Lands' End sales drop as store base shrinks

Lands' End sales fell in its October quarter as its store base dwindled, though an improved merchandise assortment and a more-targeted promotional strategy helped drive a 26% increase in profits.

For the third quarter ended Oct. 31, Lands' End posted a profit of $18 million, or 56 cents a share, up from a profit of $14.3 million, or 45 cents a share, a year earlier. Revenue, meanwhile, fell 2.8% to $373.1 million as same-store sales fell 3.1%.

"We delivered another quarter of strong operating margin increases driven by a better assortment of product, a more targeted promotional strategy and disciplined expense controls. Profitable growth and price integrity are critical components of the Lands' End's brand strategy and this represents the sixth consecutive quarter in which we have delivered better than 20% growth in operating income,” said Edgar Huber, Lands' End president and CEO.

As of Oct. 31, the company operated 242 boutiques in Sears locations and 14 standalone stores, down from 275 Sears boutiques and 16 standalone stores a year earlier. Revenue in the company's direct business -- Internet and catalog sales -- fell 1.2% to $320.3 million, hurt by weakness abroad. The direct business makes up the majority of Lands' End's sales. Net merchandise sales in the retail segment fell 11.5% to $52.8 million on the decline in Lands' End Shops at Sears. Gross margin, however, widened to 49.1% from 45.4%, as the retailer reduced its total expenses by 6.3%.