Good day, ladies and gentlemen, and welcome to the Lands' End Fourth 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 be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would like to turn the conference over to Bernie McCracken, Chief Accounting Officer, you may begin.

Good morning, and thank you for joining the Lands' End earnings call for our fiscal fourth quarter and fiscal 2016 results. On the call today, you will hear from Jerome Griffith, our Chief Executive Officer; and Jim Gooch, our Chief Operating Officer and Chief Financial 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 fourth quarter and fiscal 2016 earnings results, which are now available on landsend.com. I would like to remind you that today's discussions 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 Investor 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 Jerome Griffith.

Thank you, Bernie, and thank you everyone joining us this morning. I'm pleased to be speaking to you today as the CEO of Lands' End. In the more than half century since the brand was established, Lands' End has become a symbol of American family values, American spirit, and has amassed a strong and loyal customer following. The company's iconic heritage and strong brand recognition as well as its highly compelling model as an e-commerce-led business are the attributes that drew me to the role. However, in the recent history, the company lost traction as it lagged behind competitors and in some ways did not adequately evolve to keep pace with the changing retail landscape. I believe we have a tremendous opportunity to rejuvenate this business as we address these issues and position the company to leverage its strengths. This includes creating a relevant assortment that maintains our classic American heritage with an updated look, providing a clear brand-identity to speak to today's consumer and better leveraging our existing distribution channels, while expanding into new channels. It is a matter of execution and I believe that my brand experience and expertise, and strategically optimizing distribution channels will enable us to strengthen our competitive position and drive sustainable long-term growth. I've had the opportunity to meet with many of our team members and have been impressed by the talent and dedication to the organization. Over the next few months, I'll take a deeper dive into the business and will be asking a lot of questions to better assess our competitive strengths and weaknesses. As I immersed myself into the organization, I expect to gain a greater understanding of who we are as the company, what we mean the consumers and what Lands' End will represent as a brand going forward. I…

Thank you, Jerome. Overall, we saw sequential improvement in our fourth quarter financial results. Revenue for the quarter decreased 3.1% to $458.8 million compared to $473.5 million last year. The sales decline was comprised of a 2.6% decrease in the Direct segment with sales of $398.5 million and 6.3% decrease in the Retail segment with sales of $60.3 million. Sales in our outfitter business were up approximately 2% for the quarter. As we discussed on our last call, we made a number of enhancements during the fourth quarter, focusing on improved traffic and conversion among our existing customers, reengaging with lapsed customers and capturing the attention of new shoppers. For the holiday season, we reallocated marketing dollars to our most effective media channels, mainly digital media and our catalogue, which resulted in improved traffic trends as well as increased demand. Refinements to our catalogue, including highlighting key selling items, and more clearly communicating our value message, drove demand among existing customers and helped reactivate lapsed customers. We also implemented a more strategic promotional plan within our test and learn environment. This allowed us to improve our demand while better managing our margin rate. In addition, we made enhancements to our website to improve the overall user experience. We methodically tested, measured and reacted to our customer feedback, which enabled us to increase conversion during the quarter. Overall, through these activities we saw improved trends in conversion, customer reactivation and margin. Importantly, since September we've seen meaningful sequential improvement in our customer file trends from both existing and lapsed customers as well as beginning signs of new customer acquisition. In terms of product, we are pleased with the performance of our sleepwear, women's knit tops and home products, all of which performed better than the company average during the quarter. However,…

Thank you. [Operator Instructions] Our first question comes from the line of Alex Fuhrman of Craig Hallum. Your line is now open.

Great. Thank you for taking my question. I'd love to get your thoughts, Jerome, I know you mentioned looking at some new distribution channels. What are some things that you see as the biggest opportunities? I mean, is it other wholesale outlets that you think could be good for Lands' End or is there maybe some more thinking around doing some more company-operated stores?

Thanks, Alex, for the question. I think both is really the answer. When you look at most successful companies today, they are looking at an omni-channel approach, where you're really distributing product where the consumer is. And I think for us, you've got 87% - almost 90% of everything that we are selling going through e-commerce. You've got still a pretty decent size business at Sears. We're doing a couple of hundred million there. And that's says that there are customers out there that want to shop in a physical presence. And in fact, this week I'll be visiting all of our own stores and some of our top volume Sears stores. I think there is an opportunity for a company-owned store platform. I'm not exactly sure what it is yet. And that I think will play out over the next few months as we take a look and put together, what we think a profit model might look like, and what a store footprint might look like. I think in the wholesale side, we are actually wholesaling product now, but it's sort of without a strategic plan. And you've got opportunities for sure in a third-party e-commerce, and potentially in some brick-and-mortar places where we could be, but its early days. So I would say there are opportunities. We are going to look them quickly, but I don't have any specifics for you at this point in time.

Great. That's really helpful to understand your thinking, and thank you. And then, just thinking about - you mentioned bringing in some more expertise, particularly around e-commerce and Jim touched on the higher CapEx plan for this year, $40 million to $50 million, so it sounds like a number of investments being made around the business. How should we think about the expenses that are going to be hitting on the SG&A side in terms of some of the new headcount you're bringing on? I mean, it looks like you guys did a pretty good job of controlling expenses this quarter and 2016 in general. Do you feel like there is more opportunity to rein in SG&A a little bit or are some of these investments and new hires going to start to pull that number up a little bit.

I see it so far. Now, listen, realize, today is my 12th business day on job. So with my vast experience we looked at a lot of processes in the company, how things get done, where the priority sit, what the opportunities are. And early days, I would say, we are doing a pretty good job controlling expenses, but we are probably spending in maybe not all the right areas. We're an extremely good catalogue company, and we spend a lot of money in managing catalogues. But I think some of those resources could be better used particularly in our e-commerce group. People would kill for our data. I mean, we have so much good data on our consumer where they are, what they buy, how often they buy, what they are looking for. We don't do enough - a good enough job of mining that data, looking at it. We don't do a good enough job of analyzing consumers' needs and wants based upon what they're buying history is. So I think you can safely say that we could do more job - a better job, and put more resources towards running a great e-commerce business as opposed to running a great catalogue business. And that really jumps out at me, because when I look at processes for the company, I think we're probably not up to date where a lot of other companies are in the world today. We are slow on product development. We are slow on reacting to trends. And we've got some pretty good businesses out there. Our swimwear business is a very good business. Our knit wear business is a very good business. We should be able to jump on trends. We can't do that today. Additionally, we should be a lot smarter about how we are managing or advertising dollars from a digital standpoint, we are not there yet. So we've got areas where we do well and then a lot of areas for improvement. And a lot of those improvements really are going to come about from re-tasking resources and putting the right resources in the right areas.

And, Alex, I think that's the key. When you talked about investing in SG&A, I think similar to what we've been able to do on the marketing side where we've taken on productive dollars and put them into more productive working media, our goal would be to do same on the SG&A, is taking on productive spend, and as Jerome mentioned, putting into some of the more productive areas.

Great. That's helpful. Thank you very much.

Yes.

Thank you. And our next question comes from the line of Steve Marotta of C.L. King. Your line is now open.

Good morning, Steve.

Good morning, Jerome and Jim. Congratulations, Jerome, welcome aboard.

Thanks.

Jerome, you mentioned an updated development calendar. Could you talk about what the cycle is now from thought process to delivery? How long that is? Where you think you can get it to? And could you also weave in your thoughts on test-and-react model, what you are doing there and how that can be a larger portion of your total mix?

Yes, idea to warehouse is pushing a year right now, which is way too long. We've got I believe the opportunity to cut that down by several weeks into the months area. I haven't got to the point yet, where I can say here is exactly how long it's going to be. I can tell you 10 years ago I was working at the company where it was 14 weeks out. So we've got a lot of room from improvement. We are making some of the right decisions today, just to talk about how we can get help from our suppliers, change our processes, streamline things to be faster and more react-full. What I've seen from the group so far in the test-and-learn culture is they are embracing it. We're already starting it. The guys had actually started it before I even got here. And there is a lot more thought into putting product on the web, let's see how this works, and doing different A/B testing or different look testing, and getting the learning and reacting to it. So the group is well on its way in that part.

Okay. My follow-up regards Lands' End Sport, could you talk about how that performed in 2016, your plans for 2017 and beyond?

In 2016, it was a small piece of the business. I think as we go forward into 2017 there are opportunities for growth there. But I think Jerome is still going through the different pieces of the business and figuring out where we're going to be investing.

Yes. It's a very small part of the business. What we have learnt from our customer, our customers are not the techie customer. Our customers are more at leisure. And the direction on that product will change a little bit going into the back part of 2017. But even so, it's a small - I wouldn't say insignificant, but it's a couple of percentage points, it's not big.

Thank you.

Thank you. And I'm showing no further questions at this time.

Okay. Thank you all.