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Lands' End (LE) Q4 Earnings Top Estimates, Digital Sales Solid

Shares of Lands' End, Inc. LE increased 9.7% during trading hours on Mar 17, following better-than-expected results during fourth-quarter fiscal 2020. Strength in the company’s business model and global e-commerce business aided quarterly results.

Apparently, global e-commerce net revenues jumped 7.5%, buoyed by Europe e-commerce rising 38% and U.S. e-commerce improving 3.7%. Notably, global new customers rose 13.7%. Management is also encouraged by the company’s recent partnership with Kohl's KSS. It is on track to enhance distribution to 300 Kohl's stores in 2021.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have increased 88.6% versus the industry’s 71.9% rally.

Let’s Delve Deeper

The company posted earnings of 60 cents a share that beat the Zacks Consensus Estimate of 56 cents. However, the reported figure declined 23.1% from 78 cents earned in the year-ago period.

Lands' End generated net revenues of $538.4 million that beat the Zacks Consensus Estimate of $531 million but dropped 2% from the year-ago period. Excluding nearly a $40-million impact of the American Airlines launch from the year-ago period, the metric would have risen 5.6%. Moreover, Outfitters net revenues plunged 54.2% to $43 million. Excluding the American Airlines’ launch impact, revenues would have fallen 20.8% on lower customer demand due to the pandemic.

Lands End, Inc. Price and Consensus

Lands End, Inc. Price and Consensus
Lands End, Inc. Price and Consensus

Lands End, Inc. price-consensus-chart | Lands End, Inc. Quote

Nonetheless, third-party net revenues, including U.S. wholesale revenues and sales in third-party marketplaces, surged 298.2% year over year to $21.3 million.

Gross profit dropped 2.7% to $212.8 million. Also, gross margin contracted 30 basis points (bps) to 39.5% owing to higher shipping costs and surcharges along with sales mix from the third- party business. This was mostly offset by better promotional strategies and persistent use of data analytics.

Further, selling and administrative (S&A) expenses dropped 1.6% to $166.7 million. However, S&A, as a rate of sales, increased 20 bps to 31% on deleverage from the American Airlines launch, somewhat offset by robust controls of operating expenses and structural costs. Meanwhile, adjusted EBITDA fell 6.5% to $46.1 million in the fiscal fourth quarter.

Financial Details

Lands' End ended the quarter with cash and cash equivalents of $33.9 million, net long-term debt of $245.6 million and total stockholders’ equity of $369.7 million. Further, inventories at the end of the quarter were $382.1 million, up 1.7% year over year.

As of Jan 29, 2021, it had $25 million of outstanding borrowings and $223 million availability under its asset-based senior secured credit facility. The company had $271.6 million of term loan debt outstanding as of Jan 29.

Meanwhile, the company generated net cash of $91.6 million from operating activities during fiscal 2020.

Outlook

Going forward, management is focused on driving continued growth in the company’s global e-commerce business, progressing with the recovery of the Outfitters business, and advancing the third-party and marketplace-growth initiatives.

For the fiscal first quarter of fiscal 2021, the company projects net revenues of $275-$285 million on strength in its global e-commerce business. Further, adjusted EBITDA is envisioned in the band of $4-$7 million. The company forecasts loss per share between 32 cents and 25 cents. We note that the Zacks Consensus Estimate for first-quarter revenues is pegged at $244.1 million. Further, the consensus estimate for the quarter stands at a loss of 31 cents.

For the first half, net revenues are estimated between $600 million and $620 million on gains from global e-commerce business, third parties and recovery of the Outfitters business. Adjusted EBITDA is likely to come in the band of $14-$20 million. Further, it anticipates loss per share of 50-36 cents.

For fiscal 2021, management expects net revenues in the bracket of $1.52-$1.57 billion, mainly backed by global e-commerce business and the recovery of the Outfitters business. Adjusted EBITDA is projected in the range of $88-$98 million. Moreover, it predicts earnings per share between 34 cents and 58 cents. We expect adjusted EBITDA in the range of $88 million to $98 million. Capital expenditures are anticipated at roughly $26 million for the fiscal year. We note that the Zacks Consensus Estimate for revenues and earnings is pegged at $1.57 billion and 67 cents, respectively, for fiscal 2021.

Hot Stocks in Retail

Abercrombie & Fitch ANF has a long-term earnings-growth rate of 18% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

L Brands LB, also a Zacks Rank #1 stock, has a long-term earnings-growth rate of 13%.

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