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spk00: Thank you for your patience and please continue to stand by. The Landon second quarter 2021 earnings conference call will begin momentarily. Thank you for your patience and please continue to stand by. Thank you. Thank you for standing by, and welcome to the Land's End second quarter 2021 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you need to press star then one on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, press star then zero to reach an operator. I would now like to hand the call over to Bernard McCracken, CAO. Please go ahead.
spk01: Good morning, and thank you for joining the Lands End earnings call for a discussion of our second quarter 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 Jim Gooch, our President 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 and quarterly reports on Form 10-Q. 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 an 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 LandZen.com. With that, I will turn the call over to Jerome Griffith.
spk07: Thank you, Bernie. Good morning, everyone, and thank you for joining us today for a discussion of our second quarter results. Building on our July 20th announcement, where we raised our second quarter and full-year outlook, we are extremely pleased with our results across all financial metrics. This quarter, Land's End delivered the highest second quarter revenue in our 58-year history. Our top-line momentum was driven by the continued strength in our global e-commerce business, as well as the earlier-than-expected recovery in our outfitters business, as both our national accounts and school uniforms businesses showed meaningful improvement. Within our global e-commerce business, our digitally-led product offering and compelling marketing strategies continue to drive growth. We are a digitally-led e-commerce business and are continuing to enhance our capabilities through our data-driven focus, an important driver of our customer acquisition. During the second quarter, we increased our global new customers by 8% from the prior year and 41% from the second quarter of 2019. Our total global customer file expanded 4% from the prior year and 13% from the same period in 2019. As we shared with you last quarter, our new customers are profitable within the first year, supporting our efficient new customer acquisition strategies. The overall customer file has continued to perform and behave similarly to our pre-pandemic customers, with retention rates consistently over 55%, even as stores have reopened. We continue to profitably and sustainably expand our presence in global e-commerce apparel as we enhance our capabilities across the four strategic pillars we first shared with you over three years ago. Our progress is demonstrated by the strength of our financial performance and our encouraging customer metrics. Our sustainable performance with both our new and existing customers is in part driven by the marketing initiatives we have implemented as we continue to further enhance our digital capabilities. Over the past few quarters, we've increased our marketing spend by prioritizing it as a key investment in building our brand and business. Beginning last quarter, we started to further emphasize our presence in social media through paid programs, which we accelerated during the second quarter. This builds on our digital-first marketing approach and complements our more advanced initiatives in search engine optimization. Both our paid social media as well as search engine optimization are highly productive marketing vehicles. allowing us to strengthen our new customer acquisition and retain our existing customers. While our trends in paid social media are strong, we remain in early stages and see continued opportunity to drive new customers to the brand through this channel. I will now provide you with some detail on our product this quarter. Our Let's Get Comfy messaging, which we introduced pre-pandemic, remained our focus this quarter as strong trends in casualization continued. We emphasized our one closet message, the versatility of our product offering and the diversity of our fit, as well as built marketing campaigns around our brand pillars. During the quarter, the swimwear category saw a significant increase as more customers began to take vacations again, a trend that has extended later into the season compared to prior years. We saw strength across the entire swimwear family, with particular growth in more versatile products such as board shorts, swim skirts, and dresses. We also saw strength in our sleepwear, knits, and woven businesses. Sleepwear remains a strong category as customers are responding to our expanded year-round offering. We continue to believe the casualization trend that we embarked on prior to the pandemic will remain. As more companies embrace a hybrid in-office, work-from-home approach, we expect comfort to remain a priority, driving a more casual where-to-work aesthetic. Our khakis and woven businesses, both of which were strong this quarter, are attractively positioned to benefit from the casualization trend. During the second quarter, our U.S. e-commerce sales were encouraging, increasing 8 percent from a year ago. Our performance in Europe increased a strong 17 percent from the prior year in the second quarter. Our outfitters business continued to recover, driven by better than expected performance in our national accounts and our school uniforms business, where the number of households has returned to nearly 2019 levels. Our performance at Kohl's exceeded our expectations again this quarter, and we remain highly encouraged by this partnership, which has allowed us to expand our brand to consumers with similar attributes to our existing customer base. We will continue to carefully examine future partnerships and distribution expansion opportunities. We are proud of what we have achieved these past few years, building a strong business model that has withstood an unprecedented operating environment and is now performing even stronger. The accelerated momentum in our performance, which is reflected in our record high sales this quarter, is further proof of our operating model, positioning us to drive long-term profitable growth. With that, I will turn the call over to Jim, who will provide you with greater details on our financial performance during the second quarter.
spk06: Thank you, Jerome, and good morning. We're very pleased with the strong results we delivered in the second quarter as we continue to make great progress across our strategic initiatives. despite the still difficult environment. Similar to last quarter, I'll make select comparisons to our second quarter of 2019 to help normalize for the significant improvement we saw in our business in Q2 of last year. As you may recall, COVID-19 negatively impacted our business in March and April of last year with the recovery in the second quarter of 2020. For the second quarter, as compared to last year, total revenue increased 23.1% to 384.1 million and grew 29% from the second quarter of 2019. This was at the high end of our revised guidance of 380 to 385 million we provided you on July 20th and well above our initial guidance of 345 to 355 million. Our global e-commerce sales increased 7.7% from 2020 and 32.5% from 2019 as the momentum in our business remained strong. The strength was led by our U.S. e-commerce business, which increased 7.6% from 2020 and 35.7% from 2019. Our international business also expanded 8.2% in the quarter from the prior year due to the 17.1% growth in Europe. Our better-than-expected results were driven by strength across a number of our key categories, including swimwear, sleepwear, and knits. The strength in swimwear was aided by increased leisure travel during the quarter, and our overall growth was supported by marketing strategies that continue to message the value and comfort in our product. Revenue for our third-party business increased to $19.1 million. That's a $14 million improvement compared to last year. This increase was largely driven by our performance through Kohl's, particularly as we expanded our swimwear offering to an additional 150 doors during the quarter. In our outfitter business, sales increased 75% due to a faster-than-expected recovery in our national accounts and school uniform business. We're seeing demand in our travel-related national accounts continue to accelerate as leisure travel recovered and airlines started to accelerate hiring to meet this demand. Our school uniform business is roughly back to 2019 levels as we're seeing a return to a more normal back-to-school shopping pattern. While small and medium-sized businesses continue to see a slower recovery, we remain confident that the strategies we're putting forth will drive improvement for this business over the long term. Moving to our retail business, during the quarter we delivered revenue of $14 million, a significant improvement from 2020 when our stores were largely closed. We're pleased with the performance of our same-store sales as they increased 3 percent from the second quarter of 2019 as traffic continues to improve and conversion remains strong. Gross margin in the second quarter increased to 46.3%, approximately a 290 basis point improvement from 2020. The expansion was led by our U.S. e-commerce business, where we continue to benefit from our enhanced promotional strategies as we leverage data analytics in our pricing and inventory management. Partially offsetting this expansion was higher shipping costs and surcharges, which we continue to see this quarter as overall global supply chains remain challenged and as well as a higher sales mix from lower margin third-party channels. As a percentage of sales, SG&A improved at 35.6%, down approximately 10 basis points from 2020. The improvement was due to leverage on higher sales and continued expense controls, which were partially offset by higher digital marketing and prior year COVID-19-related one-time expense reductions. Our SG&A as a percent of sales improved approximately 540 basis points compared to the second quarter of 2019, despite our higher digital marketing spend. I'd like to highlight that we've been investing in our digital marketing spend over the past few quarters, given the importance of this initiative towards building our brand awareness and helping to drive our long-term growth. Our strong performance led to net income for the quarter of $16.2 million, or 48 cents per share, compared to a net income of $4.4 million or $0.13 per share in 2020. In addition to these gap measures, adjusted EBITDA is an important profitability measure that we use to manage our business internally. For the quarter, adjusted EBITDA was $41.4 million, which was significantly above both our initial expectations and the $23.9 million we delivered in 2020. Turning to the balance sheet, inventories at the end of the quarter were $464.3 million compared to $441.5 million a year ago. The continued strong sell-through of our global e-commerce business has positioned us with healthy inventory levels as we head into the third quarter. On July 29th, we amended our ABL credit facility, extending the debt duration and reducing the interest rates, further enhancing our strong liquidity position as a reminder Our debt structure is comprised of our ABL line of $275 million and approximately $265 million in our term loan. We feel very comfortable with the current financial flexibility in our business. Turning to our outlook, we're seeing strong momentum in consumer demand, which we expect to continue through the remainder of the year. We're also extremely pleased with the margin performance we've achieved as a result of the execution of our strategic initiatives. That said, due to the significant industry-wide challenges in the supply chain, we expect our gross margin trends to moderate in the back half of fiscal 2021. Therefore, we're raising our adjusted EBITDA guidance to reflect the better than expected performance in the second quarter while maintaining our second half outlook despite the strong consumer demand. Our outlook has accounted for the industry-wide supply chain headwinds that we currently have visibility into. These include higher shipping costs and surcharges, as well as the continued shipping delays, port congestion, and manufacturing interruptions, particularly in Vietnam, which we expect to continue throughout 2021. We're closely monitoring the situation and proactively managing our inventory as we head into 2022. For the third quarter, we expect net revenue to be between 390 and $405 million. We expect net income of $6.5 to $9 million and diluted earnings per share to be between $0.19 and $0.27. We expect adjusted EBITDA to be in the range of $27 to $30 million. For the full year, despite the strong underlying demand trends, we're maintaining our second half outlook due to the aforementioned headwinds. We continue to expect net revenue to be between 1.67 and 1.71 billion, primarily driven by our momentum in our global e-commerce business and recovery in our outfitters business. We'd also note that if the strong travel trends continue, we could see upside to our outerwear business in the back half. We're raising our net income outlook to a range of 45.5 to 51 million, and diluted earnings per share to be between $1.35 and $1.51. We now expect adjusted EBITDA to be in the range of $136 to $143 million. With that, I'll turn the call back over to Jerome.
spk07: Jerome Adams Thanks, Jim. We remain committed to delivering a long-term profitable growth for our shareholders by consistently focusing our investments on our strategic pillars, including getting the product right, being a digitally driven company, implementing a unit channel distribution strategy, and enhancing both our infrastructure and processes. Based on these pillars, we have created a strong and resilient foundation, which delivered second quarter global e-commerce sales growth of 33% over our 2019 pre-pandemic levels. We see significant opportunity to capitalize on our multidimensional growth ahead. We believe the pandemic drove a permanent shift in consumer behavior, accelerating online shopping and increasing demand for comfort. The increase in U.S. households within our demographic who are now more willing to shop online, which represents more than 95 percent of our business, has meaningfully increased our total addressable market. We remain focused on building our brand awareness and attracting more of these consumers to Land's End as we continue to see significant opportunity with new customers. As such, our marketing initiatives are an important investment priority, particularly in our digital strategies where customer acquisition is highly efficient. We are testing new strategies in social media, and we will continue to refine our search engine optimization. We're also improving our catalog spending efficiency as we continue to enhance our profitability and digital capabilities. Turning now to our product assortment, we are well positioned on our product and our Let's Get Comfy messaging to leverage the more casual aesthetic driving the apparel market, particularly as people return to more normal activities. We will continue to focus on our one closet message and diversity of fit as we introduce seasonal colors, transitional items, and more denim heading into the fall. Our data analytics is an important tool we leverage to inform our product assortment, and we will evolve and enhance our capabilities. Our partnership with Kohl's continues to exceed our expectations, and we remain pleased with the overall success. We expanded our swimwear distribution this quarter to an additional 150 Kohl's stores, which will carry our broader assortment this fall. Our product offering is resonating with the Kohl's customer both in stores and online, where we are able to display our full offering. During the quarter, we launched our second swimwear collection with Draper James, the brand founded by Reese Witherspoon. The performance of the collection exceeded our expectations. Given the continued success of this collaboration, we're excited for our sleepwear and home collections that are on track to launch this fall. I would also like to now discuss our lands in marketplace. While we remain in early stages, we are pleased with our performance and the opportunity it represents longer term. Our customers are looking to us for complementary product that addresses needs beyond our business, and we are delivering appropriate solutions through these third-party brands. We will continue to work with third parties that share our brand aesthetic and messaging as we expand our overall offering to enhance our marketplace assortment. Turning to our outfitters business, we saw a meaningful improvement in our national accounts and school uniform business. Sales in our school uniform business are encouragingly nearing 2019 levels, and we have seen a return to more normal back-to-school shopping patterns. We expect trends in both accounts to remain strong. Consistent with our outlook, our small and medium-sized accounts are seeing a slower pace of recovery. We are continuing to make progress against the steps we have discussed to advance our position as the authority in branded apparel and hard goods for small and medium-sized businesses. We have begun to enhance our website and streamline our processes, as well as improve our marketing and pricing. In conclusion, we are extremely pleased with our record second quarter revenue performance. The momentum in our business, despite the still challenging environment, is further proof of the underlying strength of our operating model, grounded on our resilient global e-commerce business. The strategic initiatives we implemented over the past three years enabled us to emerge from the initial stages of this pandemic stronger, accelerating our pre-COVID momentum. We continue to manage our business for disciplined, profitable growth as we focus on creating long-term shareholder value. With our proven foundations, strategic pillars of growth, and an expanded total addressable market, we're very excited for our future. We look forward to updating you on our progress. With that, we will open the call for questions.
spk00: As a reminder, to ask a question, please press star then one. One moment for questions, please. Again, that's star one to ask a question. We have a question from Alex Furman with Craig Hallam Capital. Your line is open.
spk03: Great. Thanks very much for taking my question and congratulations on a strong quarter. I wanted to ask about what you're seeing with the shipping delays and costs here. Obviously, it sounds like you're able to raise your full year guidance, so clearly you're offsetting those costs. But are you starting to see any orders being canceled as a result of product taking longer to get delivered than you'd hoped for? And I guess more importantly, what strategies do you have in place for the holiday season where customers might be expecting to get their orders ahead of key dates like Christmas?
spk06: I can probably take the first part of that, Alex. We've been seeing these challenges really for the last year, year and a half here. The challenges have been moving. Higher costs across the board. We've had, as I said, delays at various points in our supply chain. And to date, if you look at our strong performance, especially over the last couple of quarters, I think our teams have been doing a great job of trying to get out in front of these and offsetting those. In our guidance, to your point, we're expecting those to continue at a similar rate. We're expecting some of the higher costs that are associated with having to expedite shipping costs associated with back orders to continue. And we're expecting the strong consumer demand to continue in the back half. Our biggest challenge will be if anything further happens where we're just having difficulty getting the actual product. And right now, like I said, the teams have been doing a good job, but there's certainly challenges going on. And we highlighted specifically in Vietnam where we're seeing some factories shut down.
spk03: Great, that's really helpful. And then can you just give us an update as you think about the seasonal workers that you typically hire? How far along are you in that process already? Do you have a lot of those workers with some kind of commitment here? Are you confident that you're going to have the labor pool you need for the holiday season?
spk06: Again, teams are doing a great job of trying to get out in front of that. It's certainly a challenge. The federal funding is stopping in Wisconsin this month, so we're hoping to get a pickup from that. I would say we're slightly behind where we'd want to be for the season, but we still think it's manageable going into Christmas.
spk03: Okay, that's really helpful. Thanks very much, and congratulations again on the really strong quarter.
spk05: Thank you.
spk00: That concludes our Q&A session. Ladies and gentlemen, thank you for participating in today's conference. This has included the program, and you may now disconnect. Everyone, have a great day. Thank you. Music playing Yeah. Thank you.
spk04: Thank you. you
spk00: Thank you for standing by, and welcome to the Land's End Second Quarter 2021 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you need to press star then 1 on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, press star then 0 to reach an operator. I would now like to hand the call over to Bernard McCracken, CAO. Please go ahead.
spk01: Good morning, and thank you for joining the Lands End Earnings Call for a discussion of our second quarter 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 Jim Gooch, our President 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 and quarterly reports on Form 10-Q. 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 an 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 LandZen.com. With that, I will turn the call over to Jerome Griffith.
spk07: Thank you, Bernie. Good morning, everyone, and thank you for joining us today for a discussion of our second quarter results. Building on our July 20th announcement, where we raised our second quarter and full-year outlook, we are extremely pleased with our results across all financial metrics. This quarter, Land's End delivered the highest second quarter revenue in our 58-year history. Our top-line momentum was driven by the continued strength in our global e-commerce business, as well as the earlier-than-expected recovery in our outfitters business, as both our national accounts and school uniforms businesses showed meaningful improvement. Within our global e-commerce business, our digitally-led product offering and compelling marketing strategies continue to drive growth. We are a digitally-led e-commerce business and are continuing to enhance our capabilities through our data-driven focus, an important driver of our customer acquisition. During the second quarter, we increased our global new customers by 8% from the prior year and 41% from the second quarter of 2019. Our total global customer file expanded 4% from the prior year and 13% from the same period in 2019. As we shared with you last quarter, our new customers are profitable within the first year, supporting our efficient new customer acquisition strategies. The overall customer file has continued to perform and behave similarly to our pre-pandemic customers, with retention rates consistently over 55%, even as stores have reopened. We continue to profitably and sustainably expand our presence in global e-commerce apparel as we enhance our capabilities across the four strategic pillars we first shared with you over three years ago. Our progress is demonstrated by the strength of our financial performance and our encouraging customer metrics. Our sustainable performance with both our new and existing customers is in part driven by the marketing initiatives we have implemented as we continue to further enhance our digital capabilities. Over the past few quarters, we've increased our marketing spend by prioritizing it as a key investment in building our brand and business. Beginning last quarter, we started to further emphasize our presence in social media through paid programs, which we accelerated during the second quarter. This builds on our digital-first marketing approach and complements our more advanced initiatives in search engine optimization. Both our paid social media as well as search engine optimization are highly productive marketing vehicles. allowing us to strengthen our new customer acquisition and retain our existing customers. While our trends in paid social media are strong, we remain in early stages and see continued opportunity to drive new customers to the brand through this channel. I will now provide you with some detail on our product this quarter. Our Let's Get Comfy messaging, which we introduced pre-pandemic, remained our focus this quarter as strong trends in casualization continued. We emphasized our one closet message, the versatility of our product offering and the diversity of our fit, as well as built marketing campaigns around our brand pillars. During the quarter, the swimwear category saw a significant increase as more customers began to take vacations again, a trend that has extended later into the season compared to prior years. We saw strength across the entire swimwear family, with particular growth in more versatile products such as board shorts, swim skirts, and dresses. We also saw strength in our sleepwear, knits, and woven businesses. Sleepwear remains a strong category as customers are responding to our expanded year-round offering. We continue to believe the casualization trend that we embarked on prior to the pandemic will remain. As more companies embrace a hybrid in-office, work-from-home approach, we expect comfort to remain a priority, driving a more casual where-to-work aesthetic. Our khakis and woven businesses, both of which were strong this quarter, are attractively positioned to benefit from the casualization trend. During the second quarter, our U.S. e-commerce sales were encouraging, increasing 8 percent from a year ago. Our performance in Europe increased a strong 17 percent from the prior year in the second quarter. Our outfitters business continued to recover, driven by better than expected performance in our national accounts and our school uniforms business, where the number of households has returned to nearly 2019 levels. Our performance at Kohl's exceeded our expectations again this quarter, and we remain highly encouraged by this partnership, which has allowed us to expand our brand to consumers with similar attributes to our existing customer base. We will continue to carefully examine future partnerships and distribution expansion opportunities. We are proud of what we have achieved these past few years, building a strong business model that has withstood an unprecedented operating environment and is now performing even stronger. The accelerated momentum in our performance, which is reflected in our record high sales this quarter, is further proof of our operating model, positioning us to drive long-term profitable growth. With that, I will turn the call over to Jim, who will provide you with greater details on our financial performance during the second quarter.
spk06: Thank you, Jerome, and good morning. We're very pleased with the strong results we delivered in the second quarter as we continue to make great progress across our strategic initiatives despite the still difficult environment. Similar to last quarter, I'll make select comparisons to our second quarter of 2019 to help normalize for the significant improvement we saw in our business in Q2 of last year. As you may recall, COVID-19 negatively impacted our business in March and April of last year with the recovery in the second quarter of 2020. For the second quarter, as compared to last year, total revenue increased 23.1% to 384.1 million and grew 29 percent from the second quarter of 2019. This was at the high end of our revised guidance of 380 to 385 million we provided you on July 20th and well above our initial guidance of 345 to 355 million. Our global e-commerce sales increased 7.7 percent from 2020 and 32.5 percent from 2019 as the momentum in our business remained strong. The strength was led by our U.S. e-commerce business, which increased 7.6% from 2020 and 35.7% from 2019. Our international business also expanded 8.2% in the quarter from the prior year due to the 17.1% growth in Europe. Our better-than-expected results were driven by strength across a number of our key categories, including swimwear, sleepwear, and knits. The strength in swimwear was aided by increased leisure travel during the quarter, and our overall growth was supported by marketing strategies that continue to message the value and comfort in our product. Revenue for our third-party business increased to $19.1 million. That's a $14 million improvement compared to last year. This increase was largely driven by our performance through Kohl's, particularly as we expanded our swimwear offering to an additional 150 doors during the quarter. In our outfitter business, sales increased 75% due to a faster-than-expected recovery in our national accounts and school uniform business. We're seeing demand in our travel-related national accounts continue to accelerate as leisure travel recovered and airlines started to accelerate hiring to meet this demand. Our school uniform business is roughly back to 2019 levels as we're seeing a return to a more normal back-to-school shopping pattern. While small and medium-sized businesses continue to see a slower recovery, we remain confident that the strategies we're putting forth will drive improvement for this business over the long term. Moving to our retail business, during the quarter we delivered revenue of $14 million, a significant improvement from 2020 when our stores were largely closed. We're pleased with the performance of our same-store sales as they increased 3 percent from the second quarter of 2019 as traffic continues to improve and conversion remains strong. Gross margin in the second quarter increased to 46.3%, approximately a 290 basis point improvement from 2020. The expansion was led by our U.S. e-commerce business, where we continue to benefit from our enhanced promotional strategies as we leverage data analytics in our pricing and inventory management. Partially offsetting this expansion was higher shipping costs and surcharges, which we continue to see this quarter as overall global supply chains remain challenged and as well as a higher sales mix from lower margin third-party channels. As a percentage of sales, SG&A improved at 35.6%, down approximately 10 basis points from 2020. The improvement was due to leverage on higher sales and continued expense controls, which were partially offset by higher digital marketing and prior year COVID-19-related one-time expense reductions. Our SG&A as a percent of sales improved approximately 540 basis points compared to the second quarter of 2019, despite our higher digital marketing spend. I'd like to highlight that we've been investing in our digital marketing spend over the past few quarters, given the importance of this initiative towards building our brand awareness and helping to drive our long-term growth. Our strong performance led to net income for the quarter of $16.2 million, or 48 cents per share, compared to a net income of $4.4 million or $0.13 per share in 2020. In addition to these gap measures, adjusted EBITDA is an important profitability measure that we use to manage our business internally. For the quarter, adjusted EBITDA was $41.4 million, which was significantly above both our initial expectations and the $23.9 million we delivered in 2020. Turning to the balance sheet, inventories at the end of the quarter were $464.3 million compared to $441.5 million a year ago. The continued strong sell-through of our global e-commerce business has positioned us with healthy inventory levels as we head into the third quarter. On July 29th, we amended our ABL credit facility, extending the debt duration and reducing the interest rates, further enhancing our strong liquidity position as a reminder of Our debt structure is comprised of our ABL line of $275 million and approximately $265 million in our term loan. We feel very comfortable with the current financial flexibility in our business. Turning to our outlook, we're seeing strong momentum in consumer demand, which we expect to continue through the remainder of the year. We're also extremely pleased with the margin performance we've achieved as a result of the execution of our strategic initiatives. That said, due to the significant industry-wide challenges in the supply chain, we expect our gross margin trends to moderate in the back half of fiscal 2021. Therefore, we're raising our adjusted EBITDA guidance to reflect the better than expected performance in the second quarter while maintaining our second half outlook despite the strong consumer demand. Our outlook has accounted for the industry-wide supply chain headwinds that we currently have visibility into. These include higher shipping costs and surcharges, as well as the continued shipping delays, port congestion, and manufacturing interruptions, particularly in Vietnam, which we expect to continue throughout 2021. We're closely monitoring the situation and proactively managing our inventory as we head into 2022. For the third quarter, we expect net revenue to be between 390 and $405 million. We expect net income of $6.5 to $9 million and diluted earnings per share to be between $0.19 and $0.27. We expect adjusted EBITDA to be in the range of $27 to $30 million. For the full year, despite the strong underlying demand trends, we're maintaining our second half outlook due to the aforementioned headwinds. We continue to expect net revenue to be between 1.67 and 1.71 billion, primarily driven by our momentum in our global e-commerce business and recovery in our outfitters business. We'd also note that if the strong travel trends continue, we could see upside to our outerwear business in the back half. We're raising our net income outlook to a range of 45.5 to 51 million, and diluted earnings per share to be between $1.35 and $1.51. We now expect adjusted EBITDA to be in the range of $136 to $143 million. With that, I'll turn the call back over to Jerome.
spk07: Jerome Adams Thanks, Jim. We remain committed to delivering a long-term profitable growth for our shareholders by consistently focusing our investments on our strategic pillars, including getting the product right, being a digitally driven company, implementing a unit channel distribution strategy, and enhancing both our infrastructure and processes. Based on these pillars, we have created a strong and resilient foundation which delivered second quarter global e-commerce sales growth of 33 percent over our 2019 pre-pandemic levels. We see significant opportunity to capitalize on our multidimensional growth ahead. We believe the pandemic drove a permanent shift in consumer behavior, accelerating online shopping and increasing demand for comfort. The increase in U.S. households within our demographic who are now more willing to shop online, which represents more than 95 percent of our business, has meaningfully increased our total addressable market. We remain focused on building our brand awareness and attracting more of these consumers to Land's End as we continue to see significant opportunity with new customers. As such, our marketing initiatives are an important investment priority, particularly in our digital strategies where customer acquisition is highly efficient. We are testing new strategies in social media, and we will continue to refine our search engine optimization. We're also improving our catalog spending efficiency as we continue to enhance our profitability and digital capabilities. Turning now to our product assortment, we are well positioned on our product and our let's get comfy messaging to leverage the more casual aesthetic driving the apparel market, particularly as people return to more normal activities. We will continue to focus on our one closet message and diversity of fit as we introduce seasonal colors, transitional items, and more denim heading into the fall. Our data analytics is an important tool we leverage to inform our product assortment and we will evolve and enhance our capabilities. Our partnership with Kohl's continues to exceed our expectations, and we remain pleased with the overall success. We expanded our swimwear distribution this quarter to an additional 150 Kohl's stores, which will carry our broader assortment this fall. Our product offering is resonating with the Kohl's customer both in stores and online, where we are able to display our full offering. During the quarter, we launched our second swimwear collection with Draper James, the brand founded by Reese Witherspoon. The performance of the collection exceeded our expectations. Given the continued success of this collaboration, we're excited for our sleepwear and home collections that are on track to launch this fall. I would also like to now discuss our lands in marketplace. While we remain in early stages, we are pleased with our performance and the opportunity it represents longer term. Our customers are looking to us for complementary product that addresses needs beyond our business, and we are delivering appropriate solutions through these third-party brands. We will continue to work with third parties that share our brand aesthetic and messaging as we expand our overall offering to enhance our marketplace assortment. Turning to our outsiders business, we saw a meaningful improvement in our national accounts and school uniform business. Sales in our school uniform business are encouragingly nearing 2019 levels, and we have seen a return to more normal back-to-school shopping patterns. We expect trends in both accounts to remain strong. Consistent with our outlook, our small and medium-sized accounts are seeing a slower pace of recovery. We are continuing to make progress against the steps we have discussed to advance our position as the authority in branded apparel and hard goods for small and medium-sized businesses. We have begun to enhance our website and streamline our processes, as well as improve our marketing and pricing. In conclusion, we are extremely pleased with our record second quarter revenue performance. The momentum in our business, despite the still challenging environment, is further proof of the underlying strength of our operating model, grounded on our resilient global e-commerce business. The strategic initiatives we implemented over the past three years enabled us to emerge from the initial stages of this pandemic stronger, accelerating our pre-COVID momentum. We continue to manage our business for disciplined, profitable growth as we focus on creating long-term shareholder value. With our proven foundations, strategic pillars of growth, and an expanded total addressable market, we're very excited for our future. We look forward to updating you on our progress. With that, we will open the call for questions.
spk00: As a reminder, to ask a question, please press star then one. One moment for questions, please. Again, that's star one to ask a question. We have a question from Alex Furman with Craig Hallam Capital. Your line is open.
spk03: Great. Thanks very much for taking my question and congratulations on a strong quarter. I wanted to ask about what you're seeing with the shipping delays and costs here. Obviously, it sounds like you're able to raise your full year guidance, so clearly you're offsetting those costs. But are you starting to see any orders being canceled as a result of product taking longer to get delivered than you'd hoped for? And I guess more importantly, what strategies do you have in place for the holiday season where customers might be expecting to get their orders ahead of key dates like Christmas?
spk06: Yeah, I can probably take the first part of that, Alex. We've been seeing these challenges really for the last year, year and a half here. The challenges have been moving. Higher costs across the board. We've had, as I said, delays at various points in our supply chain. And to date, if you look at our strong performance, especially over the last couple of quarters, I think our teams have been doing a great job of trying to get out in front of these and offsetting those. In our guidance, to your point, we're expecting those to continue at a similar rate. We're expecting some of the higher costs that are associated with having to expedite shipping costs associated with back orders to continue. And we're expecting the strong consumer demand to continue in the back half. Our biggest challenge will be if anything further happens where we're just having difficulty getting the actual product. And right now, like I said, the teams have been doing a good job, but there's certainly challenges going on. And we highlighted specifically in Vietnam where we're seeing some factories shut down.
spk03: Great, that's really helpful. And then can you just give us an update as you think about the seasonal workers that you typically hire? How far along are you in that process already? Do you have a lot of those workers with some kind of commitment here? Are you confident that you're going to have the labor pool you need for the holiday season?
spk06: Again, teams are doing a great job of trying to get out in front of that. It's certainly a challenge. The federal funding is stopping in Wisconsin this month, so we're hoping to get a pickup from that. I would say we're slightly behind where we'd want to be for the season, but we still think it's manageable going into Christmas.
spk03: Okay, that's really helpful. Thanks very much, and congratulations again on the really strong quarter.
spk05: Thank you.
spk00: That concludes our Q&A session. Ladies and gentlemen, thank you for participating in today's conference. This does include the program, and you may now disconnect. Everyone, have a great day.
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