Lands’ End Swings to $5.76 Million Loss in Q1

The retailer's aggressive discounting helped reduce profit margins and couldn't prevent an 8.7% decline in sales.
Katie Kuehner-HebertJune 1, 2016

Apparel and accessories retailer Lands’ End swung to a loss in the first quarter as aggressive discounting cut into profit margins and failed to prevent a steep sales slide.

The company on Wednesday reported a loss of $5.76 million, or 18 cents a share, down from a year-earlier profit of $1.72 million, or 5 cents a share. Revenue declined 8.7% to $273.4 million.

Promotions helped push Lands’ End’s gross profit margin down to 47.4% from 49% a year earlier and same-store sales, a key retail metric, fell 7.1%.

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“Our financial results in the first quarter were impacted by the overall weakness in the retail environment, including aggressive discounting and promotional activity,” Lands End CEO Federica Marchionni said in a news release.

As The Wall Street Journal reports, retailers across the spectrum “have been hurt by dwindling foot traffic as shoppers increasingly turn to online retailer, fast-fashion chains and discounters.”

Lands’ End was spun off from Sears Holdings Corp. in 2014 and runs many of its shops inside Sears stores. According to the Milwaukee Sentinel, the firm’s core catalog and online business accounts for the great majority of the sales declines of the past year.

“Since taking over as top executive in February 2015, Marchionni has been steering tradition-minded Lands’ End on a more stylish tack and has launched such changes as eliminating catalog circulation to less-profitable customers,” the Sentinel noted.

In an earnings call, Marchionni said the younger, trendier and higher-priced Canvas line has been attracting more young professionals to the retailer, and has also doubled the value of the average Lands’ End order.

“We believe that this new line creates a halo effect and enables us to test product and quality updates for the overall Lands’ End brand,” she said.

Marchionni also cited Lands’ End’s new e-commerce website and refinements to its catalog strategy in predicting results would improve beginning in the second quarter of fiscal 2016.

Wall Street was less sanguine. Shares in the company, down 28% this year through Tuesday’s close, dropped a further 5.7% to $15.81 in trading Wednesday.