Lands' End NASDAQ: LE reported lower first-quarter revenue as a distribution center systems rollout delayed shipments, but executives said underlying demand improved and described the recently completed joint venture with WHP Global as a major strategic reset for the apparel retailer.
Chief Executive Officer Andrew McLean said the company entered fiscal 2026 with momentum after returning to top-line growth in the fourth quarter of fiscal 2025. In the first quarter, he said consumer traffic rose by double digits, new customer acquisition improved and the Lands' End Outfitters business began the year with a growing order book.
McLean said reported results were affected by temporary disruption tied to upgrades at the company's U.S. distribution centers. The issue delayed shipments and reduced recognized sales during the quarter, but he said the company had enough orders to produce positive comparable sales absent the disruption. The backlog, which reached roughly one week of demand, has since been cleared.
"We are back to operating in a steady state," McLean said, adding that the upgrades should improve delivery speed, customer experience and execution as the year progresses.
First-quarter revenue falls, but management points to stronger demand
Chief Financial Officer Bernard McCracken said total first-quarter revenue was $239 million, down 9% from the prior-year period. He attributed the decline primarily to the warehouse management system rollout and deliberate pacing of shipments as distribution centers returned to normal capacity. Excluding that impact, McCracken said the company would have expected low-single-digit revenue growth.
Adjusted EBITDA was negative $6 million, down $16 million from a year earlier. McCracken said the decline reflected shipment timing disruption, the new royalty structure following the WHP Global transaction and continued tariff pressure.
By segment, U.S. e-commerce revenue decreased 10%, Lands' End Outfitters sales fell 10% and third-party marketplace revenue declined 6%. McCracken said the marketplace decline reflected a strategic pullback from lower-value promotional sales in favor of higher-margin, higher-quality revenue. The European e-commerce business was a bright spot, with sales up 15% versus last year and gross margin improving by about 70 basis points.
Gross profit decreased 16%, and gross margin was 47%, down approximately 410 basis points year over year. McCracken said the decline was driven by deleverage from the distribution disruption, the new royalty structure and tariff headwinds. Adjusted net loss was $4 million, or $0.11 per share, compared with adjusted net income of $5 million, or $0.18 per share, in the prior-year quarter.
WHP Global joint venture changes Lands' End financial profile
The company closed its intellectual property joint venture with WHP Global on April 1. Under the transaction, Lands' End contributed its intellectual property in exchange for $300 million in gross proceeds from WHP Global. Lands' End and WHP each own 50% of the joint venture, with WHP holding a controlling interest.
McLean said the proceeds allowed Lands' End to fully repay its term loan, significantly reducing leverage and interest expense. WHP also completed a tender offer for approximately $100 million of Lands' End shares at $45 per share, resulting in WHP acquiring about 7% of the company.
Under the long-term license agreement, Lands' End will pay the joint venture annual royalties of at least $50 million and will receive 50% of joint venture profits on a quarterly basis. McLean said the structure gives the company a recurring, high-quality earnings stream while allowing WHP to pursue new licensing opportunities across categories and geographies.
McLean said early joint venture activity includes an agreement to consolidate and extend three licenses with the company's largest apparel licensee through 2033, an agreement in principle to extend its footwear partnership by seven years and the selection of a new home textiles partner. Together, he said those actions are expected to drive more than $150 million of long-term guaranteed royalty value to the joint venture over the term of the agreements.
Guidance calls for full-year revenue growth
For the second quarter, McCracken said Lands' End expects:
- Net revenue of $290 million to $310 million
- Adjusted net income of $2 million to $5 million
- Adjusted diluted earnings per share of $0.06 to $0.16
- Adjusted EBITDA of $11 million to $14 million
For fiscal 2026, the company expects:
- Net revenue of $1.3 billion to $1.4 billion
- Adjusted net income of $10 million to $20 million
- Adjusted diluted earnings per share of $0.32 to $0.65
- Adjusted EBITDA of $68 million to $78 million
- Capital expenditures of approximately $40 million
McCracken said the guidance includes tariffs at currently implemented rates and prevailing macroeconomic conditions. He also outlined three-year targets for mid-single-digit annual revenue growth and adjusted EBITDA margins reaching the high single digits over time.
Management highlights product, B2B and personalization opportunities
McLean said second-quarter trends have started positively, with revenue comps positive through and after Memorial Day. He cited strength in swim, totes and men's apparel. Women's apparel and swim delivered positive comps in the first quarter, while totes continued to bring new customers into the brand.
During the question-and-answer session, McLean said the company's new SlenderLite swimsuit had been well received and that mix-and-match swim options were performing well. He also said the company is seeing good results in home, men's and women's categories as weather has warmed.
Executives also emphasized the opportunity in Lands' End Outfitters. McLean said the B2B business, which serves national accounts, companies and more than 5,000 U.S. schools, remains a major growth opportunity. He described school uniforms and commercial uniforms as areas where the Lands' End brand, service capabilities and embroidery platform can be differentiated.
On personalization, McLean said Lands' End views embroidery and customization as competitive advantages. McCracken added that the company can leverage infrastructure required for the B2B business across its direct-to-consumer business as well.
Balance sheet and capital allocation in focus
Inventory at quarter-end was $300 million, compared with $262 million a year earlier. McCracken said the increase primarily reflected timing effects from the distribution center ramp-up and tariff impacts on inventory costs. ABL borrowings were $30 million, down from $40 million last year.
The board authorized a share repurchase program of up to $100 million through March 31, 2029. McLean said the authorization gives the company flexibility to act when it believes the stock is trading below intrinsic value. He also said the company's stronger balance sheet gives it the ability to consider other capital allocation options, including potential acquisitions of complementary businesses, if those opportunities make sense for shareholders.
McLean closed the call by saying the WHP transaction has strengthened the investment case for Lands' End by reducing debt, creating recurring joint venture profit participation and adding a potential exchange option tied to a future WHP Global monetization event.
About Lands' End NASDAQ: LE
Lands' End, Inc NASDAQ: LE is an American retailer specializing in casual apparel, accessories and home goods. Headquartered in Dodgeville, Wisconsin, the company sells its products through a combination of direct-to-consumer channels including e-commerce, catalogues and a network of outlet stores. Lands' End is known for its nautical-inspired designs, functional outerwear and commitment to quality fabrics.
Founded in 1963 by Gary Comer as a mail-order sailing supply business, Lands' End rapidly expanded its product offering beyond marine gear.
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