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 10, 2000
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 Number)
of incorporation)
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 99.1 to this report is a news release
issued by Lands' End, Inc., discussing second quarter results for the
period ended July 28, 2000, and business outlook for the fiscal year.
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.
Date August 15, 2000 By: /s/ STEPHEN A. ORUM
Stephen A. Orum
Executive Vice President &
Chief Financial Officer
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
LANDS' END REPORTS SECOND QUARTER
DODGEVILLE, WIS. ... August 10, 2000 ... Lands' End, Inc. (LE), today
reported that net sales for its second quarter ended July 28, 2000,
totaled $255.5 million, about flat with sales of $254.6 million in the
same quarter last year.
For the quarter just ended, there was a net loss of $1.9 million,
and the diluted loss per share was $0.06, compared with net earnings of
$4.5 million, or $0.14 per diluted share, in the prior year.
For the first six months of the current year, net sales were
$521.6 million, down 4 percent from net sales of $544.2 million during
the first half of last year. Excluding last year's first half sales
from the company's discontinued Willis & Geiger business, sales in this
year's first half were down 2 percent from the prior year.
The net loss in the first half of fiscal 2001 was $1.6 million, or
a loss of $0.05 per diluted share, compared with earnings of $11.0
million, or $0.36 per diluted share, in the first six months of the
prior fiscal year. Last year's first half includes an addition to net
income (after-tax) of $1.0 million, or $0.03 per share, from the
reversal of a portion of the non-recurring charge taken in the fourth
quarter of fiscal 1999.
The company's chief executive officer, David Dyer, said that the
loss for the quarter was unexpected and disappointing. "Based on sales
trends that we saw earlier in the quarter, we had already revised our
business outlook downward. As it turned out, compared to that outlook,
gross profit was significantly less than expected. Liquidation sales,
though lower than last year, were still higher than expected, primarily
in Japan. We also experienced significant increases in costs. These
factors hurt us on profitability."
The principal factors contributing to the unexpected loss include
1) the adverse effect on gross profit resulting from liquidation sales,
primarily in Japan, and increased reserves for inventory obsolescence
in both the United States and Japan; 2) increases in fixed and variable
expenses; and 3) increases in catalog advertising expense.
Compared to the prior year, sales trends during the quarter were
weaker than initially expected and inconsistent across product lines.
The company saw continued strong sales in women's knits and swimwear,
and in coed knits. However, we had soft sales in other product lines,
especially men's and women's tailored. Corporate Sales continued to
grow in double-digits, although their sales were somewhat lower than
expected toward the end of the quarter. Internet sales at
www.landsend.com were 70 percent higher, compared with the second
quarter last year.
Sales in the core business segment, represented by the primary
monthly, prospecting and tailored clothing catalogs, were
flat, as were sales in the specialty business segment, composed of
Corporate Sales, Kids and Coming Home, compared with the prior year.
Sales in the international business segment, composed of operations in
Japan, the U.K. and Germany, were up about 2 percent from last year.
Gross profit in the quarter just ended was $122.9 million, or 48.1
percent of net sales, compared with $118.2 million, or 46.4 percent of
net sales, in the same quarter last year. The improvement in gross
profit margin over the comparable period was due to higher initial
margins primarily associated with sourcing improvements and a lower
level of sales of liquidated merchandise. However, margins in the
quarter just ended were lower than anticipated, primarily due to high
levels of liquidation sales in Japan, increased reserves for inventory
obsolescence, and higher markdowns at retail outlets in the United
States. Liquidation of excess inventory was about 8 percent of net
sales during this year's second quarter, compared with about 10 percent
in the prior year.
In the quarter just ended, selling, general and administrative
expenses were $125.6 million, or 49.1 percent of net sales, compared
with $109.4 million, or 43.0 percent, in the similar period last year.
The increase in the SG&A ratio between the periods was primarily due to
increases in catalog and national advertising, as well as relatively
higher fixed expenses. Page and catalog circulation were higher during
the quarter just ended, principally due to increased prospecting,
especially to inactive buyers, and to later mailings of certain
catalogs. Productivity, or sales per page, declined. National
advertising costs were about $3 million higher than in the prior year,
and there was an additional $4 million of fixed expense due to higher
spending on information technology.
Inventory at the end of the quarter was $207 million, up 9 percent
from $190 million in the prior year. Our first-time fulfillment rate
for the quarter just ended was about 88 percent, up from 84 percent
last year and consistent with our annual goal.
BUSINESS OUTLOOK
Looking forward for the full year, we now expect an improvement in
gross profit margin of about 200 basis points over last year, rather
than 225 as previously announced, principally due to further
liquidations in Japan. This is consistent with the improvement of 200
basis points in the first half of the year.
The company's catalog mailing strategy currently includes a 6
percent increase in United States page circulation for the first nine
months of the fiscal year. However, due to aggressive fourth quarter
circulation plans, the company now expects page circulation in the
fourth quarter to be up 20 percent as we add holiday catalogs back to
the mailing plan and shift the timing of holiday mailings. This is in
contrast to the overall 6 percent increase in page circulation for the
full year as previously announced. In view of these plans and their
emphasis on the holiday period, the company expects that the fourth
quarter will represent a substantial improvement over the prior year in
both sales and earnings, but anticipates downward trends in sales and
earnings for the third quarter. As previously stated, the company
anticipates that its sales for the full year will increase by less than
6 percent over the prior year.
Based on the disappointing results through the first half of the
year, the company no longer believes that it can achieve the 20 percent
increase in earnings per share that was previously anticipated. We
currently believe that we can achieve somewhat positive earnings growth
for the year. However, the upcoming holiday season will be critically
important as we see the full effect of our merchandising and
circulation strategies. If the trends of weak sales and higher costs
through the first six months of the fiscal year continue into the
holiday period, our current business plans will be at risk.
"Obviously, our ability to predict future sales and earnings has
not been borne out by experience so far this year," said David Dyer.
"We need to adopt a wait-and-see approach to the rest of the year. The
holiday season is always very important to us but it is really the key
to a successful year this time out."
Lands' End is a direct merchant of traditionally styled, classic
casualwear offered to customers through regular mailings of its monthly
and specialty catalogs and via the Internet.
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 2001 sales, gross profit
margin, and earnings, as well as anticipated sales trends, timing of
catalogs and future development of our business strategy, are 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; general economic or business
conditions, both domestic and foreign; effects of shifting patterns of
e-commerce versus catalog purchases; costs associated with printing and
mailing catalogs; dependence on consumer seasonal buying patterns; and
fluctuations in foreign currency exchange rates. Our future results
could, of course, be affected by other factors as well.
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.
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 28, July 30, July 28, July 30,
2000 1999 2000 1999
Net sales $255,545 $254,616 $521,590 $544,225
Cost of sales 132,674 136,400 277,820 300,575
Gross profit 122,871 118,216 243,770 243,650
Selling, general and
administrative expenses 125,598 109,429 245,177 225,715
Reversal of non-recurring
charge - (275) - (1,598)
Income from operations (2,727) 9,062 (1,407) 19,533
Other income (expense):
Interest expense (217) (358) (347) (967)
Interest income 500 36 1,219 38
Other (542) (1,672) (1,987) (1,204)
Total other income
(expense), net (259) (1,994) (1,115) (2,133)
Income (loss) before income
taxes (2,986) 7,068 (2,522) 17,400
Income tax provision
(benefit) (1,105) 2,615 (933) 6,438
Net income (loss) $ (1,881) $ 4,453 $ (1,589) $ 10,962
Basic earnings (loss)
per share $ (0.06) $ 0.15 $ (0.05) $ 0.37
Diluted earnings (loss)
per share $ (0.06) $ 0.14 $ (0.05) $ 0.36
Basic weighted average
shares outstanding 30,295 30,057 30,246 30,032
Diluted weighted average
shares outstanding 30,722 30,783 30,791 30,656
PRELIMINARY AND UNAUDITED
CONSOLIDATED BALANCE SHEETS
Lands' End, Inc. & Subsidiaries July 28, July 30,
(Dollars in thousands) 2000 1999
Assets
Current assets:
Cash and cash equivalents $ 20,050 $ 6,270
Receivables, net 15,986 13,060
Inventory 206,854 189,983
Prepaid advertising 17,718 17,964
Other prepaid expenses 8,214 6,311
Income taxes receivable 1,244 -
Deferred income tax benefit 10,661 17,947
Total current assets 280,727 251,535
Property, plant and equipment, at cost:
Land and buildings 102,910 102,437
Fixtures and equipment 190,678 158,675
Leasehold improvements 4,453 4,774
Total property, plant and equipment 298,041 265,886
Less - accumulated depreciation
and amortization 129,112 110,961
Property, plant and equipment, net 168,929 154,925
Intangibles, net 659 949
Total assets $450,315 $407,409
Liabilities and shareholders' investment
Current liabilities:
Lines of credit $ 19,200 $ 23,950
Accounts payable 79,822 70,979
Reserve for returns 5,388 4,027
Accrued liabilities 35,741 42,458
Accrued profit sharing 180 469
Income taxes payable - 1,754
Total current liabilities 140,331 143,637
Deferred income taxes 9,117 8,133
Shareholders' investment:
Common stock, 40,221 shares issued 402 402
Donated capital 8,400 8,400
Additional paid-in capital 31,541 28,665
Deferred compensation (178) (293)
Accumulated other comprehensive income 3,824 1,801
Retained earnings 452,841 417,358
Treasury stock, 9,926 and 10,156
shares at cost, respectively (195,963) (200,694)
Total shareholders' investment 300,867 255,639
Total liabilities and
shareholders' investment $450,315 $407,409
PRELIMINARY AND UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lands' End, Inc. & Subsidiaries Six Months Ended
(In thousands) July 28, July 30,
2000 1999
Cash flows from (used for) operating activities:
Net income $ (1,589) $ 10,962
Adjustments to reconcile net income to net
cash flows from operating activities-
Pre-tax non-recurring credit - (1,598)
Depreciation and amortization 11,629 10,275
Deferred compensation expense 58 101
Loss on disposal of fixed assets - 538
Changes in assets and liabilities:
Receivables, net 1,767 8,023
Inventory (44,661) 29,703
Prepaid advertising (1,146) 3,393
Other prepaid expenses (2,398) 1,278
Accounts payable 5,312 (16,943)
Reserve for returns (2,481) (3,166)
Accrued liabilities (9,446) (9,922)
Accrued profit sharing (2,580) (1,787)
Income taxes payable (11,499) (12,824)
Other 2,981 1,469
Net cash flows from (used for) operating
activities (54,053) 19,502
Cash flows used for investing activities:
Cash paid for capital additions (12,996) (5,486)
Net cash flows used for investing activities (12,996) (5,486)
Cash flows from (used for) financing activities:
Proceeds from (payment of) short-term debt 7,476 (14,992)
Purchases of treasury stock (1,019) (4,504)
Issuance of treasury stock 4,229 5,109
Net cash flows from (used for) financing
activities 10,686 (14,387)
Net decrease in cash and cash equivalents (56,363) (371)
Beginning cash and cash equivalents 76,413 6,641
Ending cash and cash equivalents $ 20,050 $ 6,270
