Lands’ End CEO: Baby Boomers and Gen X are key drivers for our business
Jerome Griffith, Lands' End CEO, joins Yahoo Finance live to discuss the company's latest earnings report, outlook for the school year and what's next for the retailer amid the pandemic.
- This is Yahoo Finance's Live. I'm Julie Hyman. We are looking at Lands' End, which recently reported its earnings. Saw an increase in sales, like we have seen it at many retailers. The increase in their sales is about 48%. And want to bring in CEO Jerome Griffith to talk to about what they are seeing, what kind of trends. You know, Jerome, we've been talking a lot about reopening trends, about people getting out and traveling again. You have some insight into what people are buying maybe to travel or to prepare for the summer. You guys have been seeing big sales of swimsuits, of beach towels. Talk to me about the read through and how it compares to summers past.
JEROME GRIFFITH: One of the biggest things we've seen is people continuing to shop online. There's been a huge increase of people shopping online since COVID started. But as we lap that a year later and starting to come out of COVID, we still see increased demand and increased shopping on the web. What's interesting for these folks that are shopping there, it's not the increase of millennials, it's the increase of Baby Boomers and Gen Xers who are really key to our business. The products that have been working is anything that's comfort-oriented throughout the pandemic. So home furnishings, knitwear, knit tops, knit bottoms.
And then as we come into the summertime, everyone's going on vacation. So you see everyone buying shorts, and somewhere, and beach towels, and comfort tops. And you see people also preparing to get back to work. So they're thinking about going back to the office. But it's going to be a hybrid model for most folks. Not everybody is going to be back in the office Monday through Friday. And the thing that people, we're finding, don't want to give up when they go back to the office is comfort. So they want to stay comfortable both at home and in the office.
- So Jerome, in this environment, this hybrid workforce that we're all probably looking at going forward, are we going to go back to wearing khakis? Is this another late 90s trend that is going to come back, except maybe just a little more form-fitting pants?
JEROME GRIFFITH: I've been in the business for 43 years. Generally, when you see trends, trends continue. Trends don't go backwards. One of the things that we think is that people have found out so much about, hey, I can actually work, get my job done, and be super comfortable while I'm doing it, and it doesn't mean that I'm not dressed for success or I'm dressed to meet with clients. It's OK to be comfortable while you're working. I don't see the trends going back whatsoever. I also don't see people from the standpoint in gaining freedom and how they're managing themselves, I don't see that going backwards either. I think you're going to continue to see like hybrid models and people valuing comfort.
- What is your visibility so far in back to school? It's a pretty important business for Lands' End. What are you seeing so far?
JEROME GRIFFITH: It is. We think from what we understand back to school is going to be pretty much back to normal. We have a sizeable uniform business between national accounts like Delta and American, small and medium-sized businesses and school uniforms. What we've seen over the course of the last year is that business is coming back a lot faster than what we anticipated, particularly in the national accounts, but also in schools. Early reads look like we'll have a pretty normal back to school season, albeit a little bit later than what normally it would be.
- And Jerome, what are you guys seeing in terms of pricing? I just hopped on over to your site, as I was reminded I need to stock up on stuff for my kids camp, and saw that you guys have some sale items, as you tend to do, that you have a sale running right now. So kind of promotionally, what's the cadence like, and are you doing fewer promotions than you would have been?
JEROME GRIFFITH: What we've seen throughout the course of last quarter, but also probably the last three or four quarters, is that consumers are excited to be out shopping. We're finding that they're spending more at full price. And what we think we're seeing right now is several things really working together for us. One is we've had a big focus on reducing our average unit cost because of the increases in volume that we've had. So our sourcing guys have done great there. One is being able to manage price points through artificial intelligence, through something we call dynamic promo-- we're on version 1.5 right now-- which all look good. But the things that are pushing against us from a pricing standpoint are really macroeconomic issues.
You've got increase in commodities. So cotton prices, for example, are going up. You've got increases in shipping costs from getting goods from the country of origin into America and then problems getting it into America because of the congestion at the ports. Then you've got increases in costs from getting things from our warehouse to the consumer. So you've got things working against all the good work that we've been doing. But overall, our gross margin was up about 200 and some-odd points last quarter. And we think that that's really sustainable going into the end of this year.
- And Jerome, your business, like so many right now, facing all these crosscurrents. You mentioned the international shipping is clogged, commodities, and so forth. As you think about what you want the portfolio to look like in three years, inventory levels, promotional levels, all those things, are you guys starting to have some vision on what a new normal might be for Lands' End, or is it still kind of let's get through what continues to be kind of a fascinating, challenging, also successful period for the business?
JEROME GRIFFITH: Since we went public in 2014, I think the company's been very diligent in investing in tech. And if you look at the things that are paying off for us now, all those tech investments as we were leading up into 2020, we're beginning to pay off in February of 2020. Then you had the hit with COVID. But what we're seeing now is all those investments continue to pay off. And we will continue to double down on our digitally-led strategies. And what we're seeing from a distribution standpoint is that our e-commerce sites are working both domestically and internationally.
Our B2B e-commerce site's working extremely well. And we're continuing to upgrade that this year. And then new partnerships like Amazon or Kohl's, which are working very well for us. They're all about not just getting additional revenue, but also increasing new customers. What we're finding with places like that where we're selling product is that it was really focused on bringing more people into the brand. And we're seeing a little over 50% of the people that are shopping with us in these new channels of distribution are brand new to Lands' End, and another quarter haven't shopped with us for five years or more. So we're quite happy with those channels.
And then finally, one of the things we think is really going to pay off for us in the long run is our marketplace technology. We're opening up our website to other brands to sell their product to our consumers because our consumers say, you know, it would be very convenient to get other things that we're looking for on your website. So we see a pretty long runway for us in the next several years.
- Jerome, good to catch up with you. Thanks so much for being here. Jerome Griffith is the CEO of Lands' End. Appreciate it.