Lands’ End, Inc. — Form 10-K Summary
Reporting period: The supplied filing is for fiscal 2021, the 52 weeks ended January 28, 2022, filed March 24, 2022. This differs from the request metadata’s “2020 Q4.” Fiscal 2020 was the 52 weeks ended January 29, 2021.
Business context
Lands’ End is a single-reportable-segment apparel and home-products retailer selling through U.S. and international eCommerce, Outfitters, third-party channels and company-operated stores. U.S. eCommerce represented 62.8% of fiscal 2021 revenue. The company continues to emphasize product, digital, omnichannel distribution, infrastructure and workplace initiatives.
Financial performance
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Revenue | $1,636.6 million | $1,427.4 million |
| Gross profit / margin | $691.5 million / 42.2%* | $605.9 million / 42.4% |
| Operating income / margin | $79.8 million / 4.9% | $41.1 million / 2.9% |
| Net income / diluted EPS | $33.4 million / $0.99 | $10.8 million / $0.33 |
| Adjusted EBITDA | $120.9 million | $87.0 million |
| Cash from operating activities | $70.6 million | $91.6 million |
| Cash used in investing activities | $25.2 million | $30.1 million |
| Cash used in financing activities | $45.1 million | $103.1 million |
*The income-statement table reports a 42.2% gross margin; MD&A text describes it as 42.3%. Management attributed the slight year-over-year margin decline to higher shipping costs and increased Third Party sales mix, partly offset by improved promotions. Adjusted EBITDA is a non-GAAP measure and should not be considered alone.
Revenue rose 14.7%. U.S. eCommerce increased 6.8%; Outfitters increased 45.9%; Third Party increased 116.6%; Retail increased 67.9%; International declined 0.8%. Growth reflected stronger online demand, recovering school-uniform and travel-related business, and a full year of Kohl’s sales plus expanded Kohl’s distribution. Supply delays weighed on results, particularly in the second half and holiday quarter.
Liquidity, debt and balance sheet
- At January 28, 2022, cash and cash equivalents were $34.3 million, restricted cash was $1.8 million, and current assets and current liabilities were $506.9 million and $311.4 million, respectively.
- Term Loan principal was $257.8 million, with a 10.75% stated rate and September 2025 maturity; scheduled quarterly amortization is 1.25%. The filing reports $234.5 million of long-term debt, net, plus $13.8 million current portion.
- The $275 million ABL revolving facility had no borrowings outstanding; reported availability was $251.5 million after letters of credit. Its maturity was extended, generally to July 2026, subject to an earlier-maturity condition tied to the Term Loan.
- Operating cash flow declined by $21.1 million, as improved earnings were more than offset by working-capital changes. Capital expenditures were $25.2 million. Total contractual obligations were $832.3 million, including $424.0 million of purchase obligations, primarily open inventory orders.
- The company said cash on hand, operating cash flows and ABL borrowings should meet capital and operating needs for at least 12 months. It reported compliance with debt covenants at year-end.
Changes, outlook and risks
- Profitability improved substantially from fiscal 2020, when COVID-related disruption, a $3.3 million Japan eCommerce goodwill impairment and restructuring costs affected results. Fiscal 2020 also included a $3.1 million CARES Act tax benefit; the effective tax rate was 27.4% in fiscal 2021 versus 13.9% in fiscal 2020.
- Management expects supply-chain delays and elevated transportation costs to continue through fiscal 2022, potentially affecting sales, gross margin and earnings. The company also cited labor shortages, inflation and higher raw-material costs.
- No formal revenue or earnings guidance is provided in the supplied filing. Management planned approximately $37 million in fiscal 2022 capital expenditures, primarily for technology and infrastructure, and did not anticipate opening additional company-operated stores in the immediate future.
- Key risks include reliance on imported merchandise and concentrated vendors, inventory availability and forecasting, seasonal fourth-quarter sales, variable-rate debt and covenant requirements, technology-system implementation, cybersecurity and privacy, and competition for labor. The Term Loan’s large scheduled 2025 maturity is a refinancing consideration.
- Goodwill and trade name totaled $363.7 million. No fiscal 2021 impairment was recorded; impairment tests rely on significant estimates of future cash flows and valuation assumptions.
- The company is defending lawsuits alleging health effects and property damage relating to uniforms supplied to Delta employees. Class certification for certain claims was denied and appellate review was rejected, but individual claims remain in litigation. Management could not estimate a loss range and believes resolution should not materially affect the company as a whole.
- ESL beneficially owned 51.9% of outstanding shares as of November 1, 2021, giving it substantial influence. The filing also describes litigation challenging the 2014 separation from Sears Holdings.
Important facts for investors to verify
- Whether supply-chain and freight cost pressures persist into fiscal 2022 and whether inventory availability recovers, especially for the holiday season.
- Cash conversion and working-capital trends, alongside the company’s ability to fund capital needs and service variable-rate debt.
- Refinancing plans and terms for the Term Loan ahead of its September 2025 maturity, plus ongoing covenant headroom.
- Progress and costs of warehouse, transportation and other technology-system implementations.
- Developments in the Delta uniform lawsuits and the Sears separation-related litigation.
- Underlying assumptions supporting the valuations of goodwill and the Lands’ End trade name.