Good day, everyone, and welcome to the Lands' End, Inc. First Quarter 2025 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. Please note, this call may be recorded. I'll be standing by if you should need any assistance. It is now my pleasure to turn the program over to Tom Altholz.

Good morning, and thank you for joining the Lands' End, Inc. earnings call for a discussion of our first quarter 2025 results, which we released this morning and can be found on our website, landsend.com. I'm Tom Altholz, Lands' End, Inc.'s Senior Director, Financial Planning and Analysis. 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 risks 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 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. 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 landsend.com. With that, I will turn the call over to Andrew.

Thank you, Tom. Good morning, and thank you for joining us today. We continue to execute our proven customer-centric strategy through creative engagement, viral moments centered around the reimagining of our iconic tote, expansion of our brand through licensing, and, of course, fresh solutions-based product. In addition, the period was characterized by improvement in the resiliency of our supply chain to maintain our momentum throughout fiscal 2025. Most pleasing was the continued performance at the top and bottom of our P&L with growth in GMV, which was low single digits positive when adjusted for prior year inventory sell-off, and a 12% improvement in our adjusted bottom line. As we continue to flow through higher levels of incremental profitability, all accomplished on a faster inventory turn and with improved working capital. As always, our focus remains on building our brand, maintaining discipline around promotional activity, and staying the course to develop a healthier long-term brand. This resulted in a record gross margin rate for the quarter, with our margin rate just shy of 51% and 210 basis points greater than last year. These are strong foundations upon which to build. We intentionally drove significant change in our supply chain as we accelerated production in the Western Hemisphere, giving us both speed and additional avenues to mitigate tariffs and provide resiliency. Less than 8% of our purchase order dollars last fiscal year were utilized on buys of China, while our supply of key franchises, including our sector-leading American-grown Supima, are now co-sourced across the globe. By intentionally creating a diverse sourcing network and strong relationships with excellent vendors, we are increasingly positioned to remain agile in our sourcing decisions, helping to address headwinds from the impact of tariffs. Innovation is the key to our successful brand building. As I touched on last…

Thank you, Andrew. For the first quarter, total revenue performance came in at $261 million, a decrease of 9% compared to last year. When excluding the impact of transitioning the kids and footwear inventory to licensed skis in the first quarter of 2024, total revenue decreased by 4% year over year. GMV decreased low single digits for the first quarter of 2025, primarily driven by timing of orders. When excluding the impact of transitioning the kids and footwear inventory to license the first quarter of 2024, GMV increased by low single digits year over year. We delivered adjusted EBITDA of $10 million in the first quarter, which came within our guidance. Gross profit decreased by 5% compared to last year. Gross margin was 51%, an approximately 210 basis point increase from the first quarter of 2024. The margin increase was driven by the impact of transitioning kids and footwear inventory to licensees in the first quarter of fiscal 2024. Our U.S. e-commerce business saw approximately flat sales and gross profit compared to the first quarter of 2024 due to the continued strength in our outerwear product offset by a slow start to seasonal swim assortment. Sales from Lands' End Outfitters increased 1% from the first quarter of 2024. Sales from the business uniform channel were slightly up year over year, and sales from our school uniform channel were slightly down year over year, driven by timing of orders. In our third-party marketplace business, gross profit dollars decreased by 11% compared to the first quarter of 2024, as revenue decreased by 9% year over year. While performance was consistently positive in most marketplaces, the combined third-party business was negatively impacted by challenges in one marketplace. Overall, marketplaces saw market improvement in April. Our European e-commerce business sales increased 28% year over…

Thank you, Bernie. As always, I want to thank all of the Lands' End, Inc. employees for their dedication to building the brand and upholding our customer-centric strategy. Our commitment to delivering exceptional quality, service, and care to our customers is what continues to set us apart and help sustain our momentum. Finally, the process our board of directors initiated last quarter to explore strategic alternatives, including a sale, merger, or similar transaction involving the company to maximize shareholder value, remains ongoing. We will not be commenting further on it at this time, and we will provide an update once appropriate. With that, we look forward to your questions.

We'll take our first question from Dana Telsey of Telsey Group. Your line is open.

Good morning. Good morning, everyone, and nice to see the progress. Couple questions. Typically, you provide second the upcoming quarter guidance. I didn't see anything, I think, in the release this time. Any color you can give us on the complexion of the year and the cadence of what you're looking for. And within that, tariff impacts. Holistically, how you're thinking about it, both in terms of pricing and on inventory? Then I have one follow-up. Thank you.

Morning, Dana. As far as guidance goes, based on the near-term uncertainty with tariff rates, the company has provided annual guidance based on the current tariff rates, which, you know, we have talked about, which is the 10% baseline and the 30% for China. Which comes to about an effective 12% rate for us in the back half. And that we, you know, we put a lot of work into a transformation process to build mitigation efforts against that against those raised tariffs and feel strongly that we have the right mitigations to get to offset those for the year.

And then just a bit of color on the on your tariff impacts. Question. I mean, you know me. You know the company. It's like we're not gonna sit around and wait for a solve later in the year. We rolled up our sleeves actually towards the end of Q4 and started shifting heavily into Western Hemisphere. So we were taking big programs, not the small programs. We took Supima is one of our biggest programs, in fact, it is our biggest program, and we we moved that to Western Hemisphere actually in process of co-sourcing that in Eastern Hemisphere as well so that we've got a lot of pacing to go after it, to move with it, and to be able to react to it. And so we're taking we're taking the pain of all those shifts way up front.

Got it. And then congratulations on the new Delta agreement. That's very encouraging. How is it different than the last agreement that you have or had and or is it then on the marketplace's business, what are you seeing there? And it was encouraging to hear about Europe. What are your thoughts on on the goals for Europe? Thank you.

Fair enough. Do you wanna take Delta? Sure. Definitely. Then Delta arrangement, is a two and a half year completion of a contract they signed with another vendor. That we will complete that, and we're in discussions on what the future of that will be beyond that. In terms of marketplaces, you know, we feel really good about marketplaces Nordstrom's continues to be the fastest growth marketplace for us. Actually, it's really driven off the back of a very high AOV. It's the highest AOVs we've ever recorded you know, as we as we just see a very premium customer come to the brand. So we're excited about that. Amazon's continued to grow for us along with along with Macy's. And, you know, we saw progress on Target as well that we were happy with. I believe your question probably has some calls embedded in it, and I do want to address that. We did have a tough quarter with calls, but I actually feel very optimistic about it and the trends that we're seeing out of the business. We had a reset with calls and feel good about the direction we're seeing there and the selling getting, which is driven by actually also an increase in AOV. So in terms of marketplaces in general, we feel very positive. Europe, I couldn't be more excited about. I actually think the opportunity for Lands' End, Inc. internationally is amazing. We just use the opportunity of the challenges we had late last year to really lean in and say, we want to create a halo for the US brand. It's like we should be continually evolving this brand upwards, and it's like Europe is a great place. To pick up on that cache. And we started to do a lot of work around segmentation as much as anything And we we found that, you know, we can reach a customer from Debenhams to Next to to the UK, to Germany. But, also, you know, we're looking at how we're really gonna lean in to France now. We see that as a very fashion-forward market. We've always had sales to France. But we see that as a significant opportunity for us. And we see more market expansion coming off the back of that. So what actually way more bullish on it than we necessarily were even three months ago.

Thank you.

Thanks, David. Thanks, David.

We'll take our next question from Marni Shapiro of Retail Tracking. Your line is open.

Hey, guys. Congratulations on the improvements. Could you talk a little bit about obviously swim was a highlight in the quarter. I'm curious about some of your other segments, you know, key segments like towels and things like that that you guys have focused on. And could you also just talk a little bit about the changes happening here? The site has been outstanding. Really much more modern. You've storytelling. It feels more youthful. I guess, could you talk about what's happening behind the scenes? Even your fashion is really on trend, but not trendy. And could you kind of roll out what we could expect to see, especially with some big seasons coming up ahead? With back to school and then winter with your outerwear business.

Right now, all that money. Marni, you can just keep asking questions forever. It's great. You know, I I think that we we we wanted to be curious with us. When we're the number one online brand for women over forty. And, you know, we felt we had the right actually and the the opportunity to move the market. And I think we built a team from design to merchandising to tech design to sourcing that could really start to react to that. We gave them the opportunity to be curious with with with the franchises. So you take Douglas, and, you know, Douglas Mhmm. I think everybody who knows Douglas thinks about it as it's it does exactly what it says on the tin, but it always comes in black and it always comes in the same silo. And we just felt that there was such enough opportunity to reach a wider consumer. And, you know, in that, we just started to get curious about what we were seeing around the world. And you know, leveraging the comments that I was just making today about Europe, we see so much trend coming out of places like France. And it's like there's no reason that one, we shouldn't be servicing that. But there's another there's another, which is that we should be starting to channel that And so as you know, we looked at turning tubeless into swim dresses. It was like taking the back out of tugless, take making it into a two piece, and actually hitting some of the real trends about having a a romper tug list. Mhmm. It's been really it's been really powerful. And what we see is you know, you heard the numbers about how our customers responding. It's really our existing customer response…

By the way, I just popped on to the UK site, and it it's so different. It feels like a European site, not an American site, which is a good thing. Can I just ask you one quick follow-up? You're getting a lot of new people in on totes. Are you able to transition them into other products? And I guess where do they move from totes? Like, where's the next place? Do they go to towels, or is it swim, or is it dresses? I'm curious, like, what the transition what the path looks like for that customer.

The big yeah. It's a great question. We talk about this a lot. So a big pivot point the it covers swim and dresses. So they go to swim dresses. So if you look at our swim dresses Mhmm. A lot of women pick up our swim dresses. And they were the most regular dresses. You know, that whole trend that's out there right now of you know, speech to bar, you know Mhmm. Pool to dinner is really calling for having the ability to not have to to your room and change. And I you know, what what we are seeing a real growth in that swim dress trend and actually swim dress is outperform regular dresses. Now I don't wanna do regular dresses at the service. They continue to be strong, and we've seen some really strong trends in there. But where the customer goes where we're seeing a lot of action is on that is on that swim dress. And I it it's it's so of a moment, and I think it's a franchise we can further build on going into the going into, you know, particularly next year.

Fantastic. Thank you so much. Best of luck for summer.

Hey. Thank you.

We'll take our next question from Eric Beder of SCC Research. Your line is open.

Good morning. I wanna talk a little bit about licensing here. You know, part of the kind of doing the apples to apples pieces that you licensing took this year are somewhat of a replacement for categories you already have. Are we now entering the part where licensing where we're seeing incremental categories that will start to add to the total revenue because they're not really replacing something that's already out there. And I guess I'd love to get an an update on how you are happy on how you feel about the footwear and the kids' licenses in terms of helping drive business both online and with your partners. Hey, Eric. Good to good to have you on. I'll start with just the the strategy side of it, and I'll let Andrew move to the feelings about the the current categories. You are correct in that, as you noticed, that we added a few new licenses in our announcement today, that were repeats from Q4 that we have signed. And those are white space, so those will be purely incremental. And start to build the brand and get us to additional channels. That we're very excited about. And as you'll realize that, you know, licensing just started in Q1 last year. So each quarter, we'll be building the historical license that we signed. They'll continue to grow Andrew, you wanna talk about footwear and Yeah. Shoot? I mean, in I mean, the the other the other color in there, Eric, is the the is the reach that we get by being in in other channels. You know, being in the clubs and being in wholesale is absolutely huge for us, and I I don't wanna diminish the the opportunity there of how far we can go. And I I…

Yeah. We've been seeing that in the catalogs with the shoes we becoming much more wider in terms of styles and trends here going forward. In terms of in terms of B2B, two two two you have the Delta contract coming up. Could you remind us historically how these kind of contracts launch If I remember correctly, there's a there's a big bump initially and then they have a nice flow afterwards. And what's we be thinking about in terms of back to school? I know that the competitor just When did you think that's gonna be fully manifested and we're gonna see that in terms of the flow here this year also.

Yeah, Eric. As far as Delta goes, it isn't necessarily the beginning or end of a contract that there's that there's large flows. It's when they decide to launch a new product line. Our current our current agreement with Delta you know, does not have a near-term new launch of product. They're they're working on that themselves. So this will be just the normal run rate that we experienced with them historically.

Okay. In terms of back to school uniforms, you know, we're excited about the volume that we added in Andrew noted in his comments that there's $13 million of new customer schools that we have added over the last six months. As one of our competitors exited the industry. So we are you know, back to schools tends to start in June for us. And then play out through September. So we're excited for the effects on Q2 of that new added business. One of the things that we like about this year just worth noting because I know there's a lot of implications for all back to schools, is we're seeing back to school line up very closely with 2024's back to school, so it it should be relatively calm. It's the way we're viewing it.

And last question. You mentioned in your release about SWIM. Do you and I agree that the product has materially improved. Do you believe that's just because of some ways and timing of the weather in some of the pieces? I know it's been cold to over year in certain areas. How should we think about that? Thank you.

No, Eric. We improved it ourselves. I keep telling you this. It's it's just like we make great product, and it it's it's connecting with the customer. So that continues to be big for us. Now I'm being I'm being slightly facetious. It definitely was a a a it definitely was a chilled start. It was cold and wet, and it was interesting that for first month of the quarter, we were actually out, you know, we were actually outselling swim with outerwear. Which has never happened to us before. So we saw that business pick up and get on this trend. I think we'll continue to see it get on this trend. And our view is is that with the product that we've got and the reach that it's getting, that there is opportunity for us. But I do wanna put in a plug for you know, the the the Lands' End, Inc. teams who've really worked hard to put this collection together, and I think it's a splendid collection.

Great. Good luck for the rest of

Thanks, Eric.

And we'll move next to Steve Silver of Argus Research. Your line is open.

Thanks, operator, and thanks for taking my questions. My first question is really about the outfitters business in general. Particularly on the enterprise side. Just curious as to whether there's been any implied hesitancy across the pipeline for outfitters given all the macroeconomic noise that we're dealing with every day. Just curious as to whether it's really business as usual in terms of enterprise prospects moving forward with with these kind of discussions or if any any companies that you're talking to are are getting a little bit more in, like, a wait and see mode given everything that's going out in the macro environment? The answer is a little surprisingly, no. So we went through the cycles with everyone else yourself included, which was oh, there's gonna be a bump. Because everyone's gonna pull forward to get ahead of tariffs. And then there's gonna be a dip because everyone's got ahead of tariffs, and then there's gonna be a slowdown And we saw none of that. We saw very con we saw very consistent business. And I think that's I think that's a testament to how our teams engage with the market. And it's also a testament to, you know, strength in the the enterprise businesses out there. But we're continuing to see that consistency from them. So right now today, I feel pretty good about that business. And it's it's showing it's showing consistent strength that again, like you, I probably wasn't necessarily expecting was gonna come through.

Great. And one more if I may. You mentioned in your prepared remarks about increasing the customer file through, like, SMS subscriptions and the like. I'm curious as to how that maybe compares just in context to previous campaigns where the customer file was, expanded and just in terms of maybe how many of those new subscribers showed stickiness and not unsubscribing once they've taken advantage of the of the product that brought them into the system in the first place. Just trying to get some context or in terms of the stickiness of some of these new customer ads. Yeah. The the the number we called out that's a great question, actually. The number we called out that I think you would key on in the script is that one to two x customer. Because that's exactly, I think, where you're going, and that answers that question. You know? It's you can pay paid search, the very short traditional method, will get you that one time customer. But where you really get them in is is making them a two times customer, and we saw significant growth in that. And I think that that's a testament to how we've chosen to market and the brand that we're choosing to market which is we're not trying to sell so much on discounting. We're trying to stand behind the quality of our product, the fashion of our product, the make experience that you have coming to Lands' End, Inc. And we were really excited to see the one times customer become a two times customer at the rate they did and help build our LTV relative to the cost of acquisition. I think there's a sort of sub part to this question, which is worth covering, which is we're doing less…

Great. I appreciate all the color.

Thanks, Steve. See you.

And this does conclude our question and answer session as well as the Lands' End, Inc. first quarter 2025 earnings call. You may now disconnect your lines. And everyone, have a great day.