Lands' End, Inc.

Your program is about to begin. If you need assistance during your conference today, please press star zero. Good day, everyone, and welcome to today's Land's End 3Q 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 2. Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Tom Althaus.

Good morning, and thank you for joining the Land's End Earnings Call for a discussion of our third quarter 2024 results, which we released this morning and can be found on our website, landsend.com. I'm Tom Othos, Land's End Senior Director of Financial Planning and Analysis, and I'm pleased to join you today with Andrew McLean, our Chief Executive Officer, and Bernie McCracken, our Chief Financial 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 risk 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 the forward-looking statements made by us. Subsequent events and developments may cause the company's outlook to change. During this call, we will 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 LandN.com. With that, I will turn the call over to Andrew. Thank you, Tom.

Good morning. Thank you for joining us today. Our performance in the third quarter of 2024 was characterized by the continued execution of our solutions-based strategy and customer focus to drive higher quality sales. In the third quarter, we delivered net revenue of $319 million, adjusted EBITDA of $20 million, a year-over-year increase of 17%, and a low double-digit percentage growth in GMV. Through the evolution of our strategy, we're further solidifying our position as a classic American lifestyle brand that creates solutions for life's every journey and attracting new and existing customers to our wide-ranging assortment of fresh, on-trend items. At the same time, we're leveraging new and innovative tactics, including greater personalization across our marketing programs to best engage customers and drive greater buying throughout the year. Paired with our strong execution, we also delivered growth in gross margin and gross profit dollars in the third quarter. When looking at our inventories, our efforts are continuing to yield results. In the third quarter, we drove a 20% year-over-year improvement in our inventory position and a double-digit increase in our turn rate. Our focus on units of wear-now products remain key to this success. By bringing customers relevant items faster, we're able to increase full-price sales of quality inventory that fit the moment, thereby reducing the debt of promotions. One way we're optimizing our supply chain is by moving fabric closer to production with a focus on the western hemisphere, which helps reduce shipping time while diversifying our sourcing relationships. We're always focused on identifying efficiencies across our supply chain, and we will continue to take steps to innovate and enhance our resiliency. Critically, our ongoing efforts to redefine and elevate our brand across our marketing channels is proving fruitful. As we continue to showcase Land's End as a quality brand that appeals to a wide range of consumers across price points, we're becoming a bigger part of the conversation on social media channels and ultimately more culturally relevant. Put another way, we're seeing greater impact from our work to build the brand from our deliberate investments in marketing rather than by relying on discounting. For example, our recent campaign to promote our family of iconic tote bags has been a success thanks to a strategic marketing campaign, targeted promotional activity, and the first of its kind, Totes Pop-Up, in New York City. As a result, Toast sales are up substantially year over year, and our new customer acquisition from Toast customers outpaced overall new customer acquisition for the quarter, largely driven by consumers much younger than our typical customer. Our Toast make great gifts for everyone, so order yours by December the 8th and get it monogrammed in time for the holiday season. Thanks to our marketing efforts, we drove a 20% increase in new customer acquisition in the third quarter, and year-to-date, we've delivered mid-teens percentage growth in our new-to-file customers when compared to last year. Turning to product, our transitional outerwear, including our Wonderweight franchise of fleeces and vests, performed especially well in the third quarter, as did wear-now items like our Any Weather fleece and bond coats. Additionally, sales of our layering products like woven tops, sweaters, and flannels continued their momentum from Q2 despite a warmer fall. We saw strength in sweaters throughout the quarter, and holiday sweaters performed especially well. We're also pleased with the strong response in-home from our efforts to evolve and elevate that assortment. We're building a more authentic and innovative Land's End digital experience to drive improvements in speed, personalization, loyalty, promotions, and merchandising. As we discussed last quarter, supporting the execution of our strategy, we're in the process of implementing a new ERP to increase collaboration and planning across the business and with our partners. Turning to the performance of our various businesses, as a reminder, consistent with the evolution of our brand, we now discuss our business in terms of B2C and B2B channels. beginning with our B2C activities. Our U.S. e-commerce business delivered its seventh consecutive quarter of margin improvement, with an increase of approximately 350 basis points as a result of our evolved marketing strategy and a more measured approach to promotions, which continued to drive higher quality sales, new to file customer growth, and improved inventory management. Our strategy to maximize key events paid off well in the third quarter. We did so with lower levels of promotional activity, which contributed to our strong gross margin performance. I'll discuss our plan to continue these efforts into the holidays in a few moments. Our European business continued its momentum during the third quarter, more than offsetting consumer headwinds across the continent, with gross margin up approximately 900 basis points and gross profit up 13% year over year. This gross margin performance exceeded our expectations in both the UK and Germany, with the brand attracting new and existing customers to its balanced offering of weatherproof outerwear and elevated knits. We remain confident about the trajectory of our international business have begun to look at geographic expansion both inside and outside of Europe and are continuing to focus on new customer acquisition efforts while at the same time driving more full-price sales in the region. Turning to third party, we continue to see success in our strategy of focusing on assortments tailored to individual marketplaces and working with partners that both share our vision for customer-focused solutions and elevate our brand. Our recently launched partnership with Nordstrom Online Marketplace performed well in the third quarter, further proof that Land's End is strengthening our position as an elevated brand. We're seeing great traction with significant full-price selling on the platform, driven by Outerwear. Now on to licensing. Licensing continued to grow in the third quarter. Our asset licensing strategy continues to be a powerful part of our brand evolution and our customer acquisition strategy, helping to boost our relevancy with a large, attractive base of customers. Our clubs channel performed well, and we expect that strength to continue in the fourth quarter. Looking at 2025, we are actively negotiating additional license arrangements and continue to believe in the capital-like growth-oriented results that this channel provides. While we recognize only licensing royalties and fulfillment fees on our P&L, the GMV associated with this business allowed us to drive low double-digit overall brand growth, build market share, and reach a much broader consumer base. Turning to our B2B Outfitters business. Our B2B business began to hit its stride during the quarter. We built a substantial new customer pipeline, emphasizing our leading market positions in banking, travel, and health-related sectors. We relaunched our website and catalog with a more contemporary feel and reorganized our sales team to emphasize these business segment-oriented categories. As we elevate and expand our B2C channels, we are seeing the impact in our B2B channel as customers recognize us for our strong product capabilities, elevated assortment, and competence in managing asset life, faster churning, quicker speed to market business. Revenue from our business uniform channel increased 7% year over year, primarily due to key wins, including the ramp-up of our partnership with Wells Bargain to outfit approximately 35,000 employees across over 4,000 branches. Looking ahead, we are ambitious about this channel, believe we have a well-defined market position, and look forward to further leveraging it to provide recurring revenues and relatively high barriers to change. School Uniform had a terrific end to the season. Once again, we were able to meet the seasonal peak and deliver on the expectations of both our school customers and their parent purchasers. We're the leading market share provider in the channel and continue to pursue growth with both existing and new Uniform customers. Our sales team has been notably busy since October with the exit of a significant industry player. Their diligence has provided opportunities to add a meaningful amount of customers, revenue, and profit to the Land's End school uniform business. I'm taking this moment to also reassure our existing customers that we have the capabilities to continue to deliver on our school uniform's promise while accommodating the incremental business. I'll now turn it over to Bernie to discuss our third quarter performance in more detail.