Lands' End, Inc.

Good day, everyone, and welcome to today's Land and 4Q Fiscal Year 2024 End 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, then the 1 key on your telephone keypad. You may withdraw yourself from the queue by pressing the star 2 key. Please note, today's conference 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 Tom Altos. Please go ahead.

Good morning, and thank you for joining the Land's End Earnings Call for a discussion of our fourth quarter and fiscal 2024 results, which we released this morning and can be found on our website, landsend.com. I'm Tom Altos, 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 the 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 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 lanzen.com. With that, I will turn the call over to Andrew.

Thanks, Tom. Good morning, and thank you for joining us today. We are proud of our fourth quarter and full year 2024 results. which reflect our successful and deliberate evolution of Land's End into a modern, digitally focused, forward-looking brand that's ready for life's every journey. Our North Star is an obsession with providing our customers with fresh and relevant solutions-based products and engaging with them in a highly personalized manner, utilizing industry-leading capabilities. This approach helps them understand and deepen their relationship with Land's End. By the numbers, the strong execution of our strategy enabled us to deliver on our fourth quarter commitments. We achieved low single-digit GMV growth on a like-for-like quarterly basis. Our sixth consecutive quarter of growth in gross profit dollars, up 3% year over year. Our eighth consecutive quarter of gross margin expansion, up approximately 760 basis points year over year. Adjusted EBITDA of $44 million, up 38% year-over-year, and adjusted net income of $18 million and adjusted EPS of 57 cents, up 120% year-over-year. Our fourth quarter performance was key as we closed out the full year, delivering mid-single-digit GMV growth with net revenue of $1.36 billion on a like-for-like basis. Gross margin improvement of 550 basis points to 48% compared to 43% in fiscal 2023 with year-over-year increases in each quarter throughout the fiscal year. Adjusted EBITDA of $93 million, a year-over-year increase of 10% and a substantial increase in net income and return to profitability with adjusted net income of $13 million or 40 cents per share. When combined with our balance sheet improvements, a growing high single-digit ROIC. I'm pleased with our successful evolution of the Land's End business model. In particular, the outstanding performance of our licensing segment demonstrates the strength of this strategic initiative and further demonstrates its remarkable potential. Licensing is fueling significant expansion of our brand reach, anchored on a capital-efficient, low-risk, high-margin financial framework. I want to talk about that in greater detail later in the call. But first, I'd like to highlight a few operational and customer-facing areas of focus that are driving incremental growth and value creation. First, our inventory. As we have talked about for the past few years, optimizing our inventory has been a priority, as doing so has enabled a better cost structure while freeing up resources to invest in the newness and speed that our customers demand. Our 12% year-over-year improvement in our year-end inventory position allowed us to significantly increase our turns by double digits and provide our customers with fresh styles much more frequently throughout the year. We're not resting on our laurels, though, and are continuing to optimize our supply chain to minimize cost and bring items to market even faster. At the same time, we are closely monitoring changes to global trade policy and are positioned to take necessary steps to maintain an efficient and resilient global supply chain. Marketing has contributed significantly as we shift to a more balanced and innovative approach, leveraging digital and experiential engagement that constantly builds our cultural relevancy on top of our historic catalog engagement. We doubled our following on Instagram year over year, finishing fiscal year 2024 with nearly a quarter of a million followers. we continue to use this channel to reach younger customers who, in turn, have a high propensity to spend. Examples of that engagement are numerous, with amongst the most entertaining being the teaser launch of our recent collaboration with Andy Swim. During the fourth quarter, we accelerated our experiential approach by launching a pop-up tote customization shop in New York City's Soho neighborhood exclusively via non-traditional media sources. This reached audiences on TikTok and Instagram via bloggers and influencers with views running into the tens of millions. It should come as no surprise that the tote bag was our number one item in driving new customer acquisition during the fourth quarter. Sign-ups that consistently bring us a customer 10 plus years younger than our average. To continue building on this brand momentum, we will leverage the successful playbook from our Soho shop to launch several beach pop-ups this summer, and we'll share more on that in the coming months. We continue to deepen our focus on technology to broaden the reach of the Land's End brand. Over the past quarter and throughout 2024, we made it a priority to better use our technology and data to drive our strategies. We completed the reskin of both our consumer and B2B websites, providing a more contemporary look and feel with enhanced functionality. The exercise saw us deploy tools to better serve the customer. Our Wear It With AI tool provides a carousel of product unique to every single customer, which, when coupled with an enhanced positioning of the TrueFit sizing tool, allows for a step change in the level of personalization offered. This is only the beginning as we continue a significant effort to redesign traditional paid search and SEO placements to better work with AI agents to meet consumer demands. It's certainly an exciting time as we look outward and to an even brighter future. Clearly, our most significant path to success continues to be about the amazing product that we bring to our consumer and our ability to expand those franchise customers into lifestyle customers Q4 wasn't just about our existing franchises, although we are proud of how they performed. It was about the constant reinvention and additions across the collection. Two years ago, we were focused on key items. Now, we offer a full collection across numerous categories, from apparel to home, and enjoy bringing the customers something new and more solution-oriented on a regular basis. As an example, during Q4, we cross-pollinated our Wonderweight and Squall franchises, creating a waterproof puffer jacket in stylish colors that flew off the shelves. The innovation did not stop there. As part of our swim resort collection launch, we took our classic one-piece tugless silhouette and added a midkini, swim dress, and shorts, broadening the solution franchise and opening the aperture of creativity to reach a whole new cohort of customers. Turning to the performance of our B2C and B2B businesses, I want to start with a key driver of our strategy where we've seen considerable growth over the past two years, licensing. Licensing is an asset-light business that increases the reach of our brand, strengthens our customer acquisition strategy, and drives GMV growth. It is also one of our fastest growing and highest margin businesses, and it continued to grow in the fourth quarter. It is worth calling out that over the last 12 months, we have created a $150 million-plus GMV licensing business with strong gross margin and gross profit dollar profiles. An example of our success is the clubs business, which we began licensing last year. This licensed business is performing exceptionally well, while also significantly increasing our brand's reach and awareness with a broader array of consumers. Clearly, Our licensing business is brand enhancing by virtue of greater exposure, and our experience today has helped us deepen our understanding of how to best operate within the land's end environment. As a result, our licensing business is well positioned for additional growth via product, channel, and international expansion. For example, taking advantage of our strong position in the category, our home licensees offering will launch on Amazon later this summer. And later this year, new partners plan to launch offerings of hosiery, men's underwear, women's intimates, base layers, and travel accessories, all manufactured and sold under licenses we've recently awarded. It is also notable that we are leveraging our platform and distribution capabilities again in an asset-like manner to offer licensed product via LandZen.com. Turning to our US e-commerce business, we delivered the eighth consecutive quarter of margin improvement with an increase of approximately 880 basis points. This improvement was primarily driven by our marketing strategy and focus on higher quality sales supported by our more conservative promotional approach, our new-to-file customer growth, and our inventory management improvements. We made a big decision with our approach to holiday. pivoting from the traditional heavy discounting that has characterized the brand over the last number of years. It didn't resonate with all existing customers, which we anticipated, but for the customers who continued on the journey and the new customers we've attracted, we provided them with an exceptional balance of price and value, resetting the baseline for holidays to come and allowing us to return the business to growth with a younger, more vibrant, broader customer base. Our European business did not meet our expectations during the quarter and was the principal headwind on our overall performance. Due to our team's strong work, however, we were still able to drive over 300 basis points and improve gross margin rate in the fourth quarter. I've talked before about using Europe to test ideas that we can then deploy across the rest of the business. In this case, our efforts to reach consumers with more elevated product beyond our existing customer file didn't resonate, and we are reflecting our learnings in our go-to-market strategy and execution in 2025. We've also brought on Andy Houghton, a seasoned international leader from Nike, to focus on growing the international business, including through new markets, while refreshing the brand identity in our existing UK and German markets. Third-party partnerships continue to showcase the broad reach of Land's End across all sectors of the market. The ability to tailor our assortment, not just by leaning into categories, but by carefully leveraging the good, best merchandise assortment that we now constantly refresh and balance with a deep understanding of the specific channel customer we are addressing is a significant win. Throughout the quarter, we delivered excellent performances at Amazon and Nordstrom. Amazon drove numerous records for us, including a strong Black Friday and record Cyber Monday, mostly from our men's Bedford Quarter zip sweater being a bestseller, which delivered record sales, resulting in an increase of 300% year over year, while Nordstrom, not surprisingly, drove the highest AOV and AURs Land's End has recorded. Coming back to the significant opportunity we see with licensing, I want to know how much progress our data scientists and engineers have made in creating leverage for our licensees within our marketplaces. Through these improvements, we are continuing to drive growth while expanding the reach of our brand. For example, our shoe licensee leveraged our capabilities to make the Flurry Kids snow boot and the Men's Dakota Duck Boot number one items in their categories for long stretches of the quarter on Amazon. Turning to our B2B Outfitters business, I am pleased to note that B2B met our revenue and profit objectives for the quarter. Along with the Wells Fargo launch in Q3, it was a great back half to the full year. We have made significant progress in developing the sales pipeline for the uniforms business. For example, over the next few months, we will begin supplying another customer in the aviation space. For our school uniform business, we also continue to see upside from our unrelenting focus on winning and retaining customers. For both of these uniform businesses, we win by leveraging both our brand, our steadfast focus on quality, our market-leading embroidery and personalization capabilities, and our great customer service to beat out less qualified competition. Land's End is a leader in the uniforms channel because it delivers on a promise of a branded experience that few, if any, competitors can match. It is now coupled with an extraordinary product engine and improved technology. For our shareholders, the business remains attractive and highly differentiated with multi-year contracts, lower marketing expense, and the opportunity to reach hundreds of thousands of new B2B2C customers who can discover the consumer side of our brand. I'll now turn it over to Bernie to discuss our fourth quarter performance in more detail.