Lands’ End’s Fiscal 2024 Performance: Navigating Macroeconomic Challenges with Improved Profitability

Lands’ End, a leading digital retailer of apparel, swimwear, outerwear, and home products, has released its financial results for the fiscal year ended January 31, 2025. The report provides insights into the company’s performance, highlighting both its successes and the challenges it faced during the year.

Overview of Financial Performance

In Fiscal 2024, Lands’ End reported total net revenue of $1.36 billion, a decrease of 7.4% from the previous year. This decline was primarily driven by the transition of the kids and footwear product lines to licensing arrangements and the company’s focus on optimizing promotional activity to improve gross margins.

Despite the revenue decrease, Lands’ End’s profitability improved significantly. Gross profit increased by 4.4% to $653.3 million, and gross margin expanded by 550 basis points to 47.9%. This improvement was attributed to leveraging the strength in key product categories, lower promotional activity, and enhancements in inventory management and supply chain costs.

Operating income was $51.0 million, a significant turnaround from the operating loss of $77.5 million reported in the previous fiscal year. This improvement was largely due to the absence of a $106.7 million non-cash goodwill impairment charge that was recorded in Fiscal 2023.

Adjusted net income, which excludes certain non-recurring or non-operational items, was $12.6 million, compared to an adjusted net loss of $4.8 million in the prior year. Adjusted diluted earnings per share was $0.40, up from an adjusted diluted loss per share of $0.15 in Fiscal 2023.

Adjusted EBITDA, a measure of the company’s operating performance, increased to $92.6 million in Fiscal 2024, compared to $84.3 million in the previous year.

Segment Performance

Lands’ End’s business is organized into six distribution channels for reporting purposes: U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing, and Retail.

The U.S. Digital segment, which includes the U.S. eCommerce, Outfitters, and Third Party channels, reported a 10.7% decrease in net revenue to $1.15 billion. However, excluding the impact of the licensing transition, the inventory buyout, and the extra week in Fiscal 2023, the U.S. Digital segment’s net revenue increased by 0.3% compared to the prior year.

The Europe eCommerce channel reported an 8.7% decrease in net revenue to $103.1 million, primarily due to the continued focus on improving gross margins through higher-quality sales and reduced markdown and clearance activity.

The Licensing and Retail channels saw a 58.5% increase in net revenue to $105.4 million, driven by revenue from the new licensing arrangements, including Lands’ End-produced inventory sold to a licensee, as well as a 3.0% increase in same-store sales for the company’s U.S. retail stores.

Operational Highlights and Challenges

Lands’ End faced several macroeconomic challenges during Fiscal 2024, including the impact of realized inflation-based price increases and high interest rates on consumer discretionary spending. These factors negatively affected customer demand and required the company to maintain higher levels of promotional activity to attract and retain customers.

Additionally, the company experienced increased costs in areas such as raw materials, packaging, labor, energy, fuel, and debt, which put pressure on its profitability. Uncertainty around trade policy and tariffs also contributed to higher product costs.

To address these challenges, Lands’ End implemented a restructuring plan during Fiscal 2024 and Fiscal 2023, reducing approximately 10% of its corporate office positions. These reductions were made to better align the organization with the evolving needs of the business and to invest in key growth areas.

The company also completed the wind-down and cessation of operations for its Lands’ End Japan subsidiary, which represented the Japan eCommerce operating segment, in the first quarter of Fiscal 2024.

Liquidity and Capital Resources

Lands’ End’s primary sources of liquidity are its cash and cash equivalents, as well as its $275 million committed revolving Asset-Based Lending (ABL) Facility. As of January 31, 2025, the company had no outstanding balance on the ABL Facility, other than $10.1 million in letters of credit.

The company also has a $260 million Current Term Loan Facility, which was used to repay the previous term loan facility. The Current Term Loan Facility matures in December 2028 and has an interest rate based on a fluctuating rate of interest equal to Term Loan Adjusted SOFR plus an applicable margin, which is based on the company’s net leverage ratio.

Lands’ End’s management believes that the company’s current cash and cash equivalents, along with cash flows from operations and availability under the ABL Facility, will be sufficient to meet its capital requirements and operational needs for at least the next 12 months.

Outlook and Future Strategies

Lands’ End’s financial performance in Fiscal 2024 demonstrates its ability to navigate the challenging macroeconomic environment and improve profitability through strategic initiatives. The company’s focus on optimizing promotional activity, enhancing inventory management, and streamlining its operations have contributed to the improvement in gross margins and overall profitability.

Going forward, Lands’ End will continue to monitor the macroeconomic conditions and their impact on consumer spending. The company plans to invest approximately $30 million in capital expenditures for strategic investments and infrastructure, primarily in technology and general corporate needs, during Fiscal 2025.

Lands’ End’s management remains committed to driving growth and profitability by leveraging its strong brand, expanding its digital presence, and exploring new opportunities, such as the licensing arrangements for the kids and footwear product lines. The company’s focus on providing solution-based apparel and home products, while maintaining a disciplined approach to operations and cost management, positions it well to navigate the evolving retail landscape and deliver value to its shareholders.