Lands' End, Inc.

Good day, everyone, and welcome to today's Lands 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 telephone keypad. You may withdraw yourself from the queue by pressing star and 2. Please note this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Chief Financial Officer, Bernie McCracken. Please go ahead.

Good morning, and thank you for joining the Lands End Earnings Call for a discussion of our first quarter 2024 results, which we released this morning and can be found on our website, landsend.com. I'm Bernie McCracken, Lands End's Chief Financial Officer, And I'm pleased to join you today with Andrew McClain, 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 Land's End.com. With that, I will turn the call over to Andrew.

Thanks, Bernie. Good morning, and thank you for joining us today. We delivered strong first quarter 2024 results from the continued execution of our strategy centered around Land's End being the innovative solutions-based brand that's ready for life every journey. This vision is the cornerstone of our value creation strategy, which is underpinned by three key priorities. Build the brand, increase product margins, and grow our customer base. Our deliberate efforts to generate more profitable sales by deploying asset-light approaches in tandem with our core digital businesses gained momentum in the first quarter of 2024, resulting in an increase in gross profit dollars and significant gross margin expansion. With inventory down 23% year over year in the first quarter, we remain nimble and continue to prioritize newness and speed to market in our assortment, introducing new styles, fabrics, and colors to which our customer responded positively. We are focused on further improving our inventory turn through a variety of speed and efficiency initiatives. As noted, it also serves as a reminder to our customer, buy it now or it may be gone. Based on our gross merchandise value, or GMV, we returned the brand to growth in the first quarter with a low single-digit increase year over year. We did this by continuing to evolve our brand story, especially across our digital and licensing channels. We're also leveraging our proprietary data to better understand the shopping behaviors of our two key customer cohorts, Resolvers and Evolvers. to further refine our customer journey and match that with a user experience that is reflective of the Land's End of today. Late in Q1, we continued to showcase our innovation when we introduced our newly designed website that better represents Land's End as a brand ready for customers at every moment. Social media has become a key part of our marketing and one that has generated strong new customer acquisition. By combining our elevated brand story with a multifaceted paid social media approach, we're better promoting newness across our assortment, which drives traffic to our own channels and drives more full-price selling. As a result, in the first quarter, we've more than doubled demand from social media year over year. Moving forward, we will continue to build our brand through marketing rather than discounts. We will do this by taking a more outfit-centric approach to our assortment, featuring significantly more productive and compelling inventory that facilitates demand across natural adjacencies. From a product standpoint, we had several high-performing categories during the first quarter and saw increased full-price selling from introducing newness. Our transitional weather solutions performed particularly well and were a key driver of our success. As milder weather prevailed across the winter and early spring, we seized the opportunity to meet the moment for our customers by leaning into our wear-now approach to our assortment, which yielded a great customer response. Through our authority in outerwear, we once again drove sales across key adjacencies with layering products, including women's sweaters and knit tops, performing particularly well. Zeroing in on outerwear, we're pleased with the performance of our weatherproof assortment of lightweight jackets, raincoats, and fleeces, which all continued to perform well in the first quarter. Women's bottoms were another winner, with customers responding well to new styles like wide-leg denim and chino pants, and on-trend materials like linen and gauze. In addition to delivering units in key apparel categories, our strong franchises like our Wonderweight line of ultralight packable outerwear, squall jackets, and drifter sweaters enable us to offer a family of products that solidify our positioning as a lifestyle brand. We remain incredibly confident in our ongoing innovation strategies. Turning to our swim business, we took a view across the season that allowed us to introduce and sell our key franchises, including the newly patent-pending Wave Shaper Sculpting Suit, at full price for a longer time period. Periodic events, like our highly popular National Swimsuit Day, have reduced our reliance on daily promotions to drive sales, And across all our channels, we were able to deliver on our gross margin goals while leveraging the success of SWIM to drive growth in our new-to-file customer accounts. In fact, looking at the season to date, where we are consistently flowing more newness, our SWIM business has the potential to exceed our margin dollar plans while maintaining our leading market share. Before I touch on the performance of our various businesses, I want to remind you that we are preparing to change the way we talk about our performance to be more consistent with the evolution of our brand. Specifically, we plan to discuss our business in terms of B2C and B2B. Beginning with our B2C activities, our U.S. e-commerce business is our largest direct-to-consumer channel. The business delivered its fifth consecutive quarter of great margin performance with an increase of over 600 basis points due to our more targeted approach to promotions, which drives higher quality sales and improved inventory management. As we've mentioned, we continue to maximize key events to drive demand. With lower levels of inventory, we are utilizing occasions like President's Day and National Swimsuit Day to lean into newness and quality products that our customers are responding to. These events have allowed us to drive profitability by achieving more full-price sales while maintaining lower levels of promotional activity. Put another way, our strategy is not to simply move units. We're maintaining lower promotional levels while achieving more quality sales from the strength of our brand and the solutions we offer customers. In addition to driving quality sales, these efforts around key events are also driving a nice increase in new customer acquisition, with our global new customer acquisition increasing in the first quarter year over year by high single digits. Building upon a strong fourth quarter, our European business continued its upward trend in Q1 with exceptional gross margin expansion of over 1,000 basis points year over year. As in the U.S., we continue to prioritize newness and better inventory management with a focus on increasing margin through lower levels of promotional activity. Moving to our third-party business, we continue to see strong results from our approach of working with partners that share our vision for customer-focused solutions and are additive to our assortment. While third-party marketplace revenue was down year over year, we saw similar margin expansion from sales through these marketplaces as we did through sales directly from land ends, further reinforcing our brand positioning and story to customers who shop with us in these other channels. We are managing the third party business in close coordination with our U.S. consumer division, enabling us to better align our approach across the various channels where consumers interact with Land's End. Our coordinated approach to maintaining a similar customer experience across our third party and direct business, while also tailoring the assortment for each partner based on their customer needs, helps us drive traffic to our website where a customer can access an even wider array of our solutions. Another benefit of this approach, and paired with our focus on better inventory management, is that we can better manage our go-to-market channels and maximize the efficiency of our inventory. During the first quarter, our licensing strategy, which adds asset-light recurring revenue streams, continued to accelerate. Our initial foray into the Costco channel exceeded our expectations with a handful of swimsuit options selling through quickly. Along with previously announced licensing agreements in kids and in footwear, we entered into a new licensing agreement for our home product, which expands a business that was already performing well into new channels. While we recognize only licensing royalties on our P&L, the incremental GMV allowed us to return the brand to growth and positions as well for the future. Turning now to our B2B Outfitters business. We have used the time wisely over the last year to kickstart the sales engine for a business that we believe can become a high performer for Land's End. This focus, evident last year, allowed us to add new accounts and deliver compelling Q1 results in our school uniform business, something we'll look to build in subsequent quarters. In addition, As we have outlined in the past, we significantly retooled the business to focus on customers by size and by industry, leveraging our strengths and being the provider of choice to large, medium, and small businesses that share our outlook for high-quality product and outstanding customer service. Consistent with our approach in the B2C businesses, we have chosen to prioritize quality of sales and profits ahead of revenue and de-prioritize low return businesses, notably our promotional products business. That effort has resulted in a more connected approach to client development through a national sales team with successful relaunches of existing clients and several new launches in process for 2025. We'll look forward to continuing this growth story in coming quarters. I'll now turn it over to Bernie to discuss our first quarter performance in more detail.