US company Lands' End's gross profit up 0.8% in 1st quarter FY24

Lands’ End, a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms, has recorded gross profit of $139.0 million in the first quarter of fiscal 2024, an increase of $1.1 million or 0.8 per cent from $137.9 million during the first quarter of fiscal 2023.

Excluding the $12.7 million from the conclusion of the Delta Air Lines business in the first quarter of fiscal 2023, gross profit increased $13.8 million or 11.0 per cent compared to the prior year. Gross margin increased approximately 410 basis points to 48.7 per cent, compared to 44.6 per cent in the first quarter of fiscal 2023. The gross margin improvement was primarily driven by leveraging the strength in product solutions and newness across the channels, lower promotional activity, and reduction in clearance inventory and improvements in supply chain costs.

In the first quarter of 2024, GMV increased low single digits compared to the first quarter of 2023. Net revenue decreased 7.8 per cent to $285.5 million compared to $309.6 million in the first quarter of fiscal 2023. Excluding the $26.9 million in revenue from the conclusion of the Delta Air Lines business in the first quarter of fiscal 2023, net revenue increased 1.0 per cent.

Third Party net revenue was $37.5 million, an increase of $14.5 million or 62.9 per cent from $23.0 million in the first quarter of fiscal 2023. The increase was primarily due to revenue generated from licensing arrangements, including $10.5 million of Lands’ End produced inventory sold to a licensee in connection with the transition of the kids business. Online marketplaces saw increased gross profit from improved gross margin primarily driven by the expansion of the company’s strategy to focus on higher quality sales, the company said in a press release.

“Our performance in the first quarter continued the considerable momentum we generated in 2023 and resulted in an increase in our Gross Merchandise Value, an increase in gross profit dollars and significant gross margin expansion. Our value creation strategy, centered around Lands’ End being the innovative, asset-light solutions-based brand that’s ready for life’s every journey, is yielding the operational and financial results we’re targeting and positioning us well to further build the brand and grow our loyal customer base,” Andrew McLean, chief executive officer, said.

Selling and administrative expenses increased $8.9 million to $127.4 million or 44.6 per cent of net revenue, compared to $118.5 million or 38.3 per cent of Net revenue in the first quarter of fiscal 2023. The approximately 630 basis points increase was driven by deleveraging from lower revenues and higher digital marketing spend focused on new customer acquisition.

“The company’s continued focus on expanding profitability, including by better managing inventories, which were down 23 per cent year-over-year, is continuing to generate favourable results which outperformed our guidance and setting a strong foundation for future growth. When excluding the impact of the conclusion of the Delta Air Lines contract in Q1 2023, the company generated increases at the top and bottom line in the first quarter, with a 60+ per cent improvement in Adjusted EBITDA,” Bernie McCracken, chief financial officer, said.

For the second quarter of fiscal 2024, the company expects net revenue to be between $290.0 million and $320.0 million and Gross Merchandise Value is expected to deliver mid to high-single digits percentage growth. Adjusted EBITDA is likely to be in the range of $14.0 million to $17.0 million.