Lands' End, Inc.

And welcome to today's Land's End first quarter earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your touchtone phone. You may withdraw yourself from the queue by pressing star and 2. Please note this call may be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Bernie McCracken, Interim Chief Financial Officer.

Good morning, and thank you for joining the Lands End Earnings Call for a discussion of our first quarter 2023 results, which we released this morning and can be found on our website, landsend.com. I'm Bernie McCracken, interim chief financial officer, and I'm pleased to join you today with Andrew McLean, our chief executive officer. After the 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. 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 the call over to Andrew.

Thank you, Bernie. Good morning, and thank you for joining us today. I'm pleased with our results for the first quarter, which demonstrate the strength of the Land's End brand and deep customer affinity, the value of our core offerings, and our company-wide focus on stellar execution. We generated revenues of $310 million at the high end of our expectations. and adjusted EBITDA of $19.5 million, well exceeding our guidance. I'll provide more commentary on our strong first quarter in a moment. But first, I want to focus on the progress we're seeing from our strategic initiatives that I shared with you last quarter and the work we continue to do to enhance value for our customers, employees, and shareholders. As you know, I believe Land's End has a tremendous opportunity ahead, and we are well positioned to generate value for all our stakeholders. To achieve that value creation, we are taking a page from our iconic brand's 60-year history, deepening our customer focus and ensuring that we're providing our customers and partners with the high-quality products they are looking for. In just a few short months, We're seeing progress as our renewed focus on our customers and prioritization of core products is driving tangible results. To be clear, we shared last quarter that Swim was performing well and that it is a priority for us alongside its natural vacation adjacencies like totes, towels, and cover-ups. Year over year, our swim business is up high single digits, and the MPD scores we're seeing in our women's swim business show that we have the leading brand in the swim category and are a top gainer of market share. What's exciting for us and gives us confidence in the path we're pursuing is that customers are responding well to newness. We've taken steps to right-size our inventory, which enables us to run more targeted promotions and leverage cost tailwinds that support our gross margin expansion. With SWIM and vacation as our template, informed by insights from our buyer file and broader consumer trends, we believe we can replicate this strategy in other categories and, in particular, those categories that our customers are looking for and that drive outsized value creation. The key attributes of SWIM include fit, performance, and functionality are also present in other categories like bottoms and outerwear, which each have franchise items and where we have authority in the marketplace. Underpinning this strategy is bringing innovation back to land's end. Innovation in how we more deeply engage with our customers, innovation in how we look critically at our product strategy, and innovation in how we better execute. While innovation is a key value driver for us, we will do so consistent with our 60-year legacy, which is appreciated by customers across the country and around the world. At its core, Land's End is a solutions company. We're in the business of providing products that solve life's issues. By obsessing about our customers' needs, we can better plan for, anticipate, and prepare for the many avenues where we can serve them. We can and will continue to execute from a position of strength, knowing that we are uniquely positioned to deliver consumers and our partners high-quality products they're looking for for themselves, their families, and their businesses and associates. We also believe there's an opportunity to create value by pursuing a licensing strategy that enables Land's End to do what we do best, bringing in partners that can leverage their own strengths. Since our last call, we have brought on a new partner to supply Land's End products to Costco, and we are actively considering category, channel, and geographic licenses with others. The potential for us to utilize this asset-like model enables us to free up our resources and better focus on our solution-driven authority in areas that are significant value drivers for Land's End. Between asset-like balance sheet gains, royalties, and increased brand visibility from multichannel distribution, we see the potential for a significant source of incremental profitability coupled with an improvement in operating margins. On our last quarterly call, we spoke to you about the work we're doing to better leverage our strong buyer file and the proprietary data it provides us that we can use to inform our decision-making. For the quarter, our U.S. buyer file stabilized with flat growth and we saw strength in the rebuy rates of our active customers. We're continuing to conduct qualitative and quantitative reviews of our data to refine our strategy so that we can better reach and cater to the needs of our existing customers and expand our customer base over time. We've already started rolling out the learnings of this work and are seeing positive results. For example, We're weighing our marketing of the swim and vacation stories more heavily on Instagram, where we can broaden our customer base and reach a younger audience that recognizes Land's End as an authority in the category. We'll continue to roll out additional updates to our strategy and marketing as that process continues. We're also working. to further improve our operations and better leverage our data to enhance efficiency through greater collaboration and faster decision-making. Our goal is to be the nimble problem solvers that our customers demand, and we're doing that by empowering our team with the information, tools, and processes to provide differentiated value for our customers, which should lead to improved operating results and enhance value creation for our shareholders. Now, turning back to our strong first quarter results, building on what we saw in the fourth quarter of 2022, consumer activity continued to progress during the quarter, resulting in strong momentum across the business. In the first quarter, our sales came in at the high end of our guidance range with $310 million in revenue, a 2% increase year over year. Importantly, we capitalized on supply chain cost improvements and utilized more targeted promotions which resulted in strong year-over-year margin performance. Regarding inventory, we continue to make progress and are pleased to report that as of the end of Q1, we have returned to normalized inventory levels consistent with what we said last quarter. As a result of our work to better match anticipated demand with supply, which is largely informed by our proprietary data, we expect that inventory levels will continue to come down and that, by the end of Q2, we will be at or below pre-pandemic levels, supporting our ability to lean into gross margin opportunities. Critical to our improved inventory levels is a focus on driving turns, increasing our freshness factor, and leveraging our vendor relationships. We did not and will not accept that a return to normalized supply chains is enough. Our go-forward stance is to reduce the time to market. Already for fall holiday inventories, we have removed as much as nine weeks from the calendar and implemented vendor-managed inventories on a handful of core NIC programs with a view to expanding that strategy. Next. Taking a look at our products and what our customers are responding to, the underlying theme is that the trends towards casualization and hybrid life appear to be sustaining. We, of course, reference swim as a leading category. We've surrounded that with other vacation essentials that our customers are responding exceptionally well to. We've also seen good momentum in linen and core knit tops, as well as seasonally appropriate attire like long-sleeved T-shirts and woven tops for both men and women. Bottoms for both men and women perform well, and in our experience, that bodes well for sales of tops. Lastly, and this is a critical point, as I mentioned earlier, customers are responding well to the overall newness in our assortment. As we move forward, we are committed to regularly injecting newness into our offerings throughout seasons and across categories. Turning to the outfitters business, as I've said before, this is a successful business with plenty of opportunity ahead. both on its own and as a potential customer acquisition engine for our consumer business. Recently, we signed a five-year extension with American Airlines, which takes that agreement to 2028. As we expected and reflected in the guidance we provided on our last quarterly call, we wrapped up our work with Delta during the quarter, resulting in some non-recurring revenue, which Bernie will detail shortly. In addition, we have hired a new leader for the Outfitters business, Jim O'Connor, He will be joining Land's End in June. Jim brings over 20 years of general management and sales leadership expertise in B2B and B2C businesses, including at Shoes to Cruise and Timberland. I'm confident Jim will be a great addition to our leadership team as we continue our focus on driving and expanding the Outfitters business. We are a digitally native business, serving our customers across a variety of online venues, from Land's End.com to Amazon to department store marketplaces. As over 90% of Land's End's purchases happen with a click, we're pleased with our online performance, and in particular, Land's End.com. Our land-bound fulfilled business, which enables us to sell through our partners' online marketplaces and deliver direct from our warehouse, provides a valuable opportunity to reach additional customers not engaging directly with our brand. This business continues to demonstrate growth and provide strong margins. We see significant opportunity in our newer partners, including Target and our most recent addition, Macy's, which we launched this quarter. Increasingly, we view this business as an integral part of our domestic B2C digital journey, which combined produce mid-single digit growth for the quarter. We'll continue to explore opportunities to leverage this proven platform with new and existing partners and speak increasingly about the growth of the consumer digital journey. Lastly, from my vantage point, our international business is an opportunity for us to grow demand and earnings faster than our core U.S. business. tapping a customer that is excited about the lifestyle we offer and the value we bring. We're exploring various opportunities to expose our products in new geographies, including through online expansion, distribution partners, and as I mentioned earlier, licensees. In our existing Europe business, we are reacting to ongoing lower levels of consumer demand in the region by applying much of the approach that has been critical to our success in the U.S., This includes a focus on key categories where we have authority in Europe, particularly linen and dresses, and incorporating newness in the assortment to which customers are responding positively. This approach, combined with a deep focus on cost control and more disciplined promotional activity, resulted in flat profitability year-on-year and gives us a platform for future growth and development. I'm proud of the way we executed throughout the quarter and the progress we've made on our strategic plans. There's more work ahead, and I look forward to sharing additional updates on our efforts in the coming quarters. With that, I will turn it over to Bernie.