Lands' End, Inc.

begin shortly please continue to stand by thank you for your patience Thank you. Thank you. Ladies and gentlemen, thank you for standing by, and welcome to the Lands' End Third Quarter 2020 Earnings Conference Call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I will now hand the conference over to Bernie McCracken, Chief Accounting Officer. Please go ahead.

Good morning, and thank you for joining the Lands End earnings call for a discussion of our third quarter fiscal 2020 results, which we released this morning and can be found on our website, landsend.com. On the call today, you will hear from Jerome Griffith, our Chief Executive Officer and President, and Jim Gooch, our Chief Operating Officer and Chief Financial Officer. After the company's prepared remarks, we will conduct a question and answer session. Please also note that the information we're about to discuss includes forward-looking statements. Such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed on this call. Factors that could contribute to such differences include but are not limited to those items noted and included in the company's SEC filings, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and Form 8K dated June 2, 2020. The forward-looking information that is provided by the company on this call represents the company's outlook as of today, and we do not undertake any obligation to update forward-looking statements made by us. Subsequent events and developments may cause the company's outlook to change. Of note, in this respect, the COVID-19 pandemic continues to have significant impact on our business, and its duration can materially alter our outlook. During this call, we'll be referring to non-GAAP measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release issued earlier today, a copy of which is posted in the investor relations section of our website at landsend.com. With that, I will turn over the call to Jerome Griffith.

Thank you, Bernie. Thank you. Good morning, and thank you for joining us today for a discussion of our third quarter results. We were extremely pleased with our third quarter performance. Our teams executed at an exceptional level to achieve strong results despite the challenges created by COVID. I am both proud and grateful for their efforts. The investments we put toward leveraging data analytics to inform our strategies around product, e-commerce, and marketing continued to pay dividends in driving growth in new customers and strong retention rates. We have also made great strides in driving improved profitability. To that end, in addition to once again generating double-digit growth on our global e-commerce business, we delivered 52% adjusted EBITDA growth in the third quarter. This performance underscores the momentum behind the Lands' End brand and the progress we are making in delivering long-term profitable growth. Additionally, the launch of Lands' End into Kohl's.com and 150 Kohl's stores at the end of September is off to a strong start. Based on the early success, we plan to expand the lands into assortment and increase the number of points of distribution from 150 coal stores to 300 in 2021. Also, during the third quarter, as previously announced, we completed the refinancing of our term debt, further improving our liquidity position, which Jim will speak to shortly. Turning to some brief highlights of our financial results, Third quarter total revenue grew approximately 6%, driven by our global e-commerce sales, which were up approximately 20%, ahead of our expectation for low double-digit growth for this business. We grew adjusted EBITDA 52% to approximately $29 million and expanded adjusted EBITDA margin by approximately 240 basis points to 7.9%. We continue to lean into our strong heritage as an American lifestyle brand that offers comfort, quality, great value, and a customer-first approach to service. At the same time, we remained focused on advancing our digitally-led strategies. We further demonstrated our ability to consistently get the product right as we leveraged data analytics to inform our key item strategy and maintain a high-quality, value-oriented offering. For the third quarter, our strongest performers were sleepwear, loungewear, and knits. Fleece also performed well, reflecting demand for transitional outerwear for the fall seasons. Home furnishings, particularly bed and bath, remains an area of strength as people spend more time at home. We will maintain our emphasis on comfort and value as consumers continue to work from home and spend more hours indoors during the cold weather months. Turning now to marketing, we remain focused on utilizing data analytics and search engine optimization programs to attract new customers while simultaneously leveraging data to drive greater personalization with existing customers. We also continue to successfully leverage AI to analyze customer behavior and further refine our promotions to optimize sales and achieve higher margins. Our let's get comfy messaging continued to resonate with consumers and it will remain front and center through the holiday season. Our strong product offering combined with our focus on employing a data-driven approach drove continued market share gains with approximately 55% growth in new customers. We are very pleased with the high percentage of rebuy rates we continue to see in our core customer base, as well as with our newer customers. This retention is highly encouraging, and we still see ample market share opportunity ahead of us. As a unit channel operator, we remain committed to delivering a consistent, high-quality, seamless customer experience across all channels to enhance our customer connection wherever, whenever, and however they choose to shop. During the quarter, we launched Apple Pay and mobile checkout with very positive early reads on both. We also expanded our data-driven approach to our catalogs and catalog circulation. Through utilizing data on existing customers, we optimized products per page and fine-tuned our circulation. As a result, response rate grew approximately 12% on a slight decline in circulation, driving higher ROIs in our catalogs. I'm very proud of our team as they work to maximize efficiency as evident in these results, and the Land's End brand and catalog is now stronger than ever. Looking ahead, we're confident that the investments we have been making in our infrastructure and foundation throughout the past few years position us well to drive further market share gains in the evolving retail landscape. I will speak more to these longer-term strategies following Jim's remarks. With that, I'll turn it over to Jim.