UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported) August 8, 2001
LANDS' END, INC.
(exact name of registrant as specified in its charter)
DELAWARE 1-9769 36-2512786
(State or other (Commission (I.R.S. Employer
jurisdiction File Number Identification
of incorporation Number)
Lands' End Lane, Dodgeville, Wisconsin 53595
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 608-935-9341
including area code
INFORMATION INCLUDED IN THIS REPORT
Item 5. Other Events.
Attached as Exhibit 99 to this report is a news release issued by
Lands' End, Inc., announcing its second quarter results of fiscal year 2002
for the period ended July 27, 2001.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, its duly authorized officer and chief financial officer.
LANDS' END, INC.
August 10, 2001 By: /S/ DONALD R. HUGHES
Donald R. Hughes
Senior Vice President &
Chief Financial Officer
EXHIBIT 99
FOR IMMEDIATE RELEASE
LANDS' END REPORTS STRONG IMPROVEMENT
IN SECOND QUARTER EARNINGS
DODGEVILLE, WIS. ... August 8, 2001 ... Lands' End, Inc. (LE), the direct
merchant of classically styled apparel and home furnishings, today reported
results for its second quarter of fiscal 2002, ended July 27, 2001.
Total revenue for the second quarter just ended totaled $285.8
million, up 4 percent from $275.6 million in the same quarter last year.
Net income for the quarter just ended was $3.0 million, and diluted
earnings per share were $0.10, compared with a net loss of $1.9 million, or
a diluted loss per share of $0.06, in the prior year.
For the first six months of the current year, total revenue was $596.9
million, up 6 percent from total revenue of $561.5 million during the first
half of last year. Net earnings in the first half of fiscal 2002 were $8.9
million, or diluted earnings per share of $0.30, compared with a net loss
of $1.6 million, or a loss of $0.05 per diluted share, in the first six
months of the prior fiscal year.
The company's chief executive officer David Dyer said, "I am pleased
with our top line sales performance, especially in light of the tough
economic environment. These continued sales improvements reflect the
strong customer acceptance of our reinvigorated product in our core
businesses. I am equally pleased with our improvements in catalog
productivity and initial margin."
Segment merchandise sales data for second quarter
(in millions) Percent
2Q02 2Q01 Change
Core business segment $160 $151 + 6 %
Specialty segment 72 72 + 1 %
International segment 31 33 - 7 %
Total merchandise sales $263 $256 + 3 %
Internet $ 51 $ 39 +32 %
Segment merchandise sales data excludes shipping
and handling revenue. Internet merchandise sales
are included in the respective business segments.
Merchandise sales in the core business segment, represented by the
primary monthly, prospecting and tailored clothing catalogs, were up 6
percent, led by strength in our coed and women's divisions. In the
specialty business segment, Kids and Coming Home showed sales growth in the
mid single digits, while Corporate Sales showed a single digit decline,
primarily due to the continued slowdown in national business spending. In
their local currencies, the U.K. and Germany had increased sales compared
to last year's second quarter, while Japan's sales were down, primarily due
to their lower level of liquidation sales this year compared with last
year. However, when measured in U.S. dollars, the international business
segment was down about 7 percent, primarily due to the effect of the strong
dollar against weaker foreign currencies.
Gross profit for the quarter just ended was $124.9 million, or 43.7
percent of total revenue, compared with $121.3 million, or 44.0 percent of
total revenue, in the same quarter last year. During the quarter, we had
higher initial merchandise margins, primarily associated with sourcing
improvements. However, this improvement was more than offset by a 90 basis
point reduction in gross margin due to the current second quarter's LIFO
charge of $750,000, versus last year's second quarter LIFO credit of $1.5
million.
Liquidation of excess inventory was about 8 percent of net merchandise
sales during this year's second quarter, about flat with last year.
Inventory at the end of the quarter was $232 million, up 12 percent from
$207 million in the prior year. This reflects the planned earlier receipt
of fall merchandise this year relative to last year. Inventory is
currently in line with planned levels, and the quality of inventory is
improved from the prior year. Our first-time fulfillment rate for the
quarter just ended was about 88 percent, the same as last year's first
quarter and consistent with our annual goal.
For the second quarter just ended, selling, general and administrative
expenses were $119.7 million, or 41.9 percent of total revenue, compared
with $124.0 million, or 45.0 percent, in the similar period last year. The
improvement in the SG&A ratio was due to a significant reduction in
national TV advertising expenses, partially offset by an increase in
magazine advertising, bringing our overall advertising spending more in line
with recent historical levels. Additionally, stronger customer response
resulted in increased productivity per catalog page, resulting in relatively
lower catalog costs. These improvements were partially offset by higher
bonus and profit-sharing expense, due to improved profitability.
BUSINESS OUTLOOK
As previously stated, for fiscal 2002, a 53-week year that will end on
February 1, 2002, the company expects that sales will increase in the single
digit range, and we expect gross profit margin to show continued improvement
compared to the prior year. As a result, we expect an increase in diluted
earnings per share of at least 20 percent for the year as a whole.
Because of our performance improvement for the first half, we are more
confident that we can achieve the overall results stated in our guidance.
With respect to our internal management plans, we expect to exceed last
year's second half financial performance.
Last year's third quarter saw the benefit of an early, cold fall/winter
season and higher liquidation sales. In the third quarter of the current
year, we anticipate about $15 million fewer liquidation sales as a result of
the quality of our inventory position. In addition, compared with the prior
year, we plan to somewhat reduce page circulation in the third quarter and
somewhat increase it in the fourth quarter, resulting in flat circulation
for the second half overall. Our sales and profit levels for the year are
dependent on customer response and buying levels during our all-important
November and December holiday season. Additionally, our optimism is somewhat
guarded due to the continuing uncertainty in the U.S. economy, especially in
the retail environment, and we have seen the direct effects of this in our
Corporate Sales business-to-business division. In light of these facts, we
are tightly managing our expenses while focusing on our best sales
opportunities.
For the full year, we plan capital expenditures of about $45 million,
of which about $18 million has been spent during the first 6 months of
fiscal 2002.
Lands' End is a direct merchant of traditionally styled, classic
products offered to customers around the world through regular mailings of
its monthly and specialty catalogs and via the Internet at www.landsend.com.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Statements in this release that are not historical, including,
without limitation, statements regarding our plans, expectations,
assumptions, and estimations for fiscal 2002, gross profit margin, and
earnings, as well as anticipated sales trends and future development of our
business strategy, are considered forward-looking and speak only as of
today's date. As such, these statements are subject to a number of risks
and uncertainties. Future results may be materially different from those
expressed or implied by these statements due to a number of factors.
Currently, we believe that the principal factors that create uncertainty
about our future results are the following: customer response to our
merchandise offerings, circulation changes and other initiatives; the mix
of our sales between full price and liquidation merchandise; overall
consumer confidence and general economic conditions, both domestic and
foreign; effects of weather on customer purchasing behavior; effects of
shifting patterns of e-commerce versus catalog purchases; costs associated
with printing and mailing catalogs and fulfilling orders; dependence on
consumer seasonal buying patterns; fluctuations in foreign currency
exchange rates; and changes that may have different effects on the various
sectors in which we operate (e.g., rather than individual consumers, the
Corporate Sales Division, included in the specialty segment, sells to
numerous corporations, and certain of these sales are for their corporate
promotional activities). Our future results could, of course, be affected
by other factors as well. More information about these risks and
uncertainties may be found in the company's 10-K filings with the S.E.C.
The company does not undertake to publicly update or revise its
forward-looking statements even if experience or future changes make it
clear that any projected results expressed or implied therein will not be
realized.
WEBCAST ANNOUNCEMENT
There will be a live, audio webcast of the company's conference call
for the general public today at 9:30 CT. This call will cover the
company's performance for the second quarter and its business outlook for
the remainder of the year. Register and listen at
http://www.videonewswire.com/event.asp?id=647. A playback will be
available for one week.
The conference call and webcast consist of copyrighted material that
may not be recorded, reproduced, retransmitted, rebroadcast, stored or
forwarded without Lands' End's express written permission. Your
participation represents your consent to these terms and conditions. The
call will be recorded by Lands' End, and your participation on this call
also constitutes your consent to having any comments or statements you make
appear on a transcript or broadcast of this call.
Contact Charlotte LaComb: 608-935-4835
PRELIMINARY AND UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
Lands' End, Inc. & Subsidiaries
(Amounts in thousands, except per share data)
Three months ended Six months ended
July 27, July 28, July 27, July 28,
2001 2000 2001 2000
Revenue
Net merchandise sales $262,874 $255,545 $549,991 $521,590
Shipping and handling
revenue 22,947 20,080 46,950 39,875
Total revenue 285,821 275,625 596,941 561,465
Cost of sales
Cost of merchandise sales 137,389 132,674 292,302 277,820
Shipping and handling
costs 23,575 21,683 47,838 42,609
Total cost of sales 160,964 154,357 340,140 320,429
Gross profit 124,857 121,268 256,801 241,036
Selling, general and
administrative expenses 119,654 123,995 241,092 242,443
Income (loss) from
operations 5,203 (2,727) 15,709 (1,407)
Other income (expense):
Interest expense (250) (217) (483) (347)
Interest income 289 500 925 1,219
Other (378) (542) (1,914) (1,987)
Total other expense, net (339) (259) (1,472) (1,115)
Income (loss) before income
taxes 4,864 (2,986) 14,237 (2,522)
Income tax provision
(benefit) 1,824 (1,105) 5,339 (933)
Net income (loss) $ 3,040 $ (1,881) $ 8,898 $ (1,589)
Basic earnings (loss)
per share $ 0.10 $ (0.06) $ 0.30 $ (0.05)
Diluted earnings (loss)
per share $ 0.10 $ (0.06) $ 0.30 $ (0.05)
Basic weighted average
shares outstanding 29,415 30,295 29,398 30,246
Diluted weighted average
shares outstanding 29,992 30,722 29,804 30,791
PRELIMINARY AND UNAUDITED
CONSOLIDATED BALANCE SHEETS
Lands' End, Inc. & Subsidiaries July 27, July 28,
(Dollars in thousands) 2001 2000
Assets
Current assets:
Cash and cash equivalents $ 10,211 $ 20,050
Receivables, net 13,531 15,986
Inventory 232,041 206,854
Prepaid advertising 15,710 17,718
Other prepaid expenses 10,636 8,214
Income tax receivable 1,655 1,244
Deferred income tax benefit 10,973 10,661
Total current assets 294,757 280,727
Property, plant and equipment, at cost:
Land and buildings 105,004 102,910
Fixtures and equipment 104,242 111,828
Computer hardware and software 109,063 78,850
Leasehold improvements 4,646 4,453
Construction in progress 10,346 -
Total property, plant and equipment 333,301 298,041
Less - accumulated depreciation
and amortization 143,775 129,112
Property, plant and equipment, net 189,526 168,929
Intangibles, net 645 659
Total assets $484,928 $450,315
Liabilities and shareholders' investment
Current liabilities:
Lines of credit $ 20,354 $ 19,200
Accounts payable 76,437 79,822
Reserve for returns 5,512 5,388
Accrued liabilities 39,209 35,741
Accrued profit sharing 1,507 180
Total current liabilities 143,019 140,331
Deferred income taxes 16,790 9,117
Shareholders' investment:
Common stock, 40,221 shares issued 402 402
Donated capital 8,400 8,400
Additional paid-in capital 32,506 31,541
Deferred compensation (82) (178)
Accumulated other comprehensive income 3,710 3,824
Retained earnings 497,985 452,841
Treasury stock, 10,782 and 9,926
shares at cost, respectively (217,802) (195,963)
Total shareholders' investment 325,119 300,867
Total liabilities and
shareholders' investment $484,928 $450,315
PRELIMINARY AND UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lands' End, Inc. & Subsidiaries Six Months Ended
(In thousands) July 27, July 28,
2001 2000
Cash flows from (used for) operating activities:
Net income (loss) $ 8,898 $ (1,589)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 12,469 11,629
Deferred compensation expense 39 58
Loss on disposal of fixed assets 24 -
Deferred income taxes 2,223 -
Tax benefit of stock options 598 1,832
Changes in current assets and liabilities:
Receivables, net 6,277 1,767
Inventory (43,830) (44,661)
Prepaid advertising 1,917 (1,146)
Other prepaid expenses (921) (2,398)
Accounts payable (19,731) 5,312
Reserve for returns (3,549) (2,481)
Accrued liabilities (626) (6,896)
Accrued profit sharing (850) (2,580)
Income taxes payable (14,868) (11,499)
Other (2,264) 1,149
Net cash flows used for operating activities (54,194) (51,503)
Cash flows used for investing activities:
Cash paid for capital additions (18,020) (15,546)
Net cash flows used for investing activities (18,020) (15,546)
Cash flows from (used for) financing activities:
Proceeds from (payments of) short-term debt 3,414 7,476
Purchases of treasury stock (14) (1,019)
Issuance of treasury stock 3,674 4,229
Net cash flows from financing activities 7,074 10,686
Net decrease in cash and cash equivalents (65,140) (56,363)
Beginning cash and cash equivalents 75,351 76,413
Ending cash and cash equivalents $ 10,211 $ 20,050