US' Lands' End Q3 FY24 gross profit rises 5.6% YoY despite revenue dip

Gross margin increased approximately 360 basis points to 50.6 per cent, compared to 47.0 per cent in Q3 FY23. The gross margin improvement was primarily driven by lower promotional activity, leveraging the strength in product solutions and newness across the channels and improved supply chain costs, Lands’ End said in a press release.

Selling and administrative expenses increased by $5.6 million to $140.9 million or 44.2 per cent of net revenue, compared to $135.3 million or 41.7 per cent of net revenue in Q3 FY23. The 250 basis points (bps) increase was driven by higher digital marketing spend focused on new customer acquisition.

The adjusted net income of the company was $1.8 million, or $0.06 income per diluted share, compared to an adjusted net loss of $3.6 million or $0.11 loss per diluted share in Q3 of FY23. The net loss of the company was $0.6 million, or $0.02 loss per diluted share compared to net loss of $112.4 million or $3.52 loss per diluted share in Q3 FY23.

Adjusted EBITDA of the company stood at $20.3 million compared to $17.3 million in the third quarter of fiscal 2023.

Global e-commerce net revenue was $211.1 million, a decrease of $5.3 million from $216.4 million in the third quarter of fiscal 2023. The net revenue for e-commerce in the US was $186.1 million, a decrease of 2.2 per cent from $190.2 million in the third quarter of fiscal 2023.

Compared to third quarter of fiscal 2023, international e-commerce net revenue decreased 4.6 per cent, primarily driven by lower promotional activity and a decrease in markdown and clearance sales in third quarter of fiscal 2024, said the release.

By distribution channel, Outfitters net revenue was $73.4 million, a decrease of $0.9 million or 1.2 per cent from $74.3 million in the third quarter of fiscal 2023. The business uniform channel increased year-over-year primarily due to the strength in national accounts. The school uniform channel decreased primarily due to the timing of customer orders earlier in the back-to-school season as compared to the prior year.

Third party net revenue was $25.5 million, an increase of $1.5 million or 6.3 per cent from $24.0 million in the third quarter of fiscal 2023. The increase was primarily due to revenue generated from licensing arrangements.

“Throughout the third quarter, we sustained momentum from our deliberate efforts to drive higher quality sales, resulting in growth in both gross margin and gross profit dollars. Our sharp focus on innovation and creating solutions for life’s every journey is supporting the continued evolution of our strategy and brand. In addition to serving our loyal existing customers, our new customer acquisition increased 20 per cent year-over-year and is up mid-teens year-to-date. As we look to the holiday season, the Black Friday through Cyber Monday weekend met our expectations and was characterised by strong customer engagement with balanced performance across our channels,” said Andrew McLean, chief executive officer (CEO) of Land’s End.

“In the third quarter, we delivered low-double digit growth in gross merchandise value (GMV), which exceeded our guidance range, and adjusted EBITDA growth of 17 per cent year-over-year, which was within our guidance range. We also achieved improvements in gross margin and gross profit, primarily driven by lower promotional activity, strength in product solutions, newness across the channels and improved supply chain costs. By improving profit margins across our business units, we have been able to reinvest in the business, including our marketing efforts focused on new customer acquisition,” said Bernie McCracken, chief financial officer (CFO) of Land’s End.

Nine-month (9M) financials

For the nine months ended November 1, 2024, the company reported net revenue of $921.3 million, reflecting a decline compared to $957.7 million for the same period in FY23. Gross profit for the 9M period stood at $452.0 million, an improvement from $430.1 million in FY23. However, total expenses rose, with selling and administrative costs increasing to $403.8 million from $377.7 million, and depreciation and amortisation decreasing slightly to $25.9 million from $28.4 million.

Despite improvements in operating performance, the company recorded a net loss of $12.3 million for this period, significantly better than the $122.1 million net loss in FY23. This translates to a diluted loss per share of $0.39 compared to $3.80 in the same period of the prior year.

Outlook

For the fourth quarter (Q4) of FY24, Land’s End expects net revenue to be between $440.0 million and $480.0 million. The company expects its GMV to grow by low-to-mid single digits. It also projects a net income of $18.0 million to $21.0 million, with diluted earnings per share ranging from $0.58 to $0.67. Additionally, adjusted net income is expected to be between $16.0 million and $19.0 million, with adjusted diluted earnings per share estimated at $0.51 to $0.61. Adjusted EBITDA is expected in the range of $43.0-$47.0 million.

For full FY24, the company expects net revenue to be between $1.36 billion and $1.40 billion. It expects GMV growth to be in the low-to-mid single digits. Net income is projected to range between $6.0 million and $9.0 million, with diluted earnings per share estimated at $0.19 to $0.29. Adjusted net income is forecast to be between $11.0 million and $14.0 million, with adjusted diluted earnings per share ranging from $0.35 to $0.45. Adjusted EBITDA is expected to be in the range of $92.0 million to $96.0 million, while capital expenditures are anticipated to be approximately $35.0 million.

ALCHEMPro News Desk (SG)