Your program will begin momentarily.

Good afternoon, everyone. Welcome to today's Lands' End, Inc. Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during our question and answer session. Register to ask a question at any time by pressing star 1 on your telephone. Also, today's call is being recorded. Now at this time, I would like to turn things over to Mr. Tom Altholz, Senior Director of Financial Planning and Analysis. Please go ahead, sir.

Good evening, and thank you for joining the 2025 results, which we released this afternoon and can be found on our website, landsend.com. I am Tom Altholz, Lands' End, Inc. Senior Director of Financial Planning and Analysis, and I am 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 are 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-Ks 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. 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 the 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 landsend.com. With that, I will turn the call over to Andrew.

Thanks, Tom. Good evening, and thank you for joining us. To begin today's call, I want to spend a moment talking about a key theme we have seen over the past several months, including over the course of the second quarter and importantly, continuing into the third quarter. That theme is a noticeable increase in momentum across our business. Across our key product categories, channels, and engagement, we are seeing improvements that give us confidence that our strategy to serve our customers' every journey is working. Our weatherproof assortment that prioritizes newness and speed to market continues to resonate with customers, enables more high-quality sales, and deepens customer loyalty. Turning to the second quarter, we continued to reach new and existing customers across a broad base of channels as we have done in previous quarters. We are engaging with them where and when they want to shop and providing considered merchandise stories that resonate individually and create leverage as we reposition the brand via a sophisticated distributed commerce model. Our increasing shift towards an asset-light, low capital intensity model allows us to rapidly deploy newness to optimize customer engagement. And with GMV holding steady year on year, we are beginning to see the benefits of that work. In the B2B channel, our team built on their successes by deepening relationships in the travel and banking sectors, extending a number of our long-term enterprise contracts. Critically, we continue to invest in our brand. Our deliberate strategy to weatherproof our assortment with solutions for life's every journey and deliver for our customers in any environment while also enhancing speed across our supply chain has enabled us to be nimble and react quickly. Especially as we see buying patterns shifting to more wear and out items. In the second quarter, the B2C businesses…

Thank you, Andrew. For the second quarter, total revenue performance was $294 million, a decrease of 7% compared to the second quarter last year and GMV was approximately flat year over year. Licensing and our presence across our third-party marketplace partners continue to help the business diversify. And reduce risk from any one business unit product or partner. Our U.S. E-commerce business saw sales decrease 11% compared to 2024. The decrease was largely driven by the slow start to the swim season. And as Andrew discussed, we saw strong swim results through Labor Day which we have incorporated into our third-quarter forecast. Our third-party marketplace business grew approximately 14% with year-over-year growth across our marketplace. We are very pleased with our performance in Macy's and Amazon and we believe improved performance at Kohl's has positioned the marketplace business well for the back half of the year. Sales from Lands' End Outfitters increased 5% from 2024. Sales from our school uniform channel increased high single digits. Driven by our acquisition of new school accounts. Revenues from the business uniform channel were up year over year driven by our enterprise accounts. Sales in Europe decreased 15% year over year. Primarily due to supply chain challenges on key seasonal products and broader macroeconomic pressures. However, we are encouraged by the early progress from adding additional channels and expect this business to improve in the back half of the year. Revenue from our licensing business grew 19% year over year, reflecting the continued momentum of our licensing program. This growth was fueled by increased brand visibility from existing licensees, further expanding our reach and impact. Gross profit decreased by 6% compared to last year. Gross margin in the second quarter was 49%. Approximately 90 basis point improvement from 2024. The margin improvement was driven…

$25 million in capital expenditures. With that, I will turn the call back over to Andrew.

Thanks, Bernie. I want to thank Lands' End, Inc.'s employees for their hard work and dedication during the quarter. With their support, we have created a truly distributed commerce retailer, with the reach to deliver for customers existing and new across channels, geographies, and categories. Looking ahead to the third quarter, we are seeing broad strength across all categories in our U.S. Business, building on our positive momentum and the trends we saw develop over the course of the second quarter. Our sales and margin over Labor Day weekend was the best we have had in the last decade. Bringing significant use to file sign up. As I mentioned earlier, this reflects the intentional work we have done to weatherproof our business and ensure our customers have what they want when they want it. It also underscores the strength of our strategy to be promotional around holidays while maintaining full price selling. In between. Finally, the Board's previously announced process to explore strategic alternatives 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 will go first this afternoon to Dana Telsey of The Telsey Group.

Hi, good afternoon everyone and nice to hear about the progress. Andrew, the acceleration in momentum on the top line that you are talking about frankly, into the third quarter now, What are you seeing by product category? How much of it is lower promotions? And given the tariff environment, have you taken price? And then also, it sounds like the Lands' End Essentials is a new opportunity. What are you seeing that is driving the business? How is the margin and price points relative to the rest of the mix? Thank you.

Hey, thanks, Dana. It is nice to hear from you. Really been progressing the business towards a distributed commerce model over the last twelve months. In fact, we saw this with our customers' shopping habits as we sort of like moved from our very traditional customer, our resolver to our revolver. And I know I have talked

about that on previous calls. We started to

actually look at where that customer was shopping. And quite a lot of the work we did around working with AI agents. So took it down this path where we started to see these customer habits are changing, customers are migrating to different channels. There are new customers to tap into. And so it became clear to us that we had opportunities that lay beyond just a traditional brand site. The brand site will always be the to us. It is going to be the most fashion-forward version of the brand. It is going to be the most complete version. But we know that those customers are shopping. And we see within our

top marketplaces the distributed model, We see that there is an Amazon customer who wants a price point. And by really focusing in on a couple of handfuls of SKUs, we put ourselves in a position that we can really lean in, put the marketing behind those SKUs and reach them at price points that matter. And we think we can build a significant business. Our Q3 numbers have been absolutely astonishing actually. As we have lent further into this. And in fact, what we are seeing is a tremendous amount of those customers then migrate to see the full assortment on landsend.com. So we think that there is a flywheel effect that is going to be happening and that will continue. To accelerate and spin the business forward as we see that momentum continue.

I would just note that at the top end of that, we have Macy's.

And Nordstrom where we sell some of the highest price points that we have. In the company and our AOVs have been somewhat astonishing. We see that as we are reaching the top of our merchandise pyramid. So again, we are putting the product we see a certain customer and we are matching that product to the customer all the better. And now we are able to manage promotions differently against each of those. In fact, one thing I want to call out, I think the team has done a great job on this is we built an AI engine that

basically creates product display pages, PVPs, and it will build language that is appropriate to each page. So

if you see a product that is on landsend.com, how the page materializes the time you get to Amazon, it will read differently. It will read more appropriate

to the Amazon bots and AI search tools, and it will read differently

and probably more elevated in all candor to a Nordstrom's customer. So we are starting we are being much more thoughtful about how we address each of these

segments. In terms of the category conversation that is out there,

we have seen strength across all categories. And it was

the second quarter was definitely there was momentum all the way through it. Slower May with SWIM, which is really important to us. One-third of the business in May. What we saw was that

build in June, it built in July. And then interestingly, it built into August. And what I am starting to see is that the strategy that designers and merchants put in place around weatherproofing has been incredible for us. Because we are able to sell to the customer when they want it, not just where they want it. And so it was

something I had not seen in the company's history before.

Over Labor Day weekend, where we had both swim and outerwear as

top five categories, which was new to us

and that was relatively full price selling. Because, again, we are trying to meet more of the discounting in different channels. Like having the customer on landsend.com with something more premium. We were able to manage markdown around that.

You asked me about

tariffs and are we handing anything on to the customer. I am going to be honest, yes, we are. As little as we possibly can, we look at our tariff and the view we took for 2025, which is in the guidance and into 2026 is that we are making a number of changes. We have made a number of changes in our sourcing network.

They have been very successful for us, and they have given us the nimbleness to move in and out of markets. As tariffs come. And we have also worked with our vendors and narrowed the number of vendors. And that has given us the ability to share some of the

burden with them. So we think about them for half of the tariff rise that we are seeing. Of the remainder, we are

splitting that fairly evenly between internal changes that we are making as we

get after below margin and then the rest of it is going through to what I would say is a relatively small increase to the customer. And we will endeavor to make that the smallest number it can be. But I do not want to sugarcoat it that we can absorb the whole thing. So I think I got everything in there. I am happy to go back to it if you have got more.

David, the only thing I would add on product categories would be that you know, one of the exciting things for us is as people are shifting their timing on purchases whilst we noted that '2, but it has actually been a nice tailwind to start Q3 as that swim kicks in. And when Andrew was talking about essentials, it is a smaller part of our business, but it has been really a big lift in its early days in both Amazon and the other places that we are putting in.

Thank you.

Thank you. We go next now to Eric Beder of SCC Research.

Good afternoon.

Right. Hey, Eric. Could you talk a little bit about the flow of licensing here? I know that the first half had kind of a little bit of puts and takes because you were shifting. Licensing to from all categories you previously had into a licensing category. What are we going to see in the back half in terms of potentially now becoming expanding the categories beyond what you have done before with the licensing mechanism?

Hey, Eric. I am going to take the I am going to take the front half, and then I will let Bernie take the back half. We are up 36% on our licensing revenues, then a number you will see in the Q, but I really wanted to call that out. We continue to look at how we will drive the business forward in the back half with that. And in the back half, we think that there is upside to it because there are new licenses. And then on top of that, we get into the holiday season. And it is like we were really still sort of in our infancy last year on this. So we see tremendous upside opportunity. And actually, the sky is the limit in terms of the licenses we can go after. We have been a little slower for reasons. For some reasons this year. And I think as we get into the future, we see opportunity to accelerate those number of licenses.

Yes. And what I would add to that, we started the year you know, the the licensees started the business in early last year, there is a ramp up for those. So what we are starting to see as we hit the back half of this year is them accelerating. Our current licensees are accelerating to their full potential. And we will get that benefit in the back half of this year while we also have the new licensees starting to build their program, and then we will get the benefit next year of them building up to full potential. One of the leverage points that I have

found really interesting is as we sort of like go down this path and I have done this before in my career, which is to pull the licensees to get the licenses together. And go to a big customer, a big department store customer and really have them all present as a complete house of Lands' End, Inc. And in doing that, it is very powerful to have that leverage. And as we negotiate into that, we see that as an amplification of licenses that was not originally anticipated and what we how we were laying out the business model, but it is now it became very obvious as we went further into this. So we see upside here.

Great. When you look in outerwear, last year, you shifted the continued to shift the outerwear to more wear now and thinner and kind of not as heavy product. And that was a big success. What should we be thinking about how you are going to handle outerwear this year? Obviously, it seems like it started out pretty well in Labor Day.

Eric, I was in product meetings all morning, and you should see like the outerwear that is to come. It was it is absolutely darling. And actually, in as much as in as much as I want to give you the full answer, and I will, I mean, I would point you to some of the new products that we have out there around squall in particular. And that we will send you the the PDP of the rain jacket and it is it is you will see a couple of things. You will see

new product.

New innovation and you will see new PDPs that really speak to how the customer wants to shop and the PDP almost in its own way acts as a landing page for the brand. So there is incredible use of imagery. There is incredible use of storyline in there. And actually, we lean heavily into customer reviews. And part of why I was loving the product so much this morning is the team was showing me early reviews on it.

Which

are many of them are five star and we see it from our resolver and our revolver customer and we know when

both of those

are loving the product that it is going to be a home run. So I do not think you are necessarily going to see new new franchises being added, but I think you will see those franchises being ened. I am not going to give you the whole story. You are going to have to wait to see some of it because we have got some astonishing product coming up.

Great. Last question. So when you look at the catalogs, there has been an increasing focus on events and lifestyle and driving kind of multiple purchases for that. When you look at your customer base, that thirty-five to fifty-year-old customer is your focus. How has been their response to that versus kind of the prior core? And are you seeing those customers continue to increase

on the price in terms of percentage of buying all pieces? Thank you.

Yes. We continue to see the evolve. Think thirty-five to fifty-year-old new to file customer is is coming to the brand and they are

buying across product categories. And buy a bigger basket. And it has been an incredibly successful strategy for us to lean into that versus the more traditional Resolver customer who tends to come back and buy something that is worn out or to stick with the one in one particular category. They just may be a swim customer and that is who they are going to be.

We are starting to see behavior of new cohorts, resolvers with

evolver tendencies. And so we are starting to break down that barrier. What we have done with catalogs, and in particular, as we came into Q3,

we were extremely thoughtful about this. We really leaned in with the

our data scientists and began to

be thoughtful about the particular kind of catalog that goes to

a 5x shopper, which is effectively a resolver for us at this point. Versus a customer we are trying to encourage to a second purchase because we know recency is very important to us. And actually, we began to segment the file more to chase that after lapsed customers. We know there is tremendous amount of value in there. And we have begun actually with the catalog to prospect to gain that for a number of years. Of not using the catalog to prospect and relying probably a little too much on performance marketing because I think performance marketing is under pressure in any case from AI agents. But I think it has a tendency to be more transactional. Versus emotional. And we find that we can handle transactional better on, say, Amazon. That is a better place to be with that kind of with that kind of customer purchase decision. So for us, the catalog is

I think it is fair to say we have taken the catalog on the offensive

this quarter, and I think you are going to see more and more of that from us. And actually, you just might get different catalogs sent to you. And I will give you a very good example.

Our traditional customer, that resolver,

she likes to see red lines. What do I mean by that? She wants to see a was his pricing. Our revolver does not want to see that. So you might find that you get a different catalog depending on how we have evaluated you as a customer. And we will continue to lean into this. The data science behind this is fascinating. And hopefully, we can spend some time walking you through it when you visit next.

Okay. Good. Look forward to it. Thank you.

Thank you. We will go next now to Steve Silver of Argus Research.

Thanks, operator, and thanks for taking my questions. It is great to hear the progress in the outfitters business. It sounds like there might be some new opportunities to be announced over the course of the rest of the year. Just curious as to your view of this state of the pipeline in outfitters broadly. And then maybe if you can just put in some context how many prospects may be in in more advanced stages of conversation at any point in time.

Yeah. Thanks. How is it going, Steve? It is nice to hear from you as well.

So we break it up into we break out figures out into several buckets. I am just going to start school. We are very deliberately targeting growth in school.

We have found that the product that we bring to market is OCATEC certified and that means that there is absolutely nothing bad in it. And we find it to be very competitively priced. And if something none of our competitors can do. So we have a competitive advantage that we can lean in and go after progressively more schools from large to small. And so we have really tasked our team to grow that business. And I would say not just because one of our competitors fell out last year, but because of our own doubling down and having more having a better go to market strategy, where we see opportunities to pick those schools. And I tend to think about

adding schools in

anywhere from about $5 million to $3 million buckets. Given the size of those. So opportunity in there with multiple customers. I think when it gets into the commercial uniforms business, I am going to split it into just to simplify over here all night. I think there is the smaller customers. We have completely rebuilt our experience for smaller customers. And it is paying starting to pay dividends for us. The site which in my opinion had become extremely sort of B2C focused and was more cat category driven is now about the emphasis of differentiation. Of what we can bring to your business. And I think the other part is we have done we changed our IT philosophy to be more about sprints rather than sort of like longer projects, and we are delivering continual upgrades. And that is allowing us to be much more focused on getting turnaround for the customer in there. I would say that it does not stop there because what we tend to find is many

big companies who may well become the second group, which is our enterprise accounts tend to start off by shopping as small. And so we can use that to prospect quite heavily. In terms of the enterprise accounts,

I have got so much good news in there, but I am really not in the position to share it. Obviously, the last call, we talked about winning Delta back and we are extremely proud about that. Our team just got back from Italy where they had been with Delta assessing uniforms for the future. And it is like it is there is a lot of goodness to come from that. I would say that the of bringing a a delta back is not lost on other airlines out there. I am going to leave it at that. And in financial services, we continue to dominate. The big play for us

is going to be now building adjacent categories. And one of the adjacent categories we really like is in the healthcare industry. And I think you will see us start to add that category more consistently and carefully. I just want to

like blanket everyone everywhere Lands' End, Inc. does better when it focuses on something and decides to win. And that is how we work as a team.

That is helpful. Thank you so much. And one last one, if I may. You cited some progress in Europe with the narrowing of the declines there. Also the implementation of new websites in some key European markets. I am curious if you could put some context around, the expectations for completing the turnaround of the European business? And moving just towards something more of a contribution to the overall business? Yes, it is a great question.

Usually, I am in Europe testing out ideas.

Good, bad or indifferent. One idea that we are taking from

The U.S. That is really important to us is this distributed commerce model. So

just so we are on the same page and it really allows the customer to purchase directly from where they are browsing. So we are meeting customers

where they are rather than waiting for them to come to the brand site. So that might be social media, it might be from online articles. It might be from smart devices, and it could be from marketplaces. And so we are working our way into social media. We are working our way into marketplaces. And I think I want to put emphasis on the marketplaces because Europe's retail has always been more marketplace driven. Than in North America. And that is an area of growth for us. So we opened NeXT. We opened Devenham's. We opened Amazon. And we have seen terrific

starts to each of those. And I think you will see us continue to grow those

and take from the strategy that has been already really successful. In The U.S. I think that is focusing around product that is appropriate. To that channel and product that is

that is priced appropriately and narrow assortments

that then encourage you to be curious about coming back to see other landsend.co.uk or the German site or actually the French site. So

that is the first part of it. In terms of the

In terms of the sort of brand sites themselves,

The UK is in pretty good shape. I think we have turned the corner there. We understood The UK consumer. And we have made inroads with them.

I think we have got the product assortment right. Right now, the area we are working on, and again, there is a meeting I was in earlier today, is to get focused around our German resolver. Customer. The Evolver customer we have got nailed. It is about now

working on the Resolver customer, and that arguably is going to come through catalog. So we are spending time working out

taking excuse the pun, a page out of what we have done in The U.S. And then working at how we can use the catalog as an effective tool to engage with that resolver German customer and then that will bring us fully back. To where the brand is contributing from Europe. Because again, I am absolutely committed to it because the halo that we will get from Europe is key. And the last point I will make on this

particularly to reach our revolver customers, watch for a couple of really powerful collabs. Coming. The collab model that we have had

from the really, this is the success of the tote bag in The U.S. Has created a halo for the brand everywhere. We are that on the road

and we are now going to be doing that in Europe. And again, I would love to

would love to share who those co labs are for. But I think my team in Europe would be really, really upset with me. So I am going to keep I am going stay quiet. And watch this space.

Great. Thank you so much for the color and best of luck in the second half.

Thank you. Take care. Thank you. And gentlemen, that was our final question for today. So that will bring us to the conclusion of today's Lands' End, Inc. earnings conference call. Again, everyone, we would like to thank you all so much for joining us this afternoon and wish you all a great remainder of your day. Goodbye.