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LE

LANDS' END, INC. (LE)·Q1 2025 Earnings Summary

Executive Summary

  • Net revenue fell to $261.2M (−8.5% YoY), but gross margin expanded 210 bps to 50.8% and Adjusted EBITDA of $9.5M landed within company Q1 guidance; licensing revenue rose over 60% while Europe eCommerce declined 28.4% amid a premium relaunch .
  • Annual FY2025 guidance was maintained (revenue $1.33–$1.45B, Adjusted EBITDA $95–$107M, Adjusted EPS $0.48–$0.86); capital expenditures were lowered to ~$25M from $30M previously, reflecting disciplined investment priorities and tariff mitigation plans (baseline ~10% globally, 30% China; China <8% of 2024 product cost) .
  • Management highlighted supply-chain resiliency (Western Hemisphere shift, co-sourcing) and AI-enabled marketplace optimization (record AOVs at Nordstrom), supporting higher-quality sales at improved margins .
  • Strategic alternatives review (including sale/merger) remains ongoing, a potential stock-reaction catalyst alongside margin trajectory and licensing expansion .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin reached “just shy of 51%,” up 210 bps YoY to 50.8%, supported by prior licensing transitions and disciplined promotions; Adjusted EBITDA of $9.5M was in-line with guidance .
    • Licensing revenue increased over 60%; new agreements for travel accessories, men’s underwear/base layer, and women’s intimates/base layer extend brand reach on an asset-light, high-margin framework .
    • Marketplace optimization, including proprietary AI tools, drove record AOVs at Nordstrom and continued growth at Amazon and Macy’s; management: “Nordstrom continues to be the fastest growth marketplace…highest AOVs we've ever recorded” .

  • What Went Wrong

    • Consolidated net revenue declined 8.5% to $261.2M (−4.2% ex kids/footwear transition); net loss widened to $8.3M (−$0.27/diluted share) on SG&A deleverage (47.3% of revenue) .
    • Europe eCommerce fell 28.4% to $17.9M due to a deliberate premium relaunch and inventory clean-up amid a weak macro, creating near-term headwinds .
    • Third party revenue decreased 9.0% to $14.1M, impacted by challenges in one marketplace (Kohl’s reset), though April saw improvement; cash from operations remained negative (−$22.5M), albeit improved vs prior year .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Revenue ($USD Millions)$318.628 $441.663 $261.208
Gross Profit ($USD Millions)$161.145 $201.335 $132.726
Gross Margin %50.6% 45.6% 50.8%
Operating Income ($USD Millions)$9.287 $36.951 $(2.370)
Adjusted EBITDA ($USD Millions)$20.269 $43.689 $9.521
Net Income (Loss) ($USD Millions)$(0.593) $18.519 $(8.262)
Diluted EPS ($USD)$(0.02) $0.59 $(0.27)
Adjusted Diluted EPS ($USD)$0.06 $0.57 $(0.18)

Segment revenue breakdown (Q1 2025 vs Q1 2024):

SegmentQ1 2024 ($M)Q1 2025 ($M)
U.S. eCommerce$170.5 $170.7
Outfitters$42.7 $42.9
Third Party$15.5 $14.1
Europe eCommerce$25.0 $17.9
Licensing & Retail$31.8 $15.6
U.S. Digital Segment$228.7 $227.7

Key KPIs (Q1 YoY):

KPIQ1 2024Q1 2025
Inventories, net ($M)$288.629 $262.372
Cash & Equivalents ($M)$27.350 $18.139
Net Cash from Operating Activities ($M)$(25.815) $(22.463)
ABL Borrowings Outstanding ($M)$40.0 $40.0
ABL Availability ($M)$133.8 $86.8
Term Loan Debt Outstanding ($M)$256.8 $243.8
Share Repurchases in Quarter ($M)$1.014 $2.777

Q1 2025 actuals vs company Q1 guidance (from Mar 20 release):

MetricCompany Guidance (Q1 2025)Actual Q1 2025
Net Revenue ($M)$260–$290 $261.2
Adjusted EBITDA ($M)$9–$12 $9.5
Adjusted Diluted EPS ($)$(0.22)–$(0.13) $(0.18)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue ($B)FY 2025$1.33–$1.45 $1.33–$1.45 Maintained
GMV GrowthFY 2025Mid-to-high single digits Mid-to-high single digits Maintained
Net Income ($M)FY 2025$8–$20 $8–$20 Maintained
Diluted EPS ($)FY 2025$0.25–$0.64 $0.25–$0.64 Maintained
Adjusted Net Income ($M)FY 2025$15–$27 $15–$27 Maintained
Adjusted Diluted EPS ($)FY 2025$0.48–$0.86 $0.48–$0.86 Maintained
Adjusted EBITDA ($M)FY 2025$95–$107 $95–$107 Maintained
Capital Expenditures ($M)FY 2025~$30 ~25 Lowered
Tariff AssumptionsFY 2025Impact of implemented global tariffs ~10% baseline globally; 30% China; China <8% 2024 product cost Clarified detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2025)Trend
AI/TechnologyReskinned consumer and B2B sites; “wear it with AI” personalization; redesigning paid search/SEO to work with AI agents .Launched AI-driven recommendation/outfitting engine; proprietary AI tool to optimize marketplace discovery; ~400K new SMS subscribers .Expanding deployment and measurable engagement gains .
Supply Chain ResiliencyInventory optimization, speed-to-market initiatives; monitoring trade policy .Accelerated Western Hemisphere production; co-sourcing globally; “less than 8%” of FY2024 buys from China .Diversification accelerated; improved agility .
Tariffs/MacroFY2025 guidance incorporated implemented global tariffs .Baseline tariff ~10% outside China, 30% China; mitigation in place; only annual guidance due to near-term uncertainty .Guidance maintained; more detail on assumptions .
Product PerformanceQ3: GMV up low-double digits; disciplined promos; strong franchises .Outerwear strength (Wonderweight, Squall) offset slower swim start; swim franchises expanding (Tuggles swim dresses) .Outerwear resilience; building swim momentum .
Regional TrendsInternational eCom −4.6% (Q3); inventory reductions .Europe eCom −28.4%; premium relaunch; marketplaces (Next, Debenhams), France relaunch .Repositioning in progress; near-term headwinds .
LicensingAsset-light growth driver; $150M+ GMV over last 12 months; expansion planned .Licensing revenue +60%; new licenses signed; distribution via landsend.com and partners .Accelerating, broadening categories/channels .
Strategic AlternativesBoard initiated process Mar 7, 2025 .Process ongoing; no further comment until appropriate .Ongoing potential corporate catalyst .

Management Commentary

  • “Record gross margin rate for the quarter, with our margin rate just shy of 51% and 210 basis points greater than last year.” – Andrew McLean, CEO .
  • “Less than 8% of our purchase order dollars last fiscal year were utilized on buys out of China…we accelerated production in the Western Hemisphere…to mitigate tariffs and provide resiliency.” – Andrew McLean, CEO .
  • “Nordstrom continues to be the fastest growth marketplace for us…highest AOVs we’ve ever recorded.” – Andrew McLean, CEO .
  • “We recently launched our Tote Girl Summer campaign…pop-up shops across iconic summertime locations.” – Andrew McLean, CEO .
  • “Partnership with Delta Air Lines commences in the second quarter of fiscal 2025…serve as their uniform provider through the end of 2027.” – Company .

Q&A Highlights

  • Guidance cadence: Company withheld quarterly guidance due to tariff uncertainty; annual guidance embeds ~10% baseline tariffs ex-China and 30% China, with mitigation plans in place .
  • Marketplaces: Challenges at Kohl’s in Q1, but reset and improving trends; continued growth at Amazon and Macy’s; Nordstrom driving premium customers and highest AOVs .
  • Delta contract: Run-rate program completion with no near-term new launch; normal volume unless Delta initiates a new product line .
  • School uniforms: $13M annualized new business added; back-to-school runs June–September; cadences expected similar to 2024 .
  • Customer file and marketing: Growth in one-to-two-time buyers; shift away from paid search toward social/influencer and AI-agent marketing; ~400K new SMS subscribers in Q1 .

Estimates Context

  • S&P Global consensus estimates were unavailable at time of analysis due to request limits; therefore, comparisons to Street consensus cannot be provided.
  • Actuals vs company guidance: Revenue ($261.2M) and Adjusted EBITDA ($9.5M) were in-line with Q1 guidance ranges; Adjusted diluted EPS (−$0.18) was within guided loss per share range .
  • With annual guidance maintained despite tariff assumptions, Street models may hold steady near management ranges, with potential mix shifts (licensing up, Europe rebuilding) to monitor .

Key Takeaways for Investors

  • Bold margin story: Gross margin expanded to 50.8% (+210 bps YoY) on higher-quality sales and licensing mix; sustaining this dynamic is central to the thesis .
  • Capital discipline: FY2025 capex lowered to ~$25M from ~$30M; reinforces focus on asset-light growth and cash preservation amid tariff uncertainty .
  • Licensing flywheel: Revenue +60% in Q1, with new categories signed; expect continued high-margin brand reach across partner channels and landsend.com .
  • Supply-chain resiliency: Western Hemisphere acceleration and co-sourcing reduce tariff exposure (China <8% of 2024 buys) and improve agility .
  • Europe reset: Near-term headwind (−28.4% eCom) as brand relaunch proceeds; watch marketplace launches (Next, Debenhams) and France site relaunch for inflection .
  • B2B continuity: Outfitters stable with Delta engagement and $13M school uniforms wins; back-to-school cadence aligned with 2024 .
  • Corporate catalyst: Strategic alternatives process remains ongoing; margin trajectory and licensing momentum are positive context for any strategic outcome .