Lands’ End stays hot in second quarter

According to Lands’ End president and CEO Edgar Huber, the company is well positioned to continue executing against its strategic initiatives to drive long-term sales and earnings growth.



The retailer, which completed its separation from Sears on April 4, has achieved double digit year-over-year adjusted EBITDA growth for more than four consecutive quarters as of the second quarter of fiscal 2014.



“We are pleased with our second quarter results and our progress towards growing the business and building Lands’ End into a global lifestyle brand,” said Huber. “While the overall retail environment remained challenging, we continued to see positive customer response to our merchandising and marketing initiatives and remain focused on improving the contemporary relevance of the Lands’ End brand. Improved merchandise assortment, modern creative presentation, better inventory management and continued expense controls all contributed to another quarter of strong sales and margin increases. In the second quarter, merchandise sales and services revenue increased 5.4% to $347.2 million while gross margin improved 310 basis points to 48.5% and operating income increased 37.6% to $25.3 million.”



Merchandise sales and services increased 5.4% to $347.2 million in the quarter, from $329.6 million in the second quarter of 2013. Merchandise sales and services in the Direct segment increased 7.1% to $292.6 million, driven by growth in all direct businesses due to improved sell-through of current season merchandise.



Merchandise sales and services in the Retail segment decreased 2.9% to $54.6 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. The decrease, however, was partially offset by an increase in same-store sales. Same-store sales in the Retail segment increased 2.8%, driven by higher sales in the company’s Lands’ End Shops at Sears.



Gross profit increased 12.5% to $168.4 million and gross margin increased 310 basis points to 48.5% in the quarter compared with $149.7 million and 45.4%, respectively, in the second quarter of 2013. The increase in gross margin was driven by increases in gross margin in the Direct segment, which improved 320 basis points to 49.2%, and in the Retail segment of 200 basis points to 44.7%. The gross margin increases in both the Direct and Retail segments were attributable to improved merchandise assortment architecture and a more targeted promotional strategy.



Net income increased 4.9% to $11.8 million, or $0.37 per diluted share, in the second quarter of 2014 compared with $11.3 million, or $0.35 per diluted share, in the second quarter of 2013.



Adjusted EBITDA1 increased 26.6% to $30.1 million in the quarter, from $23.8 million in the second quarter of 2013.