Lands’ End slowdown part of retail malaise

Lands’ End said first-quarter 2022 sales fell 5.5% and blamed “unprecedented food and fuel inflation,” according to CEO Jerome Griffith. “Client was looking for comfortable, casual clothes a year ago because he was working from home.” It’s true and it created a spike in demand. However, this has now subsided and current inflationary pressures have only reinforced the shift in consumer buying habits.

The litany of complaints about high inventory and low sales, prompted by a failure to understand changing consumer preferences, is now well documented. walmart
WMT
Target
TGT
Ross Stores
ROST
, and other retailers all reported inventory that was too high and out of sync with current customer preferences. Customers come back to work in the offices, get rid of their casual sweaters and pants and dress in business casual again. No ties, but more traditional work clothes are once again part of the routine for many. This encourages consumers to refresh this part of their wardrobe rather than continuing to buy more casual clothes.

Based on how many stores planned their merchandise purchases, it seems no one predicted how quickly the daily clothing change would happen. But it came as more casual goods poured into stores and were unpacked, leaving stores like Lands’ End with excess inventory. Their inventory was up about 11% from a year ago while revenue fell 5.5%.

Gross margin fell 42.5% due to additional supply chain costs of $14 million. The company is hopeful that its inventory flow will soon normalize and that it can better meet customer needs in the future. Lands’ End adjusts its product assortment to accommodate changes in customer preference.

It is important to note that Jim Gooch, Chief Financial Officer
CFO
of Land’s End, said he is encouraged to see some stabilization in freight costs, as carriers have now begun to honor contracted rates. This is indeed good news for Lands’ End and the retail industry. However, transportation costs are expected to remain high for the rest of this year.

Lands’ End now offers its assortment in 300 Kohl’s stores. The assortment will expand to 500 stores by fall 2022 and will be in approximately 600 stores by the end of the year. This should boost sales due to the additional stores. In the first quarter, sales increased by 83% with third-party suppliers.

Global e-commerce revenue fell 15.7% in the first quarter. Breaking down geographically, net e-commerce revenue in the United States decreased by 14.1% and international e-commerce decreased by 21.7%. The company said delays in receiving key products were responsible.

Net outfitting revenues (business merchandise and uniforms) increased 32.6%, due to strong demand from the company’s small and medium-sized business customers, national accounts and school uniform accounts.

To recap:

For the three months ended April 29, 2022, net revenue fell 5.5% to $303.7 million from $321.4 million last year. In 2021, the company reported a loss of $2.4 million or $0.07 per diluted share. The company now expects net revenue of $1.62 billion to $1.68 billion and net profit between $20.0 and $29.0 million. He expects adjusted EBITDA to be between $100 million and $112 million and capital expenditures to be around $37 million.

POST SCRIPTUM : It is hoped that specialty retailers will be more nimble in assessing future customer demand. We see here again that the long-term commitments of any trader have pitfalls. We all knew there would be an effort to get people back into offices and in-person teamwork would be revived, and retailers need to watch these changes carefully. While COVID-19 is still taking its toll, most office workers want to have a connection to their office. They will wear appropriate clothing. This still allows for recreation and recreation wear, but this merchandise has been purchased and will do for now. Customers want fresh produce for how their daily routines are today.

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