Good day, ladies and gentlemen, and welcome to the Lands’ End Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Bernie McCracken, Chief Accounting Officer. Please go ahead.

Good morning and thank you for joining the Lands’ End earnings call for our fiscal third quarter 2016 results. On the call today, you will hear from Jim Gooch, our Co-Interim Chief Executive Officer and Chief Financial Officer and Joe Boitano, our Co-Interim Chief Executive Officer and Chief Merchandising Officer. After the Company’s prepared remarks, we will conduct a question-and-answer session with our covering analysts. Please note that this morning we released our fiscal third quarter 2016 earnings results, which are now available on landsend.com. I would like to remind you that today’s discussion will contain forward-looking statements related to future events and expectations. These statements are based on current expectations and the current economic environment or are based on potential opportunities. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause the Company’s actual results to differ materially from those discussed are posted in the investors’ information section of landsend.com and in our most recent SEC filings. Our discussion will also include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures also can be found in the investor information section of landsend.com. Any reference in our discussion today to EBITDA means adjusted EBITDA as defined in the earnings release. Lastly, we assume no obligation to update the information presented on this call except as required by law. I will now turn the call over to our Jim Gooch.

Good morning. Thank you for joining us today. I’ll begin the call with the discussion of our near-term priorities and provide operational highlights from the third quarter. Joe will walk you through our key merchandising and marketing initiatives. And then, I’ll review our third quarter financial results in more detail. As Interim Co-CEO, Joe and I are focused on driving improved near-term financial results while continuing to execute on our long-term objectives. We are clearly disappointed in our third quarter results with sales below our expectations and gross margin pressure from deeper discounting. However, we took steps to ensure that we had clean inventory levels at the end of the quarter while we continued to focus on driving profitability and aggressively managing our cost. We’ve also evaluated our performance across the organization, drawing from our learnings over the last several quarters to develop a set of initiatives that we believe will position us to deliver improved financial results and better execute our business over the long term. With these priorities in place, we now have a more focused and cohesive organization, a test to read and react approach to our business, our results oriented marketing plan and a merchandising strategy that reflects the strong brand heritage of Lands’ End and most importantly, alliance with our customer needs. I’ll now walk you through some of the initiatives we’ve begun to implement, many of which have already yielded improved results. First, in order to drive improved sales performance, we began reallocating our marketing dollars back into our most effective media channels, specifically our catalogs and digital media. In addition to increasing our spend on catalog, we are making refinements that we believe will drive improved conversion among existing customers and reengage lapsed customers. As part of this, we’ll allocate more catalog pages…

Thanks, Jim, and good morning, everyone. I am pleased to be here today to discuss our go-forward initiative. As Jim indicated, we have evaluated where the brand is today and in that we’ve developed a well-defined and focused strategy around our merchandising offering. Our primary focus is on our classic business with our objective being to provide an assortment that reflects our strong brand heritage and addresses the lifestyle needs of our Lands’ End customer. Lands’ End grew from a modest yachting supply company into one of the world’s most recognizable sportswear brand out of an appreciation for well-made stylish products that reflect true American value. However, over recent years, we did not provide the innovation and newness to effectively compete with the best-in-class offerings in the marketplace. We now see an opportunity to regain our best-in-class positioning as we heighten the level of quality, style and value incorporated into our product assortment. To accomplish this, we will focus on the classic product and our core customer by addressing their changing lifestyle needs with new and relevant products. We’ve recognized that our success is rooted on our ability to deliver an assortment that is exciting and compelling to our customers. We will emphasize categories in which Lands’ End has been known as a destination including outerwear, swimwear and sweaters. Going forward, our priority is to create a compelling assortment designed to reengage our customer, enable us to regain our strong market position, particularly in key volume driving categories. We will do this by working towards several goals. First, we need to create a product assortment that is relevant to our core customer and aligns with their lifestyle need. We have long winded destination for classic American sportswear, and we see an opportunity to regain our position in this category. We…

Thank you, Joe. Now, I’ll provide a review of the third quarter financial results. Revenue for the quarter decreased 6.9% to $311.5 million compared to $334.4 million last year. The sales decline was comprised of 5.5% decrease in the direct segment with sales of $272.1 million and 15.6% decrease in the retail segment with sales of $39.3 million. Sales on our outfitter business were relatively flat for the quarter. Overall, while the first half of the quarter was very difficult from a sales perspective with double-digit declines, we saw significant improvement in our sales trend in the back half of September and October, and over that period sales were relatively flat to last year. With the exception of our outerwear business, which was soft throughout the quarter due to the continued warm weather, this improvement in trend was across most of our categories with the largest drivers being our women sweaters and bottoms, men’s knit tops and home categories. The sales decrease in the direct segment was driven by decline in our U.S. direct business as well as our international business. After a slow start to the quarter, sales were positively impacted in September by a successful friends and family event where we saw strong customer response from testing different levels of promotional offers. In October, we increased the depth of the offer, which has helped us begin to rebuild our customer file ahead of the holiday season. In retail, the sales decline was largely due to 14.3% decrease in same store sales combined with eight fewer Sears locations. We ended the quarter with 219 shops at Sears and have continued to see weak traffic trends within malls and more specifically within our Sears locations. This was partially offset by sales from our new Chicago premium outlet store which opened…

Thank you. [Operator Instructions] And our first question comes from Steve Marotta of C.L. King & Associates. Your line is now open.

I have a couple of questions. First, let’s address flattish sales in late September and October. I assume that’s on a consolidated basis. And you also intimated that is also on an increased promotional activity. Can you talk a little bit about the differential in promotions, maybe from the first part of the quarter to the last part of the quarter and into the current season and overlay that if you will with the inventory and how you define the fact that it’s cleaner even though it is down less than what the sales decrease is?

Yes. First of all, I’ll hit on a couple of those. First, yes, it’s on a consolidated basis. As we said, we were off to a pretty rough start in the first half of the quarter from top-line sales and also we were ending up being a little deep in a couple of spots on inventory. So, we did take a look at our promotional cadence and our promotional depth. We made a couple of changes in the back half to go deeper on some categories and some products, and that absolutely helped us move the needle from top-line sales. However, I would say that it was fairly consistent as we talk about catalogs or as we talk about our spend from a circulation perspective. That wasn’t a significant increase. We did more things digitally, did more things from an email perspective, did more things from a targeted customers perspective that help move the needle in the back half. So, as I look at inventory at the end here, even though it’s not down the same percentage, we are cleaner and we are lower year-over-year. We don’t have any significant issues targeted that might be an issue going into the fourth quarter. So, we feel very comfortable, not only about our dollar volume of inventory but also qualitative of inventory.

Okay. Can you talk a little bit about the promotional cadence? I know you give guidance, but can you talk a little bit about fourth quarter-to-date if it was at what you would consider a similar level to the back half of the last quarter or whether it’s higher or lower?

Yes, as you said, certainly we don’t give guidance, but I’ll give you little bit insight. Overall, promotionally, I think we are consistent with what we’ve said on prior calls that we anticipate the fourth quarter to be fairly flat promotionally and from a catalog perspective year-over-year. I will tell you that we’re pretty happy to see that the overall trends that we saw in the back half of September and into October, we saw many of those continue into November and actually continue into this past weekend around the holidays and it was culminated with one of our better Black Friday and one of our better Cyber Mondays that this Company has seen. So, we do feel comfortable with where we are at. We are doing more test reading, reacting that I mentioned in my prepared remarks. We are listening to the customer; we’re reacting on products and price points where we feel it’s warranted to, to help drive business, focused on driving incremental sales and incremental gross margin dollars.

And one more question as it pertains to your focus on the classics, and you did mention a couple of the categories and you also mentioned being more appropriate, if you will, for your core customer, more amenable to them. Can you define your core customer, age and demographics?

Our current core customer -- it’s Joe Boitano. Our core customer is around 52 years old. She is and he is that customer who likes classic clothes. She is not a fashionista, but she is looking for quality, she is looking for fit, she is looking for sportswear, she is looking for clothes that she feels comfortable with that work into her lifestyle.

And do you expecting that age demographic to remain the same, say for the next year to two to three? I mean for what you’re targeting for what you want to do, do you expect that to remain roughly the same?

Our hope is that we will attract a younger customer through additional new styles and new development of ideas within our product and new offerings.

Thank you. And our next question comes from Mark Rosenkranz of Craig Hallum. Your line is now open.

Hi, good morning. Thanks for taking my questions.

Good morning.

Good morning.

Just kind of high level question. You talked about some of the improvements you saw in total buyers in September and October as well as some of the lapsed buyers. When you look at the kind of revenue headwinds you’ve seen, what are you kind of looking at as the first sizeable improvement? Would it be those kind of returning customers increase traffic or kind of what are you gauging to see the kind of initial signs that the revenue is going to be a sustainable improvement?

I think that that’s a key metric that we look at. We look at the health of our buyer file. And as we said I think on prior calls, we break that between active, lapsed and new customer acquisition. And some of the changes that we made in the back half, as I said, we’ve seen the best results in both the active and the lapsed buyer file that we’ve seen in recent history. New customer acquisition is still trailing a little bit last year but we’ve also seen an improvement in trend. So, as we improve the strength of that buyer file, that will eventually -- it ended up in direct improvement in sales, but that will also give us more momentum going into the fourth quarter.

Okay, great. And then, on the classic side, you plan on a greater emphasis there. What is the kind of split where you kind of thinking and see between the classics and the rest of the business? What level of inventory and sales you think makes up a good percentage related to classics line?

Our classic business should -- will represent about 97% of our total business. It is a major driver of our sales. And as I mentioned in my prepared remarks, Canvas and Sport will be scaled back dramatically.

Okay. Fair enough. That’s helpful. And then last one from me, on the operating expense line, you had some good improvement in the SG&A. What kind of -- you touched on those mostly variable expenses, do you think it’s a reasonable level kind of going forward, this improvement that we’ve been seeing, or do you think there is a little more maybe room for improvement as we go through Q4 and the start of 2017?

I wouldn’t anticipate any dramatic improvement. I think we’ll continue to refine certainly the variable piece. Our biggest pieces of our SG&A, you have a variable piece, you have the marketing piece, you have fixed piece around salaries. And I think we’ve instilled a pretty good cultural DNA around aggressively managing that variable expense, the sales scale up and down. So, you’ll continue to see some movement on there. As I mentioned, the marketing expense should be fairly flat year-over-year. So, I think continuation in the prior trend should be achievable in the fourth quarter.

Thank you. And that concludes our question-and-answer session for today. Ladies and gentlemen, thank you for participating on today’s conference. This does conclude the program and you may all disconnect. Have a great day, everyone.