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Bear of the Day: Lands' End (LE)

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Lands' End, Inc. (LE - Free Report) is still navigating supply chain issues even as demand for apparel remains strong. This Zacks Rank #5 (Strong Sell) has had its full year earnings estimate cut in the last 30 days.

Lands' End is a retailer of casual clothing, accessories, footwear and home products for women, men, kids and the home. It operates online at www.landsend.com, on third party marketplaces such as at Kohl's, and through its own brick and mortar retail locations.

Highest Full Year Sales Since 2011

On Mar 16, Lands' End reported its fourth quarter and fiscal 2021 full year results and missed on the Zacks Consensus Estimate by $0.12. Earnings were $0.21 versus the Zacks Consensus of $0.33.

Fourth quarter revenue rose 3.2% to $555.4 million from $538.4 million. Global eCommerce net revenue fell 4.4% to $441.5 million from $461.9 million the year before due to shipping delays caused by supply chain challenges. US eCommerce fell 2.2% and International fell 14.6%.

Outfitters, however, increased 43.6% to $61.8 million due to stronger demand within Lands' End travel-related national accounts and school uniform customers.

The Kohl's partnership continues to pay off as third party net revenue, which includes the Kohl's partnership, rose to $36.3 million from $21.3 million a year ago.

The $15 million increase was mostly due to the Kohl's partnership which expanded to 300 locations during the third quarter of 2021 from 150 retail locations in the fourth quarter of 2020.

Increased shipping costs due to the global supply chain challenges hit gross margins, which fell about 360 basis points to 35.9% from 39.5% a year ago.

For the full year, revenue rose 14.7% year-over-year for the company's highest revenue since 2011.

Supply Chain Challenges Hit Fiscal 2022

The supply chain challenges that hit in the fourth quarter of 2021 aren't over. Lands' End warned that it would take a $15 million hit in the first quarter due to incremental shipping costs.

It also expects year-over-year sales growth to be higher in the back half of the year due to lapping strong demand from the first half of 2021 and inventory constraints it experienced in the back half of 2021.

2022 Earnings Estimates Cut

Analysts have gotten bearish on Lands' End.

One analyst cut their 2022 earnings estimate in the last month which has pushed the Zacks Consensus down to $0.94 from $1.40 during that time. That's an earnings decline of 5% as Lands' End made $0.99 last year.

Shares Sink Over the Last Year

The apparel retailers were hot to start 2021 when sales exceeded expectations on the reopen. But as supply challenges hit, shares have sunk.

Lands' End shares are down 33.8% over the last year. They saw a rebound off the lows in 2022 but are still down 18.5% year-to-date.

Zacks Investment Research
Image Source: Zacks Investment Research

Will they make new lows before they report first quarter results?

Shares aren't that cheap. They trade with a forward P/E of 17.9.

Retailers are out of favor in 2022 as the supply chain challenges persist and fears about a recession swirl. If you're interested in the group, you may want to keep them on your watch list and tune into their first quarter reports.

 


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