Lands' End (LE) Prelim. Q4 Revenue Exceeds Views

Lands’ End, Inc. (Nasdaq: LE) announced estimated preliminary financial results for the fourth quarter ending January 29, 2016.

Net revenue is expected to be between $464 million and $474 million in the fourth quarter of fiscal 2015, a decrease of 6% to 8% compared to $505 million in the fourth quarter of fiscal 2014.

*** The Street sees Q4 revenue of $444.4 million.

Net revenue in the Direct segment is expected to be between $401 million and $410 million for the fourth quarter of fiscal 2015 compared to $432 million for the fourth quarter of fiscal 2014. The expected decrease is primarily attributable to a decline in the Company’s U.S. businesses resulting from a highly promotional environment and unfavorable weather conditions. Monthly year-over-year sales performance improved sequentially during the quarter as the Company increased promotional activity.

Net revenue in the Retail segment is expected to be between $63 million and $64 million in the fourth quarter of fiscal 2015, compared to $73 million in the fourth quarter of fiscal 2014. The expected decrease is primarily the result of a decline in same store sales, and a decrease in the number of Lands’ End Shops at Sears. Same store sales in the Retail segment are expected to decrease between 8% and 10%. The Company operated 227 Lands’ End Shops at Sears, 14 global Lands’ End Inlet stores and five international shop-in-shops on January 28, 2016 compared to 236 Lands’ End Shops at Sears, 14 global Lands’ End Inlets and five international shop-in-shops on January 30, 2015.

Gross margin is expected to be between 42.0% and 42.2% in the fourth quarter of fiscal 2015 compared to 44.0% in the fourth quarter of fiscal 2014. The expected Gross margin decline is primarily due to a decrease in the Direct segment, as well as a smaller decrease in the Retail segment.

The Company is performing its annual testing of goodwill and indefinite-lived intangible assets. As a result, the Company has determined a write-down of the Lands’ End trade name is required. The estimated impairment of $90 million to $110 million will reduce the value of the asset from $528 million to between $418 million and $438 million. This non-cash accounting charge will not impact the Company’s liquidity, cash flows, compliance with debt covenants or any future operations.

Including the impairment, Net loss is expected to be between $35 million and $50 million, and diluted loss per share is expected to be $1.08 to $1.55 in the fourth quarter of fiscal 2015 compared with Net income of $33 million and diluted earnings per share of $1.03 in the fourth quarter of fiscal 2014. The impairment is expected to negatively impact diluted earnings per share by $1.86 to $2.24.

*** The Street sees Q4 EPS of $0.77.

Adjusted EBITDA1 is expected to be in the range of $44 million to $48 million in the fourth quarter of fiscal 2014, compared to $70 million in the fourth quarter of fiscal 2014.

Federica Marchionni, Lands' End's President and Chief Executive Officer, stated, "While our financial results were negatively impacted by the unseasonably warm weather, weak economic fundamentals and the continuation of a highly promotional retail environment, we continued to make progress on a number of key initiatives across product, branding, technology, distribution and talent to achieve our vision for Lands' End as a meaningful global lifestyle brand. These strategic initiatives, which we have implemented over the last several quarters, are intended to enhance our appeal to our core customer, as well as inject design and aspiration that will expand the reach of our brand to a broader consumer base over time. Overall, we believe that the steps that we are taking are positioning us to achieve meaningful long term growth."

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