and services,    $ 263,322   $ 55,700 $ 13       $ 319,035
net
Costs and expenses:                                             
Cost of sales (excluding           136,901     27,546   —          164,447
depreciation and amortization)
Selling and administrative         105,134     24,968   6,874      136,976
Depreciation and amortization      4,428       887      337        5,652
Total costs and expenses           246,463     53,401   7,211      307,075
Operating income (loss)            16,859      2,299    (7,198)    11,960
Other income, net                  —           —        1          1
Income (loss) before income taxes  16,859      2,299    (7,197)    11,961
Other income, net                  —           —        1          1
Depreciation and amortization      4,428       887      337        5,652
Adjusted EBITDA                    $21,287    $3,186  $(6,861)  $17,612
Total assets                       $ 1,065,611 $ 69,450 $ 40,668   $ 1,175,729

CONTACT: ICR
         John Rouleau / Rachel Schacter
         203-682-8200
         John.Rouleau@icrinc.com
         Rachel.Schacter@icrinc.com
        
         Lands' End, Inc.
         Michele Casper
         Senior Director of Public Relations
         (608) 935-4633
         Michele.Casper@landsend.com
        
         Lands' End, Inc.
         Mike Rosera
         Chief Operating Officer and Chief Financial Officer
         (608) 935-9341

Lands' End Company Logo
 
Press spacebar to pause and continue. Press esc to stop.