The stock rose about 1.5 percent today, continuing a steady climb that has it up 8 percent this week. We think this is mostly ordinary movement since there was no new company news and the whole market rose.
Our view
The company is moving toward a lighter business model with less debt, but the core retail business is still seeing sales decline. If you have been thinking about buying it, we would wait to see if the brand can stabilize its customer base first.
Lands' End filed formal paperwork confirming Charlie Cole has officially started as the new Chief Executive Officer. This follows an earlier announcement in June about the leadership change.
Leadership transitions are always important for a retailer in the middle of a turnaround. Cole is taking over as the company tries to move away from owning all its own inventory and toward a model where it earns more from licensing its brand to others. This shift is meant to make the business more profitable and less risky, but the new CEO will have to prove he can stop the current slide in sales while making that transition.
Analysts have consistently maintained their buy ratings on Lands' End following the company's recent quarterly earnings report. Two of the three analysts rate the stock a buy, with an average price target suggesting a 26% gain from today.
Average target$16.50+26%vs $13.12 today
TodayAvg price
Low $15High $18
Buy3 analysts
0Bearish
1Neutral
2Bullish
FirmRatingPrice TargetDate
Craig-Hallum
Buy
$15
3/28/2024
Telsey Advisory
—
$18
9/13/2022
Craig-Hallum
Buy
$15
4/22/2022
Lands' End earnings
The company has a habit of clearing the low bars set by analysts, beating earnings expectations in five of the last eight quarters even as total revenue has been shrinking.
Earnings history
EstimateBeatMiss
Lands' End past earnings results
Expected
Actual
Surprise
EPS
$-0.21
$-0.11
+47.6%
Revenue
$269M
$239M
-11.1%
Key highlights
Revenue outlook remains steady: The company expects full year revenue to land between $1.30 billion and $1.40 billion, showing that management remains confident in its sales targets for the rest of the year. This annual forecast is important because it suggests the business can recover from recent operational hiccups and maintain its market position.
Distribution issues hurt sales: Total revenue fell 8.5% to $238.9 million because of a temporary disruption caused by upgrading a warehouse management system at its main U.S. facility. Management noted that without this shipping delay, sales would have grown by a low single-digit percentage, indicating that customer demand is actually healthier than the headline number suggests.
Europe business shows strength: Revenue from the European web business grew 14.5% to $20.5 million, which was a bright spot that avoided the shipping problems faced in the United States. This growth is a positive sign for long-term owners as it proves the company can successfully expand its brand and improve its mix of products in international markets.
Balance sheet gets stronger: The company used $300 million from a new partnership deal to fully pay off its term loan, which is a type of long-term debt. This move is significant for shareholders because it lowers interest costs and gave the board enough confidence to authorize $100 million for buying back company stock.
Inventory levels rising: Inventory rose 14% compared to last year to $299.9 million, partly due to the shipping delays and the impact of taxes on imported goods, known as tariffs. While higher inventory can tie up cash, the company expects these levels to come back in line as its shipping centers return to normal speed.
Our take: This was a noisy quarter where a one-time warehouse glitch masked solid underlying demand. The big news is the debt payoff, which cleans up the books and gives the company more freedom to return cash to shareholders. It is a messy but encouraging step forward for the long-term case.
