Lands’ End earnings: ‘We went from a pretty rocky start to a really good finish,’ CEO says

Lands’ End CEO Andrew McLean joins Yahoo Finance Live to discuss company earnings, inventory, consumer behavior and demand, and the outlook for Lands’ End.

Video Transcript

- Lands' End fourth quarter loss suggests strong promotions during the holiday season weren't enough to offset inflationary pressures and supply chain collapses in the broader economy. For more on the company's Q4 results, let's get to Lands' End CEO Andrew McLean. Andrew, great to have you here. Help us break down this quarter. What were some of the catalysts? What were some of the detractors here that you look at and hopefully are able to continue to turn the ship here?

ANDREW MCLEAN: Yeah. Thank you. You know, we came into the quarter, things were a little tough. We had that the-- we had bet on sleep, had worked well for us during the pandemic. A number of other retailers did it and we found ourselves drowning in sleep along with many of our other competitors. We had to liquidate that inventory.

Where we really started to turn the ship was when we thought about when we looked at our data, we do have a lot of data in our company. We were able to look and see where is the customer leaning in? What are they looking at? And we saw a couple of things. One, we have this amazing outerwear collection. We've been known for it for a long time. The customer wanted that outerwear.

And so we started to lean into offers around the outerwear that started carts. And once we get a cart started, we can really begin to build that order value. And that helped us through the month of December.

And then January, we built on that by launching swim early. The customer had been telling us that they wanted to swim possibly as a year round resource. We lean into it, started our resort season early, and we saw good numbers come from that. So we went from a pretty rocky start to a really good finish.

- Well, Andrew, it's Julie here. I got to tell you, I'm a big beach chow fan of Lands' End stuff. I have a lot, like my camp-- my camps-- my kids' camps, they're fully outfitted with the Lands' End towels and some swimwear as well. So I'm among the ranks of those folks.

I am curious what kind of discounting you have had to employ, right, because that has been something that kind of went away during the pandemic, or at least was a lot less and then has come back with force to many retailers?

ANDREW MCLEAN: You know, we started to personalize our discounting. So we thought we put the customer first. I know every retailer says that. But we actually looked in and we looked at the behavioral cohorts of our customers. And we have a really strong engine that's able to price accurately against them and tailor an offer to them.

So if you get an email from us, we have an AI-driven system that looks at the customer, understands their buying practices, and really tailors an offer that's specific to them. And we get way more engagement than that.

And one of our wins that is, you know, we have conversion that can run 2, 3x times any of our competitors. And so we're able to flex that muscle up and down. And that's really how we set about it. So this was not a blunt instrument approach. This was really, really considered and thoughtful about how we got ahead of our inventory and got ourselves to the end of the year looking fresh.

- Andrew, my closet is swimming in technical fabrics right now. Where is Lands' End adjusted its own make up of inventory, the different types of fabrics that are kind of woven into the strategy moving forward as you're going after that core consortium or consumer that is continuing to engage with the brand?

ANDREW MCLEAN: It's a great question. We have a long heritage. We're a 60-year-old company. And we've always invested in technical fabrics and thinking about our customers. So I'll take swim, it's near and dear to my heart. The amount of innovation that we do around swim is astonishing. And I actually think we can talk about it more. So I look at from rash guards to tummy tucks to, you know, strategies for holding you in how you want to look.

We've really thought about that we're going to spend less time thinking about the athletic world. And we're going to spend more time solving the issues that come up in customers' lives and making them feel great about the product they wear from us.

And I actually-- I just spent time with my merchant and design teams. I wanted a little inspiration before I came on the call. And they were showing me some of the innovation for spring. And what we're starting to do is we're going to flow some of that technical innovation that we've had in swim for actually for quite a long time. We're going to flow that into the rest of our product assortment. And we think that can really drive some of our key categories

- Andrew, how are you guys thinking about store footprint right now? I saw that you saw a drop in your store-- company-operated stores comps sales. And so I wonder what the plans are in terms of growing or shrinking that footprint.

ANDREW MCLEAN: Yeah, we have 30 stores. So I mean, it's not going to set the world on fire in terms of where the size of it is right now. Even though I've come from, you know, a store background, I was at several retailers that had a lot of stores, I tend to look at it on an ROIC basis. And right now, I see opportunities ahead of stores. You know, we are this digitally native company, sort of, unicorn in there, that we're scale-- scalable and profitable with our two digital businesses.

And I think it's more about putting energy into those and having any activities around that, the flywheels that spin customers into that. And I don't know a store is necessarily fit within that, at least for the foreseeable future. And for the foreseeable future, that's 6 to 9 months for me at the moment.

- When you look at the mix, the inventory mix, I mean, we continue to hear from retailers what they would deem successful based on the amount of that inventory that they're selling at full price. What's a good figure that you think about at Lands' End for that?

ANDREW MCLEAN: Yeah. We don't give that figure out, but as close to 100% as we possibly can. A lot of our mix is actually basics and seasonal basics and they're in stocks forever. I know you see a lot of it in your closets. And so we lean into-- we lean into those and we don't need to discount those. So where we run into trouble is where we get pockets of overhanging inventory.

We talked about sleep earlier. We also had some issues with kids coming through last year. We see it in pockets and we take care of those and that tends to be more on the fashion side of things. So again, it's very specific to the customer because we let that guide us and like what we think the customer is going to want at what price.

- Andrew, thanks so much for being here today, really interesting conversation. Andrew McLean, Lands' End CEO. Thanks.