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Lands' End (LE) Q4 Earnings Top Estimates, Digital Sales Solid

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Shares of Lands' End, Inc. (LE - Free Report) increased 9.7% during trading hours on Mar 17, following better-than-expected results during fourth-quarter fiscal 2020. Strength in the company’s business model and global e-commerce business aided quarterly results.

Apparently, global e-commerce net revenues jumped 7.5%, buoyed by Europe e-commerce rising 38% and U.S. e-commerce improving 3.7%. Notably, global new customers rose 13.7%. Management is also encouraged by the company’s recent partnership with Kohl's (KSS - Free Report) . It is on track to enhance distribution to 300 Kohl's stores in 2021.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have increased 88.6% versus the industry’s 71.9% rally.

Let’s Delve Deeper

The company posted earnings of 60 cents a share that beat the Zacks Consensus Estimate of 56 cents. However, the reported figure declined 23.1% from 78 cents earned in the year-ago period.

Lands' End generated net revenues of $538.4 million that beat the Zacks Consensus Estimate of $531 million but dropped 2% from the year-ago period. Excluding nearly a $40-million impact of the American Airlines launch from the year-ago period, the metric would have risen 5.6%. Moreover, Outfitters net revenues plunged 54.2% to $43 million. Excluding the American Airlines’ launch impact, revenues would have fallen 20.8% on lower customer demand due to the pandemic.

Lands End, Inc. Price and Consensus

 

Lands End, Inc. Price and Consensus

Lands End, Inc. price-consensus-chart | Lands End, Inc. Quote

Nonetheless, third-party net revenues, including U.S. wholesale revenues and sales in third-party marketplaces, surged 298.2% year over year to $21.3 million.

Gross profit dropped 2.7% to $212.8 million. Also, gross margin contracted 30 basis points (bps) to 39.5% owing to higher shipping costs and surcharges along with sales mix from the third- party business. This was mostly offset by better promotional strategies and persistent use of data analytics.

Further, selling and administrative (S&A) expenses dropped 1.6% to $166.7 million. However, S&A, as a rate of sales, increased 20 bps to 31% on deleverage from the American Airlines launch, somewhat offset by robust controls of operating expenses and structural costs. Meanwhile, adjusted EBITDA fell 6.5% to $46.1 million in the fiscal fourth quarter.

Financial Details

Lands' End ended the quarter with cash and cash equivalents of $33.9 million, net long-term debt of $245.6 million and total stockholders’ equity of $369.7 million. Further, inventories at the end of the quarter were $382.1 million, up 1.7% year over year.

As of Jan 29, 2021, it had $25 million of outstanding borrowings and $223 million availability under its asset-based senior secured credit facility. The company had $271.6 million of term loan debt outstanding as of Jan 29.

Meanwhile, the company generated net cash of $91.6 million from operating activities during fiscal 2020.

Outlook

Going forward, management is focused on driving continued growth in the company’s global e-commerce business, progressing with the recovery of the Outfitters business, and advancing the third-party and marketplace-growth initiatives.

For the fiscal first quarter of fiscal 2021, the company projects net revenues of $275-$285 million on strength in its global e-commerce business. Further, adjusted EBITDA is envisioned in the band of $4-$7 million. The company forecasts loss per share between 32 cents and 25 cents. We note that the Zacks Consensus Estimate for first-quarter revenues is pegged at $244.1 million. Further, the consensus estimate for the quarter stands at a loss of 31 cents.

For the first half, net revenues are estimated between $600 million and $620 million on gains from global e-commerce business, third parties and recovery of the Outfitters business. Adjusted EBITDA is likely to come in the band of $14-$20 million. Further, it anticipates loss per share of 50-36 cents.

For fiscal 2021, management expects net revenues in the bracket of $1.52-$1.57 billion, mainly backed by global e-commerce business and the recovery of the Outfitters business. Adjusted EBITDA is projected in the range of $88-$98 million. Moreover, it predicts earnings per share between 34 cents and 58 cents. We expect adjusted EBITDA in the range of $88 million to $98 million. Capital expenditures are anticipated at roughly $26 million for the fiscal year. We note that the Zacks Consensus Estimate for revenues and earnings is pegged at $1.57 billion and 67 cents, respectively, for fiscal 2021.

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