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What changed in LANDS' END, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LANDS' END, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+255 added−552 removedSource: 10-K (2023-04-10) vs 10-K (2022-03-24)

Top changes in LANDS' END, INC.'s 2023 10-K

255 paragraphs added · 552 removed · 194 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

65 edited+21 added−41 removed20 unchanged
Biggest changeNet revenue is presented by distribution channel in the following table: (in thousands) Fiscal 2021 % of Net Revenue Fiscal 2020 % of Net Revenue Fiscal 2019 % of Net Revenue U.S. eCommerce $ 1,027,138 62.8% $ 961,911 67.4% $ 910,088 62.8% International 220,997 13.5% 222,878 15.6% 181,087 12.5% Outfitters 254,191 15.5% 174,260 12.2% 285,807 19.7% Third Party 86,517 5.3% 39,945 2.8% 13,654 0.9% Retail 47,781 2.9% 28,454 2.0% 59,565 4.1% Total Net revenue $ 1,636,624 $ 1,427,448 $ 1,450,201 In Fiscal 2021, we fulfilled orders to customers in approximately 144 countries outside the United States, totaling approximately 15% of Net revenue. 3 Table of Contents Net r evenue by the geographical location where the product is shipped is as follows: (in thousands) Fiscal 2021 % of Net Revenue Fiscal 2020 % of Net Revenue Fiscal 2019 % of Net Revenue United States $ 1,393,402 85.1% $ 1,191,346 83.4% $ 1,247,288 86.0% Europe 179,302 11.0% 175,011 12.3% 137,134 9.5% Asia 44,383 2.7% 49,725 3.5% 48,470 3.3% Other 19,537 1.2% 11,366 0.8% 17,309 1.2% Total Net revenue $ 1,636,624 $ 1,427,448 $ 1,450,201 Long-lived assets by geographical location, which includes Property and equipment, net, are as follows: (in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019 United States $ 121,259 $ 136,038 $ 148,340 Europe 7,879 8,267 8,716 Asia 653 983 609 Total long-lived assets $ 129,791 $ 145,288 $ 157,665 Strategy We continue to leverage our iconic American brand, which was founded on the principles of delivering great quality, uncompromising service and exceptional value to our customers.
Biggest changeNet revenue by the geographical location where the product is shipped is as follows: (in thousands) Fiscal 2022 % of Net Revenue Fiscal 2021 % of Net Revenue Fiscal 2020 % of Net Revenue United States $ 1,368,518 88.0% $ 1,393,402 85.1% $ 1,191,346 83.4% Europe 135,878 8.7% 179,302 11.0% 175,011 12.3% Asia 33,451 2.2% 44,383 2.7% 49,725 3.5% Other 17,582 1.1% 19,537 1.2% 11,366 0.8% Total Net revenue $ 1,555,429 $ 1,636,624 $ 1,427,448 Long-lived assets by geographical location, which includes Property and equipment, net, are as follows: (in thousands) Fiscal 2022 Fiscal 2021 Fiscal 2020 United States $ 120,311 $ 121,259 $ 136,038 Europe 7,051 7,879 8,267 Asia 276 653 983 Total long-lived assets $ 127,638 $ 129,791 $ 145,288 Strategy We continue to leverage our iconic American brand, which was founded on the principles of delivering great quality, uncompromising service and exceptional value to our customers.
These, along with our overall message on comfort, fit and great value, have resonated well with our customers. Inventory Planning Inventory Planning seeks to determine optimal inventory levels that align with merchandising and marketing plans and initiatives. The team also supports efforts to optimize product margin through active management of in-season promotions and post-season clearance activities.
These, along with our overall message on versatility, fit, comfort and great value, have resonated well with our customers. Inventory Planning Inventory Planning seeks to determine optimal inventory levels that align with merchandising and marketing plans and initiatives. The team also supports efforts to optimize product margin through active management of in-season promotions and post-season clearance activities.
While we focus on customer facing system improvements, we are also implementing warehouse management tools designed to improve operational efficiencies and optimize our distribution operations. In support of our business strategies, we are implementing new solutions to enable and streamline the process in which we offer, sell and fulfill our products with wholesale partners and external marketplaces.
While we focus on customer facing eCommerce system improvements, we are also implementing warehouse management tools designed to improve operational efficiencies and optimize our distribution operations. In support of our business strategies, we are implementing new solutions to enable and streamline the process in which we offer, sell and fulfill our products with wholesale partners and external marketplaces.
In addition to paying competitive salaries and wages, Lands’ End has various compensation awards and programs in place for all employees based on their position, such as annual incentive plans, equity awards, sales incentive plans, peak incentives and discretionary bonuses based on company performance. We offer a comprehensive benefit package to all eligible employees.
In addition to paying competitive salaries and wages, Lands’ End has various compensation awards and programs in place for all employees based on their position, such as annual incentive plans, stock equity awards, sales incentive plans, peak incentives and discretionary bonuses based on company performance. We offer a comprehensive benefit package to all eligible employees.
We compete principally on the basis of merchandise value (quality and price), product innovation, our established customer file and award-winning customer service. Seasonality We experience seasonal fluctuations in our net revenue and operating results and historically have realized a significant portion of our yearly net revenue and earnings during our fourth fiscal quarter.
We compete principally on the basis of merchandise value (quality and price), product attributes and innovation, our established customer file and award-winning customer service. Seasonality We experience seasonal fluctuations in our net revenue and operating results and historically have realized a significant portion of our yearly net revenue and earnings during our fourth fiscal quarter.
We use third-party shipping companies to transport the product to our facilities. Our reliance on imported products has certain risks around disruptions in countries of manufacture, port congestion, transportation delays and heightened security measures that have affected, and could in the future affect, timely deliveries of product to our points of distribution.
We use third-party shipping companies to transport the product to our facilities. Our reliance on imported products has certain risks related to disruptions in countries of manufacture, port congestion, transportation delays and heightened security measures that have affected, and could in the future affect, timely deliveries of product to our points of distribution.
We believe we will generate near-term return on investment with most of our marketing spend allocated to digital marketing and our catalog. The catalog continues to be a productive vehicle to drive customers to our website and Company Operated stores. Customer Service We are committed to building on Lands’ End’s legacy of strong customer service.
We believe we will generate near-term return on investment with most of our marketing spend allocated to digital marketing and our catalog. The catalog continues to be a productive vehicle to drive customers to our websites and Company Operated stores. Customer Service We are committed to building on Lands’ End’s legacy of strong customer service.
Lands’ End is an iconic American brand with a large and loyal customer base. Operating out of Wisconsin, in the heartland of the United States, we believe our vision and values make a strong connection with our core customer as evidenced by the growth of our new and active customer files.
Lands’ End is an iconic American brand with a large and loyal customer base. Operating out of Wisconsin, in the heartland of the United States, we believe our vision and values make a strong connection with our core customer as evidenced by the long-term growth of our new and active customer files.
Our vendors are required to provide us with full access to their facilities and to relevant 6 Table of Contents records relating to their employment practices, such as, but not limited to, child labor, wages and benefits, forced labor, discrimination, freedom of association, unlawful inducements, safe and healthy working conditions and other business practices so that we may monitor their compliance with ethical and legal requirements relating to the conduct of their business.
Our vendors are required to provide us with full access to their facilities and to relevant records relating to their employment practices, such as, but not limited to, child labor, wages and benefits, forced labor, discrimination, freedom of association, unlawful inducements, safe and healthy working conditions and other business practices so that we may monitor their compliance with ethical and legal requirements relating to the conduct of their business.
Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak shipping/selling periods and, accordingly, working capital requirements typically decrease during the fourth quarter of the fiscal year as inventory is shipped/sold.
Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak selling periods and, accordingly, working capital requirements typically decrease during the fourth quarter of the fiscal year as inventory is sold.
The D&I Council maintains a prominent online presence within the Company’s intranet through which it communicates with all employees across a wide range of subjects, including the recognition of important days with various cultures and educational materials in support of building greater awareness and appreciation of our individual stories, experiences and lives.
The DEI Council maintains a prominent online presence within the Company’s intranet through which it communicates with all employees across a wide range of subjects, including the recognition of important days with various cultures and educational materials in support of building greater awareness and appreciation of our individual stories, experiences and lives.
ITEM 1. BUSINESS As used in this Annual Report on Form 10-K, references to the “Company”, “Lands’ End”, “we”, “us”, “our” and similar terms refer to Lands’ End, Inc. and its subsidiaries. Our fiscal year ends on the Friday preceding the Saturday closest to January 31.
ITEM 1. B USINESS As used in this Annual Report on Form 10-K, references to the “Company”, “Lands’ End”, “we”, “us”, “our” and similar terms refer to Lands’ End, Inc. and its subsidiaries. Our fiscal year ends on the Friday preceding the Saturday closest to January 31.
Our three year average global salaried turnover rate is approximately 11.0%, and the turnover rate for our U.S. hourly full-time staff is approximately 10.5%. We maintain a strong focus on employee retention through regular and consistent communication, periodic pulse surveys and continued emphasis on employee personal health and safety.
Our three-year average global salaried turnover rate is approximately 11%, and the turnover rate for our U.S. hourly full-time staff is approximately 11%. We maintain a strong focus on employee retention through regular and consistent communication, periodic pulse surveys and continued emphasis on employee personal health and safety.
We file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments to those reports, as well as proxy and information statements, electronically with the SEC, and they are available on the SEC’s web site ( www.sec.gov ), which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
We file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments to those reports, as well as proxy and information statements, electronically with the SEC, and they are available on the SEC’s website ( www.sec.gov ), which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
We also invest significantly in brand development through our focus on providing excellent customer service, emphasis on digital transformation and innovative product development. We believe that this commitment to our brand has helped to generate our large and loyal customer base for over fifty years.
We also invest significantly in brand development through our focus on providing excellent customer service, emphasis on digital transformation and innovative product development. We believe that this commitment to our brand has helped to generate our large and loyal customer base for sixty years.
People, the individuals we employ, the customers we serve, and their families, are the heart of our company. We are committed to creating an inspiring culture that is welcoming, safe and inclusive for all who work and shop with us.
People, the individuals we employ, the customers we serve, and their families, are the heart of our company. We are committed 7 Table of Contents to creating an inspiring culture that is welcoming, safe and inclusive for all who work and shop with us.
Creative designs for these marketing platforms are developed in-house by our creative team with supplemental work by external agencies on a project basis. We strive to be efficient in our overall spend, enabling us to invest in initiatives that we believe will yield benefits over the longer term.
Creative designs for these marketing platforms are developed in-house by our creative team with supplemental work by external agencies on a project basis. We strive to be efficient in our overall spend, enabling us to invest in initiatives that we 6 Table of Contents believe will yield benefits over the longer term.
The D&I Council oversees programming designed to celebrate diversity and foster awareness of all perspectives. To that end, the D&I Council maintains training modules, which are required of all employees, and hosts relevant speakers throughout the year to further employee education.
The DEI Council oversees programming designed to celebrate diversity and foster awareness of all perspectives. To that end, the DEI Council maintains training modules, which are required of all employees, and hosts relevant speakers throughout the year to further employee education.
It is our belief that by encouraging and supporting BRGs, we are reinforcing our message of inclusion and hope to further empower our employees to utilize their voice to make Lands’ End welcoming, understanding and stronger . The Employee Services team continually evolves our benefit offerings to provide more inclusive options.
It is our belief that by encouraging and supporting BRGs, we are reinforcing our message of inclusion and hope to further empower our employees to utilize their voice to make Lands’ End welcoming, understanding and stronger. The Human Resource team continually evolves our benefit offerings to provide more inclusive options.
We are also seeking to enhance our branding initiatives by investing in strategic relationships with other brands, public personalities and online influencers designed to showcase our apparel. We attempt to build on our brand recognition through our “Let’s Get Comfy” tagline in multi-channel marketing campaigns including through our eCommerce website, www.landsend.com, catalog distribution, digital marketing and social media.
We are also seeking to enhance our branding initiatives by investing in strategic relationships with other brands, public personalities and online influencers designed to showcase our brand. We attempt to build on our brand recognition through multi-channel marketing campaigns including through our eCommerce website, www.landsend.com , catalog distribution, digital marketing and social media.
Diversity and Inclusion As we strive to be a great place to work, we continue to focus on key initiatives to educate and support diversity and inclusion in the workplace. We believe our strength in work and life comes from the combination of 9 Table of Contents our unique experiences, backgrounds, and talents .
Diversity, Equity and Inclusion As we strive to be a great place to work, we continue to focus on key initiatives to educate and support diversity and inclusion in the workplace. We believe our strength in work and life comes from the combination of our unique experiences, backgrounds and talents.
In Fiscal 2021, the top five countries where our vendors are located accounted for approximately 75% of our merchandise purchases in dollars. Our products are manufactured in approximately 20 countries and the majority are imported from Asia and South America, depending on the nature of the product mix.
In Fiscal 2022, the top five countries where our vendors are located accounted for approximately 70% of our merchandise purchases in dollars. Our products are manufactured in approximately 20 countries and the majority are imported from Asia and South America, depending on the nature of the product mix.
Sarah Rasmusen joined Lands’ End in November 2017 as the Senior Vice President, U.S. eCommerce becoming Chief Customer Officer in 2020 and promoted to Executive Vice President, Chief Customer Officer in March 2021. She was previously employed by Lands’ End between 2006 and 2010.
She joined Lands’ End in November 2017 as the Senior Vice President, U.S. eCommerce, becoming Chief Customer Officer in 2020 and was promoted to Executive Vice President, Chief Customer Officer in March 2021. She was also previously employed by Lands’ End from 2006 to 2010.
On June 17, 2002, we became a wholly-owned subsidiary of Sears Roebuck and Co., a wholly-owned subsidiary of Sears Holdings. Sears Holdings distributed 100 percent of the outstanding common stock of Lands’ End to its stockholders on April 4, 2014, and our common stock was listed on the NASDAQ Stock Market.
On June 17, 2002, we became a wholly-owned subsidiary of Sears Roebuck and Co., a wholly-owned subsidiary of Sears Holdings Corporation and its consolidated subsidiaries (“Sears Holdings”). On April 4, 2014, Sears Holdings distributed 100 percent of the outstanding common stock of Lands’ End to its stockholders (“Separation”), and our common stock was listed on the Nasdaq Stock Market.
In the U.S. these include the following, among other benefits: • Comprehensive health insurance coverage that is offered to full-time employees • Parental leaves provided to all new parents for birth, adoption or foster placement • Paid caregiver leave allowing employees to take up to 20 days off to care for a terminally ill spouse or dependent child • Community giving programs allowing employees to give back to nonprofit organizations • Health and wellness programs, exercise classes (including virtual classes during the COVID pandemic), health coaching and wellness incentive programs • Services designed to help employees balance work and life, including an Employee Assistance Plan and financial education workshops 10 Table of Contents Outside of the U.S., we provide competitive benefits which align with market specific needs a nd regulations , including comprehensive health, dental and vision coverage, pension plans, employer -provided life insurance and paid time off benefits such as paid leave, vacation and holidays.
In the U.S. these include the following, among other benefits: • Comprehensive health insurance coverage that is offered to full-time employees, spouses/domestic partners and dependent children • Parental leaves provided to all new parents for birth, adoption or foster placement • Paid caregiver leave allowing employees to take up to 20 days off to care for a terminally ill spouse or dependent child • Community giving programs allowing employees to give back to nonprofit organizations • Health and wellness programs, onsite medical clinic, exercise classes, health coaching and wellness incentive programs • Services designed to help employees balance work and life, including an Employee Assistance Plan, mental health coaching/counseling and financial education workshops Outside of the U.S., we provide competitive benefits which align with market specific needs and regulations, including comprehensive health, dental and vision coverage, pension plans, employer-provided life insurance and paid time off benefits such as paid leave, vacation and holidays.
In Fiscal 2021, we generated Net revenue of approximately $1.64 billion. Net revenue is generated worldwide with operations based in the United States, United Kingdom, Germany and Japan. This network reinforces and supports sales across the distribution channels in which we do business.
In Fiscal 2022, we generated Net revenue of approximately $1.56 billion. Net revenue was generated worldwide with operations based in the United States, United Kingdom, Germany and Japan. This network reinforces and supports sales across the distribution channels in which we do business.
W e were recognized by Forbes in 2021 as one of America’s Best Employers for Diversity and one of America’s Best Employers for Women. We maintain a Diversity and Inclusion Council (“D&I Council”) consisting of employees who come from diverse backgrounds, with Lands’ End’s Chief Executive Officer serving as the executive sponsor.
We were recognized by Forbes in 2022 as one of America’s Best Employers for Diversity and one of America’s Best Employers for Women. We maintain a Diversity, Equity and Inclusion Council (“DEI Council”) consisting of employees who come from diverse backgrounds, with Lands’ End’s Chief Executive Officer serving as the executive sponsor.
In Fiscal 2021, our top 10 vendors accounted for approximately 47% of our merchandise purchases in dollars and we worked with approximately 112 vendors that manufactured substantially all our products. We generally do not enter into long-term merchandise supply contracts.
In Fiscal 2022, our top 10 vendors accounted for approximately 47% of our merchandise purchases in dollars and we worked with approximately 110 vendors that manufactured substantially all our products. We generally do not 5 Table of Contents enter into long-term merchandise supply contracts.
Our in-house team manages all product specifications and seeks to ensure brand integrity by providing our customers with the consistent, high-quality merchandise for which Lands’ End is known. Our product strategy includes four major themes: own the weather; own the water; layers, layers, layers; and we fit every body.
Our in-house team manages all product specifications and seeks to ensure brand integrity by providing our customers with the consistent, high-quality merchandise for which Lands’ End is known. Our product strategy includes three major themes: own the vacation; own the weather; and own the fit.
With the Clean Lakes Alliance, we help with education and protecting and improving the quality of local parks and lakes in Wisconsin. Marketing We believe that our most important asset is our brand. Lands’ End is well-recognized and has a deeply rooted tradition of excellent quality, value and service.
Since 2010, Lands’ End has been a founding and corporate partner of the Clean Lakes Alliance, which helps with education and protecting and improving the quality of local parks and lakes in Wisconsin. Marketing We believe that our most important asset is our brand. Lands’ End is well-recognized and has a deeply rooted tradition of excellent quality, value and service.
We believe that our typical customers expect quality, seek good value for their money and are looking to add classics to their wardrobe while also placing an emphasis on comfort, functionality and product innovation that supports their lifestyle.
We believe that our typical customers expect quality, seek good value for their money and are looking to add classics to their wardrobe while also placing an emphasis on products that support their lifestyle.
Our efforts to retain talent and maintain strong employee engagement have been very effective, as evidenced by 42% of our employee base having a tenure of 10 years or more. Turnover within our workforce is closely monitored to alert management of potential issues aside from our normal and desired turnover.
Survey outcomes are utilized to drive meaningful improvements. Our efforts to retain talent and maintain strong employee engagement have been very effective, as evidenced by approximately 37% of our employee base having a tenure of 10 years or more. Turnover within our workforce is closely monitored to alert management of potential issues aside from our normal and desired turnover.
References to www.landsend.com do not constitute incorporation by reference of the information at www.landsend.com , and such information is not part of this Annual Report on Form 10-K or any other filings with the SEC, unless otherwise explicitly stated.
Available Information, Internet Address and Internet Access to Current and Periodic Reports and Other Information Our website address is www.landsend.com . References to www.landsend.com do not constitute incorporation by reference of the information at www.landsend.com , and such information is not part of this Annual Report on Form 10-K or any other filings with the SEC, unless otherwise explicitly stated.
We compete with a diverse group of direct-to-consumer companies and retailers, including national department store chains, women’s and men’s specialty apparel chains, outdoor specialty stores, apparel catalog businesses, sportswear marketers and online apparel businesses that sell similar lines of merchandise.
Competition We operate primarily in the apparel industry which is highly competitive. We compete with a diverse group of direct-to-consumer companies and retailers, including national department store chains, women’s and men’s specialty apparel chains, outdoor specialty stores, apparel catalog businesses, sportswear marketers and online apparel businesses that sell similar lines of merchandise.
Between 1999 and 2006, she worked in a variety of eCommerce leadership positions for Saks, Inc., Bloomingdale’s and Bates Worldwide. Early in her career, she held technology roles with KPMG and Pillsbury Law (formerly known as Winthrop, Stimson, Putnam & Roberts).
Between 1999 and 2006, she worked in a variety of eCommerce leadership positions for Saks, Inc., Bloomingdale’s and Bates Worldwide. Early in her career, she held technology roles with KPMG and Pillsbury Law. 11 Table of Contents
(formerly CMGI, Inc.), a supply chain business process management company from June 1999 to October 2013, most recently as Executive Vice President, Chief Administrative Officer and General Counsel. Earlier in his career, he was a junior partner at Hale and Dorr LLP. He also serves as Chairman of the Board of Directors of the Tufts University Hillel Foundation.
He was employed by ModusLink Global Solutions, Inc. (formerly CMGI, Inc.), a supply chain business process management company, from June 1999 to October 2013, most recently as Executive Vice President, Chief Administrative Officer and General Counsel. Earlier in his career, he was a junior partner at Hale and Dorr LLP.
We currently have six groups: Lands’ End PRIDE (LGTBQ+), Lands’ End Working Parents, LEEDA (Lands’ End Employees with Disabilities and Allies), Lands’ End Veterans, Lands’ End Multicultural, and Lands’ End UpLift (multi-generation). The groups are open to all employees, including allies who want to be supportive and involved.
We currently have seven groups: Lands’ End PRIDE (LGTBQ+), Lands’ End Working Parents, LEEDA (Lands’ End Employees with Disabilities and Allies), Lands’ End Veterans, Lands’ End Multicultural, Lands’ End UpLift (multi-generation), and, added in 2022, the Lands’ End Women Group. 8 Table of Contents The groups are open to all employees, including our international employees and allies who want to be supportive and involved.
We regularly conduct anonymous employee opinion surveys to seek feedback from all employment classifications on a variety of topics, including confidence in company leadership, competitiveness of our compensation and benefits package, career growth opportunities and feedback on how we could improve our efforts to be an even greater place to work.
Lands’ End has an open-door philosophy. We regularly seek employee feedback through both formal and informal employee survey methods from all employment classifications on a variety of topics, including confidence in company leadership, competitiveness of our compensation and benefits package, career growth opportunities and feedback on how we could improve our efforts to be an even greater place to work.
Other recognized trademarks owned by Lands ’ End includes Starfish™, Iron Knees®, Hyde Park®, Year ’ Rounder®, ClassMate ®, Willis & Geiger® and ThermaCheck ®. Lands ’ End ’ s rights to some of these trademarks are limited to select markets.
Other recognized trademarks owned by Lands’ End includes Starfish™, Little Black Suit™, Iron Knees®, Hyde Park®, Year’Rounder®, ClassMate®, Willis & Geiger® and ThermaCheck®. Lands’ End’s rights to some of these trademarks are limited to select markets.
Information Technology Our information technology systems provide comprehensive support for the design, merchandising, sourcing, marketing, distribution and sales of our Lands’ End products. We have a dedicated information technology team that provides strategic direction, application development, infrastructure services and systems support for the functions and processes of our business.
We have a dedicated information technology team that provides strategic direction, application development, infrastructure services and systems support for the functions and processes of our business.
Operating out of America’s heartland, we believe our vision and values make a strong connection with our core customers. We offer products online at www.landsend.com, through our own Company Operated stores and through 2 Table of Contents third - party distribution channels .
Operating out of America’s heartland, we believe our vision and values make a strong connection with our core customers. We offer products online at www.landsend.com , through our own Company Operated stores and through third-party distribution channels. We are a classic American lifestyle brand with a passion for quality, legendary service and real value.
We are a classic American lifestyle brand with a passion for quality, legendary service and real value . We seek to deliver timeless style for women, men, kids and the home. Lands’ End was founded in 1963 by Gary Comer and his partners to sell sailboat hardware and equipment by catalog.
We seek to deliver timeless style for women, men, kids and the home. Lands’ End was founded in 1963 by Gary Comer and his partners to sell sailboat hardware and equipment by catalog.
Gray served as Executive Vice President, General Counsel and Secretary of Tumi Holdings, Inc., a manufacturer and retailer of consumer goods including business bags, luggage, apparel and other travel-related goods, from December 2013 until November 2016. He was employed by ModusLink Global Solutions, Inc.
He joined Lands’ End as Executive Vice President, Chief Administrative Officer and General Counsel in May 2017. Mr. Gray served as Executive Vice President, General Counsel and Secretary of Tumi Holdings, Inc., a manufacturer and retailer of consumer goods including business bags, luggage, apparel and other travel-related goods, from December 2013 until November 2016.
Distribution Channels Lands’ End identifies five separate distribution channels for revenue reporting purposes: • U.S. eCommerce offers products through our eCommerce website. • International offers products primarily to consumers located in Europe and Japan through eCommerce international websites and third-party affiliates. • Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S. • Third Party sells the same products as U.S. eCommerce direct to consumers through third-party marketplace websites and through domestic wholesale customers. • Retail sells products through Company Operated stores.
See Note 8 , Landsʼ End Japan Closure . • Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S. • Third Party sells the same products as U.S. eCommerce direct to consumers through third-party marketplace websites and through domestic wholesale customers. • Retail sells products through Company Operated stores.
Therefore, we require that all vendors comply with applicable legal requirements, agree to our global compliance requirements and meet our product quality standards.
It is important to us that our partners share the same core values as we do. Therefore, we require that all vendors comply with applicable legal requirements, agree to our global compliance requirements and meet our product quality standards.
Our Dodgeville facility is approximately 1.1 million square feet, our Reedsburg facility is approximately 400,000 square feet and our Stevens Point facility is approximately 150,000 square feet. Our customer orders are shipped via third-party carriers. We own and operate a distribution center in the United Kingdom based in Oakham, a community north of London.
Distribution We own and operate three distribution centers in Wisconsin. Our Dodgeville facility is approximately 1.3 million square feet, our Reedsburg facility is approximately 550,000 square feet and our Stevens Point facility is approximately 150,000 square feet. Our customer orders are shipped via third-party carriers.
This reinforces the message of our founder, Gary Comer “The really important thing that makes Lands’ End what it has become is people. You, me, everyone around us.
Our founder, Gary Comer set the foundation with this quote: “The really important thing that makes Lands’ End what it has become is people. You, me, everyone around us. It is what we do as people that makes this a great place to come to work”.
Our operations include customer service agents who are available on the phone, via chat, email or social media, and an ever-evolving digital self-service platform as well as through Company Operated store locations.
Our operations include customer service agents who are available on the phone, via chat, email or social media, and an ever-evolving digital self-service platform as well as through Company Operated store locations. These all have contributed to our award-winning customer service, which we believe is one of our core strengths and a key point of differentiation from our competitors.
Information about our Executive Officers The following table sets forth information regarding our executive officers, including their positions. Name Position Age Jerome Griffith Chief Executive Officer 64 James Gooch President and Chief Financial Officer 54 Peter L.
In formation about our Executive Officers The following table sets forth information regarding our executive officers, including their positions. Name Position Age Andrew J. McLean Chief Executive Officer 54 Bernard McCracken Interim Chief Financial Officer Vice President, Controller and Chief Accounting Officer 61 Peter L.
Trademarks that are important in identifying and distinguishing our products and services are Let’s Get Comfy®, Lands’ End Lighthouse®, Square Rigger™, Squall®, Super-T™, Drifter™, Outrigger®, Marinac®, and Beach Living®, all of 5 Table of Contents which are owned by us, as well as the licensed marks Supima ®, No-Gape®, and others.
Trademarks that we commonly use to identify and distinguish our products and services are Lands’ End Lighthouse®, Squall®, Tugless Tank®, Drifter™, Outrigger®, Marinac®, and Beach Living®, all of which are owned by us, as well as the licensed marks Supima®, No-Gape®, and others.
Training and Development Lands’ End partners with employees to discover and develop their talents and abilities through various programs. Development opportunities are available throughout the employee lifecycle from internships and onboarding to early in career programs and executive coaching. Programs cover a variety of topics, including diversity and inclusion, cybersecurity, harassment free workplace, product updates and deployment of new technology.
Training and Development Lands’ End partners with employees to discover and develop their talents and abilities through various programs. Development opportunities are available throughout the employee lifecycle, including internships, onboarding, Early in Career networking, mentorships, workshops, self-paced learning and executive coaching.
Thus, lower than expected fourth quarter net revenue has had and could have an adverse impact on our annual operating results. See also Item 1A, Risk Factors , in this Annual Report on Form 10-K.
We generated 34.0%, 33.9% and 37.7% of our yearly net revenue in the fourth quarter of Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively. 4 Table of Contents Lower than expected fourth quarter net revenue could have an adverse impact on our annual operating results. See also Item 1A, Risk Factors , in this Annual Report on Form 10-K.
Compensation and Benefits We have demonstrated a history of investing in our workforce by offering competitive salaries and wages and are committed to a total compensation program that is competitive for our type of business and within the markets where we operate. We also aim to pay employees equitably who are performing in similar roles.
Compensation and Benefits We have demonstrated a history of investing in our workforce by offering a fair and competitive total rewards program that will attract, retain and reward employees at all levels and aim to pay employees equitably who are performing similar roles.
Other terms commonly used in this Annual Report on Form 10-K are defined as follows: • ABL Facility – Asset-based senior secured credit agreements, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo, N.A. and certain other lenders, as amended to date • Adjusted EBITDA – Net income appearing on the Consolidated Statements of Operations net of Income tax expense, Interest expense, Depreciation and amortization and certain significant items • Brexit – The United Kingdom’s exit from the European Union • Company Operated stores – Lands’ End retail stores in the Retail distribution channel • COVID – Coronavirus disease 2019 (COVID-19) caused by severe respiratory syndrome coronavirus 2 (SARS-CoV-2) • Debt Facilities – Collectively, the Term Loan Facility and ABL Facility • ESL – ESL Investments, Inc. and its investment affiliates, including Edward S.
Other terms commonly used in this Annual Report on Form 10-K are defined as follows: • ABL Facility – Asset-based senior secured credit agreements, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo, N.A. and certain other lenders, as amended to date • Adjusted EBITDA – Net income/(loss) appearing on the Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items • Company Operated stores – Lands’ End retail stores in the Retail distribution channel • COVID – Coronavirus disease 2019 (COVID-19) caused by severe respiratory syndrome coronavirus 2 (SARS-CoV-2) • Debt Facilities – Collectively, the Term Loan Facility and ABL Facility • First Quarter 2020 – The 13 weeks ended May 1, 2020 • Fiscal 2023 – The Company’s next fiscal year representing the 53 weeks ending February 2, 2024 • Fiscal 2022 – The 52 weeks ended January 27, 2023 • Fiscal 2021 – The 52 weeks ended January 28, 2022 • Fiscal 2020 – The 52 weeks ended January 29, 2021 • SEC – United States Securities and Exchange Commission • Term Loan Facility – Term loan credit agreement, dated as of September 9, 2020, among the Company, Fortress Credit Corp., as Administrative Agent and Collateral Agent, and the lenders party thereto Lands’ End is a leading digital retailer of casual clothing, swimwear, outerwear, accessories, footwear and home products.
We have annual talent reviews to evaluate and align on high potential talent with development actions that prepare employees for internal promotion and career growth opportunities, including succession planning for management positions. Lands’ End has an open-door philosophy.
We maintain a strong digital presence to represent our brand and proactively target talent, in addition to a meaningful employee referral bonus program. We have annual talent reviews to evaluate and align on high potential talent with development actions that prepare employees for internal promotion and career growth opportunities, including succession planning for management positions.
These all have contributed to our award-winning customer service, which we believe is one of our core strengths and a key point of differentiation from our competitors. 7 Table of Contents We have received many accolades over the years and most recently, received the following: • Lands’ End was included in the Newsweek list of America’s Best Customer Service in 2021, 2020, and 2019, ranking No.1 for 2021 and 2019 for best customer service in the Online Retailers: Clothing in the Apparel category Distribution We own and operate three distribution centers in Wisconsin.
We have received many accolades over the years and most recently Lands’ End was included in the Newsweek list of America’s Best Customer Service in 2022, 2021 and 2020, ranking No. 2 for 2022 and No.1 for 2021 for best customer service in the Online Retailers: Clothing in the Apparel category.
We are a vertically integrated retailer that manages most aspects of our design, marketing and distribution in-house. In Fiscal 2022, we plan to continue to focus on our five strategic pillars, as we have over the past several years: Product. The soul of the Lands’ End brand has always been products with a purpose.
We are a vertically integrated digital retailer 3 Table of Contents that manages most aspects of our design, marketing and distribution in-house. In Fiscal 2023, we plan to focus on the following five strategic pillars: Product to Solve Life’s Issues.
This workforce consists of approximately 20 % salaried employees, 40 % hourly employees and 4 0 % part-time employees. With the seasonal nature of the fourth quarter holiday shopping season in the retail industry, approximately 1 , 5 00 additional, flexible, part-time employees are hired to support our call and distribution centers .
With the seasonal nature of the fourth quarter holiday shopping season in the retail industry, approximately 1,500 additional, flexible, part-time employees are hired to support our customer service and distribution centers. Recruitment and Retention Lands’ End leverages a multipronged recruitment approach to source and hire top talent aligned with our corporate priorities.
When making compensation decisions, Lands’ End considers compensation market data primarily focused on apparel retail companies and other related industries.
We are committed to a total rewards program that is competitive for our type of business and within the markets where we operate. When making compensation decisions, Lands’ End considers compensation market data primarily focused on apparel retail companies and other related industries.
While our product focus has shifted significantly over the years, we have continued to adhere to our founder’s motto as one of our guiding principles: “Take care of the customer, take care of the employee and the rest will take care of itself.” Lands’ End seeks to provide a common customer experience regardless of whether they are interacting with us on our company websites, at Company Operated stores or through third-party distribution channels.
While our product focus has shifted significantly over the years, we have continued to adhere to our founder’s motto as one of our guiding principles: “Take care of the customer, take care of the employee and the rest will take care of itself.” We have one external reportable segment and identify our operating segments according to how our business activities are managed and evaluated.
In 2021, Forbes recognized Lands’ End as one of America’s Best Employers for Diversity and one of America’s Best Employers for Women. History We were founded in 1963, incorporated in Delaware in 1986, and our common stock was listed on the New York Stock Exchange from 1986 to 2002.
Our goal is to drive deep and meaningful engagement with all stakeholders to achieve our collective goals. History We were founded in 1963, incorporated in Delaware in 1986, and our common stock was listed on the New York Stock Exchange from 1986 to 2002.
We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore, the results of our operating segments are aggregated into one external reportable segment.
We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore, the results of our operating segments are aggregated into one external reportable segment. 2 Table of Contents Distribution Channels Landsʼ End identifies five separate distribution channels for revenue reporting purposes: • U.S. eCommerce offers products through our eCommerce website. • International offers products primarily to consumers located in Europe and Japan through eCommerce international websites and third-party affiliates.
Senior management regularly reviews organizational talent assessments to identify employees who possess the potential for advancement and to identify, recommend and address developmental needs. We provide development experiences for all levels of the organization and are committed to performance management, offering annual reviews, goal setting, 360 feedback and formal coaching support and mentorships for employees.
We provide development experiences for all levels of the organization and are committed to 9 Table of Contents performance management, offering annual reviews, goal setting, 360 feedback and formal coaching support and mentorships for employees. Corporate Information Our principal executive offices are located at 1 Lands’ End Lane, Dodgeville, Wisconsin 53595. Our telephone number is (608) 935-9341.
Gray Executive Vice President, Chief Administrative Officer and General Counsel 54 Sarah Rasmusen Executive Vice President, Chief Customer Officer 49 Chieh Tsai Executive Vice President, Chief Product Officer 56 11 Table of Contents Jerome Griffith has served as Chief Executive Officer and as a member of the Board of Directors since March 2017.
Gray Chief Commercial Officer, Chief Administrative Officer and General Counsel 55 Sarah Rasmusen Chief Innovation Officer 50 Andrew J. McLean has served as the Chief Executive Officer since January 28, 2023. He joined Lands’ End as Chief Executive Officer-Designate and member of the Board of Directors in November 2022.
We have one external reportable segment and identify our operating segments according to how our business activities are managed and evaluated. Our operating segments consist of: U.S. eCommerce, Europe eCommerce, Japan eCommerce, Outfitters, Third Party, and Retail.
During Fiscal 2022, our operating segments consisted of: U.S. eCommerce, Europe eCommerce, Japan eCommerce (See Note 8, Lands’ End Japan Closure ), Outfitters, Third Party and Retail.
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Lampert • First Quarter 2020 – The 13 weeks ended May 1, 2020 • Fiscal 2022 – The Company’s next fiscal year representing the 52 weeks ending January 27, 2023 • Fiscal 2021 – The 52 weeks ended January 28, 2022 • Fiscal 2020 – The 52 weeks ended January 29, 2021 • Fiscal 2019 – The 52 weeks ended January 31, 2020 • Fourth Quarter 2020 – The 13 weeks ended January 29, 2021 • Sears Holdings – Sears Holdings Corporation, a Delaware corporation, and its consolidated subsidiaries • SEC – United States Securities and Exchange Commission • Second Quarter 2020 – The 13 weeks ended July 31, 2020 • Separation – On April 4, 2014, Sears Holdings distributed 100% of the outstanding common stock of Lands’ End to its stockholders • Term Loan Facility – Term loan credit agreement, dated as of September 9, 2020, among the Company, Fortress Credit Corp., as Administrative Agent and Collateral Agent, and the lenders party thereto • Third Quarter 2021 – The 13 weeks ended October 29, 2021 • Transform Holdco – Transform Holdco LLC, an affiliate of ESL, which on February 11, 2019 acquired from Sears Holdings substantially all of the go-forward retail footprint and other assets and component businesses of Sears Holdings as a going concern Lands’ End is a leading uni-channel retailer of casual clothing, accessories, footwear and home products.
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Net revenue is presented by distribution channel in the following table: (in thousands) Fiscal 2022 % of Net Revenue Fiscal 2021 % of Net Revenue Fiscal 2020 % of Net Revenue U.S. eCommerce $ 955,752 61.4% $ 1,027,138 62.8% $ 961,911 67.4% International 166,627 10.7% 220,997 13.5% 222,878 15.6% Outfitters 265,898 17.1% 254,191 15.5% 174,260 12.2% Third Party 118,996 7.7% 86,517 5.3% 39,945 2.8% Retail 48,156 3.1% 47,781 2.9% 28,454 2.0% Total Net revenue $ 1,555,429 $ 1,636,624 $ 1,427,448 In Fiscal 2022, we fulfilled orders to customers in approximately 140 countries outside the United States, totaling approximately 12% of Net revenue.
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We focus on delivering key items made of quality materials, in iconic styles that offer great value to our customers and their families. We provide an assortment of products leveraging our key item strategy with a focus on delivering comfort, style and value with emphasis on major categories such as swim, outerwear and sleepwear.
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High-quality products will remain the Company’s engine, and we will continue to strengthen the organization’s focus on key categories, such as swimwear and outerwear, where we have established our authority and believe we have value creation opportunities. Digitally Native. Lands’ End maintains a leading digital presence in both our business-to-consumer and business-to-business digital markets.
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We will continue to lead with our Let’s Get Comfy® marketing, emphasizing comfort, versatility with one closet messaging and consistent quality of our fit. In addition, we continue our focus on inclusivity. We have done this by providing apparel to “fit every body” in extended sizes, with petite, tall and plus for women and big and tall for men.
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These offerings, digital gateways to our global eCommerce consumer businesses and Outfitters business-to-business, are central to our future, as they are scaled, scalable and profitable. Through enhanced use of data and analytics, we plan to build on these digital platforms to drive deeper customer affinity and grow our share of the addressable market. Customer Obsessed.
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We work to drive consistency in our fit across multiple categories and classifications. In Fiscal 2022, we plan to continue to leverage customer data to drive decisions around our merchandise assortment, fabrics, silhouettes and price points. Digital. We focus on utilizing digital technologies to obtain new customers and continuously improve the overall customer experience.
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At Lands’ End, we are customer obsessed and strive to bring our customer what they want, when they want it and where they want it, regardless of the product category or means they use to shop our brand.
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This is done by leveraging data analytics to better tailor and personalize the shopping experience for each customer. We are a digitally-led organization, applying technology as we adapt to ongoing shifts in customer shopping behaviors.
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Additionally, we are focused on further penetrating our existing customer base and seek to build their loyalty through cross-category shopping, as well as introducing new customers to our brand.
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We leverage advanced data analytics and machine learning in our effort to optimize gross profit through product level promotions and to optimize both internal and external search capabilities. We strive to continually enhance our website with a “test and learn” approach.
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We plan to shift our focus and market to the behavior of our customer cohorts, versus more traditional demographic approaches, and use our understanding of our customer cohorts to grow our customer database, drive loyalty and further build our brand. Innovation.
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As part of our Fiscal 2022 initiatives, we plan to continue to leverage artificial intelligence to analyze customer behavior and optimize promotions. Distribution. We take a uni-channel distribution approach, utilizing eCommerce, our own Company Operated stores and third-party distribution channels to engage our customer where and how they choose to shop.
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Lands’ End has long been an innovator, epitomized as being an early adopter of eCommerce for apparel retail, through its embrace of data analytics to better organize our business and service our customers. We strive to be innovative throughout our business to drive stronger results.
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Given the impact of the COVID pandemic on consumers’ shopping habits, which has driven more consumers to shop online rather than in a store, we do not anticipate opening more Company Operated stores in the immediate future. We do, however, plan to pursue opportunities to selectively partner with other retailers to increase exposure of our products to more consumers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur utilization of imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, transportation and other delays in ocean shipments, unexpected or significant port 18 Table of Contents congestion, lack of freight availability, increased cost to secure freight availability, risks of damage, destruction or confiscation of products while in transit to a distribution center, organized labor strikes and work stoppages, heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, the United Kingdom (including as a result of Brexit) , the Netherlands and Japan, and freight cost increases.
Biggest changeOur ability to mitigate the adverse impacts of these events depends in part upon the effectiveness of our disaster preparedness and response planning, as well as business continuity planning. 17 Table of Contents Our utilization of imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, transportation and other delays in ocean shipments, unexpected or significant port congestion, lack of freight availability, increased cost to secure freight availability, freight cost increases, risks of damage, destruction or confiscation of products while in transit to a distribution center, organized labor strikes and work stoppages, heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, the United Kingdom, including those as a result of the United Kingdom’s exit from the European Union.
Severe weather events may impact our ability to supply our Company Operated stores, deliver orders to customers in a timely manner and adequately staff our Company Operated stores and distribution centers, which could have an adverse effect on our business and results of operations.
Severe weather events may impact our ability to deliver orders to customers in a timely manner, supply our Company Operated stores and adequately staff our distribution centers and Company Operated stores, which could have an adverse effect on our business and results of operations.
In addition, new technology solutions are being built and deployed to enable many of Lands’ End’s growth strategies including third-party marketplaces and wholesale relationships, Lands’ End Outfitters customization efforts, and digital experience enhancements on our eCommerce platforms. These efforts are highly dependent on coordination across numerous internal and external technology and business teams.
In addition, new technology solutions are being built and deployed to enable many of Lands’ End’s growth strategies including third-party marketplaces and wholesale relationships, Outfitters business-to-business customization efforts, and digital experience enhancements on our eCommerce platforms. These efforts are highly dependent on coordination across numerous internal and external technology and business teams.
Violation of ethical, labor, safety, or other standards by vendors, or the divergence of a vendor’s labor practices from those generally accepted as ethical in the United States could hurt our reputation or materially impact our ability to import products manufactured by these vendors or from the regions in which they operate, which could have an adverse effect on our business and results of operations. 20 Table of Contents We conduct business in and rely on sources for merchandise located in foreign markets and our business may therefore be adversely affected by legal, regulatory, economic and political risks associated with international trade in those markets.
Violation of ethical, labor, safety, or other standards by vendors, or the divergence of a vendor’s labor practices from those generally accepted as ethical in the United States could hurt our reputation or materially impact our ability to import products manufactured by these vendors or from the regions in which they operate, which could have an adverse effect on our business and results of operations. 19 Table of Contents We conduct business in and rely on sources for merchandise located in foreign markets and our business may therefore be adversely affected by legal, regulatory, economic and political risks associated with international trade in those markets.
If actual results fall short of our estimates and assumptions used in estimating revenue growth, future cash flows and asset fair values, we could incur further impairment charges for intangible assets, goodwill or long-lived assets, which could have an adverse effect on our results of operations. 16 Table of Contents RISKS RELATED TO BRAND AND BRAND EXECUTION If customer preference for our branded merchandise and services changes or we cannot compete effectively in the apparel industry, our business and results of operations may be adversely affected.
If actual results fall short of our estimates and assumptions used in estimating revenue growth, future cash flows and asset fair values, we could incur further impairment charges for intangible assets, goodwill or long-lived assets, which could have an adverse effect on our results of operations. 15 Table of Contents RISKS RELATED TO BRAND AND BRAND EXECUTION If customer preference for our branded merchandise and services changes or we cannot compete effectively in the apparel industry, our business and results of operations may be adversely affected.
Our level of debt presents the following risks, among others: • we could be required to use a substantial portion of our cash flow from operations to pay principal (including amortization) and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic acquisitions and other general corporate requirements; • our leverage could increase our vulnerability to economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged; • our interest expense could increase if prevailing interest rates increase, because a substantial portion of our debt bears interest at variable rates; • our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business, our industry and changing market conditions and could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategies; • our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions and other general corporate requirements; • the agreements governing our debt contain covenants that limit our ability to pay dividends or make other restricted payments and investments; • the agreements governing our debt contain operating covenants that limit our ability to engage in activities that may be in our best interests in the long term, including, without limitation, by restricting our subsidiaries’ ability to incur debt, create liens, enter into transactions with affiliates or prepay certain kinds of indebtedness; • the agreements governing our debt contain certain financial covenants, including a quarterly maximum total leverage ratio test, a weekly minimum liquidity test and an annual maximum capital expenditure amount (the “financial covenants”); and • the failure to comply with the operating and financial covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the applicable debt or may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies, and in the event our creditors accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that debt and the lenders could proceed against the collateral granted to them to secure such indebtedness.
Our level of debt presents the following risks, among others: • we could be required to use a substantial portion of our cash flow from operations to pay principal (including amortization) and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic acquisitions and other general corporate requirements; • our leverage could increase our vulnerability to economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged; • our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business, our industry and changing market conditions and could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategies; • our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions and other general corporate requirements; • the agreements governing our debt contain covenants that limit our ability to pay dividends or make other restricted payments and investments; • the agreements governing our debt contain operating covenants that limit our ability to engage in activities that may be in our best interests in the long term, including, without limitation, by restricting our subsidiaries’ ability to incur debt, create liens, enter into transactions with affiliates or prepay certain kinds of indebtedness; • the agreements governing our debt contain certain financial covenants, including a quarterly maximum total leverage ratio test, a weekly minimum liquidity test and an annual maximum capital expenditure amount (the “financial covenants”); and • the failure to comply with the operating and financial covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the applicable debt or may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies, and in the event our creditors accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that debt and the lenders could proceed against the collateral granted to them to secure such indebtedness.
Also, during Fiscal 2021, some of our printing vendors could not meet their service obligations due to labor shortages and other factors which diminished their short-term volume capacity and impacted some of our catalog mailings. We currently use the national mail carriers for distribution of substantially all our catalogs and an increasing quantity of our outbound customer deliveries.
Also, during Fiscal 2022, some of our printing vendors could not meet their service obligations due to labor shortages and other factors which diminished their short-term volume capacity and impacted some of our catalog mailings. We currently use the national mail carriers for distribution of substantially all our catalogs and an increasing quantity of our outbound customer deliveries.
If we 15 Table of Contents are not able to fulfill our liquidity needs through operating cash flows and/or borrowings under credit facilities or otherwise in the capital markets, our business and financial condition would be adversely affected. Our leverage may place us at a competitive disadvantage in our industry.
If we are not able to fulfill our liquidity needs through operating cash flows and/or borrowings under credit facilities or otherwise in the capital markets, our business and financial condition would be adversely affected. 14 Table of Contents Our leverage may place us at a competitive disadvantage in our industry.
Our strategy includes initiatives to further our reach in the United States and in several countries throughout the world through various distribution channels and brands, including through relationships with third-party eCommerce marketplaces. We have limited experience operating in many of these locations and with third parties 21 Table of Contents and face major, established competitors .
Our strategy includes initiatives to further our reach in the United States and in several countries throughout the world through various distribution channels and brands, including through relationships with third-party eCommerce 20 Table of Contents marketplaces. We have limited experience operating in many of these locations and with third parties and face major, established competitors.
ITEM 1A. RISK FACTORS You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating our company and our common stock. Any of the following risks could materially and adversely affect our business, results of operations or financial condition.
ITEM 1A. RIS K FACTORS You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating our company and our common stock. Any of the following risks could materially and adversely affect our business, results of operations or financial condition.
Addition ally, the deployment of new technology systems may require substantial investments in our infrastructure and network. As we deploy, update and make enhancements, we must, among other things, continue to update internal controls and operational processes as implementation progresses, recruit and train qualified personnel to assist with change management, and conduct, manage and control routine business functions.
Additionally, the deployment of new technology systems may require substantial investments in our infrastructure and network. As we deploy, update and make enhancements, we must, among other things, continue to update internal controls and operational processes as implementation progresses, recruit and train qualified personnel to assist with change management, and conduct, manage and control routine business functions.
Unauthorized use 17 Table of Contents of our trademarks, copyrights, trade secrets or other proprietary rights may cause significant damage to our brands and our ability to effectively represent ourselves to agents, suppliers, vendors, licensees and/or customers. Additionally, our efforts to pursue licensing and wholesaling activities with third parties increases risk of brand damage.
Unauthorized use of our trademarks, copyrights, trade secrets or other proprietary rights may cause significant damage to our brands and our ability to effectively represent ourselves to agents, suppliers, vendors, licensees and/or customers. Additionally, our efforts to pursue licensing and wholesaling activities with third parties increases risk of brand damage.
Failure to successfully deploy new technologies, enhancements of the infrastructure in a cost-effective manner, and in a manner that satisfies consumers ’ expectations, could have an adverse impact on our capital resources, financial condition, results of operations or cash flows.
Failure to successfully deploy new technologies, enhancements of the infrastructure in a cost-effective manner, and in a manner that satisfies consumers’ expectations, could have an adverse impact on our capital resources, financial condition, results of operations or cash flows.
As of January 28, 2022, we had goodwill and intangible asset balances totaling $363.7 million, which are subject to testing for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our intangible assets consist of a trade name of $257.0 million and goodwill of $106.7 million.
As of January 27, 2023, we had goodwill and intangible asset balances totaling $363.7 million, which are subject to testing for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our intangible assets consist of a trade name of $257.0 million and goodwill of $106.7 million.
The ability to raise additional financing depends on numerous factors that are outside of our control, including general economic and market conditions, the health of financial institutions, our credit ratings and lenders’ assessments of our prospects and the prospects of the retail industry in general, some of which have been and may continue to be impacted by the COVID pandemic.
The ability to raise additional financing depends on numerous factors that are outside of our control, including general economic and market conditions, the health of financial institutions, our credit ratings and lenders’ assessments of our prospects and the prospects of the retail industry in general, some of which have been and may continue to be impacted by the current macroeconomic conditions.
If adequate funds are not available on acceptable terms, we may be unable to fund our expansion, successfully develop or enhance our products, or respond to competitive pressures, any of which could negatively affect our business.
If adequate funds are not available on acceptable terms, we may be unable to fund our capital needs, successfully develop or enhance our products, or respond to competitive pressures, any of which could negatively affect our business.
The prices of these raw materials increased substantially in Fiscal 2021 and can be volatile due to the demand for fabrics, weather conditions, supply conditions, government regulations, general economic conditions, crop yields and other unpredictable factors.
The prices of these raw materials increased in Fiscal 2022 and can be volatile due to the demand for fabrics, weather conditions, supply conditions, government regulations, general economic conditions, crop yields and other unpredictable factors.
The current U.S. labor shortage has and may continue to impact our ability to hire and retain qualified personnel and impact our ability to operate our business effectively.
The current U.S. labor shortage may impact our ability to hire and retain qualified personnel and impact our ability to operate our business effectively.
Nevertheless, the steps we take to protect our proprietary rights may be inadequate and we may have trouble in effectively limiting unauthorized use of our trademarks and other intellectual property worldwide.
Nevertheless, the steps we take to protect our proprietary rights may be inadequate and we may have trouble in effectively limiting 16 Table of Contents unauthorized use of our trademarks and other intellectual property worldwide.
In Fiscal 2021, global supply chain challenges resulted in delays in ocean freight, port congestion and domestic freight availability, which impacted our inventory levels. If we cannot obtain a sufficient amount and variety of quality product at acceptable prices, it could have a negative impact on our competitive position.
During Fiscal 2021 and the first half of Fiscal 2022, global supply chain challenges resulted in delays in ocean freight, port congestion and domestic freight availability, which impacted our inventory levels. If we cannot obtain a sufficient amount and variety of quality product at acceptable prices, it could have a negative impact on our competitive position.
To the extent that COVID continues to adversely affect the U.S. and global economy, our business, results of operations, cash flows, or financial condition may be adversely impacted.
To the extent that COVID adversely affects the U.S. and global economy, our business, results of operations, cash flows, or financial condition may be adversely impacted.
In the second half of Fiscal 2021, we experienced transportation cost increases as a result of the global supply chain challenges . We rely upon third-party land-based and air freight carriers for merchandise shipments from our distribution centers to customers.
During Fiscal 2021 and first half of Fiscal 2022, we experienced transportation cost increases as a result of the global supply chain challenges. We rely upon third-party land-based and air freight carriers for merchandise shipments from our distribution centers to customers.
During Fiscal 2021, we experienced the impact of paper shortages, although we took actions designed to mitigate the impact of the shortage on our business. We also depend upon external vendors to print and mail our catalogs.
During Fiscal 2022, we experienced the impact of these paper shortages and we took actions designed to mitigate the impact of the shortage on our business. We also depend upon external vendors to print and mail our catalogs.
During Fiscal 2021 we experienced global supply chain challenges, which resulted in lower than expected levels of key merchandise in inventory at certain times during the year.
During Fiscal 2021 and the first half of Fiscal 2022, we experienced global supply chain challenges, which resulted in lower than expected levels of key merchandise in inventory at certain times during the year.
Many other factors may affect our profitability and financial condition, including: • changes in laws and regulations and changes in their interpretation or application, including changes in accounting standards, taxation rates and requirements, product marketing application standards as well as environmental laws, including climate-change related legislation, regulations and international accords; • differences between the fair value measurement of assets and liabilities and their actual value, particularly for intangibles and goodwill, contingent liabilities such as litigation, the absence of a recorded amount, or an amount recorded at the minimum, compared to the actual amount; • changes in the rate of inflation, such as current inflationary pressures, interest rates and the performance of investments held by us; • changes in the creditworthiness of counterparties that transact business with or provide services to us; • changes in business, economic and political conditions, including political instability, war, such as the current conflict with Russia and Ukraine, terrorist attacks, the threat of future terrorist activity and related military action, natural disasters, the cost and availability of insurance due to any of the foregoing events, labor disputes, strikes, slow-downs or other forms of labor or union activity, and pressure from third-party interest groups; and • negative claim experiences and higher than expected large claims under our self-insured health and workers’ compensation insurance programs. 24 Table of Contents Our share price may be volatile.
Many other factors may affect our profitability and financial condition, including: • changes in laws and regulations and changes in their interpretation or application, including changes in accounting standards, taxation rates and requirements, product marketing application standards as well as environmental laws, including climate-change related legislation, regulations and international accords; • differences between the fair value measurement of assets and liabilities and their actual value, particularly for intangibles and goodwill, contingent liabilities such as litigation, the absence of a recorded amount, or an amount recorded at the minimum, compared to the actual amount; • changes in the rate of inflation, such as current inflationary pressures, interest rates and the performance of investments held by us; • changes in the creditworthiness of counterparties that transact business with or provide services to us; • changes in business, economic and political conditions, including political instability, war, such as the current conflict with Russia and Ukraine, terrorist attacks, the threat of future terrorist activity and related military action, natural disasters, the cost and availability of insurance due to any of the foregoing events, labor disputes, strikes, slow-downs or other forms of labor or union activity, and pressure from third-party interest groups; • negative claim experiences and higher than expected large claims under our self-insured health and workers’ compensation insurance programs; and • the failure of financial institutions in which we maintain cash deposits, including those where balances may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
Due to the seasonal nature of our business, we rely heavily on flexible part-time employees to staff our distribution centers to support our peak seasons, including back-to-school shopping season and fourth fiscal quarter holiday shopping season.
Due to the seasonal nature of our business, we rely heavily on flexible 22 Table of Contents part-time employees to staff our distribution and customer service centers to support our peak seasons, including back-to-school shopping season and fourth quarter holiday shopping season.
Global and domestic conditions, including as a result of the COVID pandemic, that have an effect on consumer discretionary spending include but may not be limited to: unemployment, general and industry-specific inflation, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policies.
Global and domestic conditions that have an effect on consumer discretionary spending include but may not be limited to: unemployment, general and industry-specific inflation, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policies.
The ultimate effects of Brexit on us are still difficult to predict as there remains considerable uncertainty around the impact of new, post-Brexit regulations as the various agencies develop enforcement practices. Adverse consequences from Brexit include greater restrictions on imports and exports between the UK and EU members and increased regulatory complexities.
The ultimate effects of Brexit on us are still difficult to predict as there remains considerable uncertainty around the impact of post-Brexit regulations as the various agencies interpret the regulations and develop enforcement practices. Adverse consequences from Brexit include greater restrictions on imports and exports between the United Kingdom and European Union members and increased regulatory complexities.
Increases in costs relating to postage, paper, and printing have increased and may continue to increase the cost of our catalog mailings and could reduce our profitability to the extent that we are unable to offset such increases by raising retail prices, or by implementing more efficient printing, mailing, delivery, and order fulfillment systems, or by using alternative direct-mail formats.
Increases in costs relating to postage, paper, and printing have increased and may continue to increase the cost of our catalog mailings and could reduce our profitability to the extent that we are unable to offset such increases by raising retail prices, or by implementing more efficient printing, mailing, delivery, and order fulfillment systems, or by using alternative direct-mail formats. 13 Table of Contents Paper for catalogs and promotional mailings is an essential resource in the success of our business.
The market price of our common stock may fluctuate significantly due to several factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of comparable companies; • changes to the regulatory and legal environment under which we operate; and • domestic and worldwide economic conditions.
The market price of our common stock may fluctuate significantly due to several factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of comparable companies; • changes to the regulatory and legal environment under which we operate; and • domestic and worldwide economic conditions. 23 Table of Contents Further, when the market price of a company’s common stock drops significantly, stockholders often initiate securities class action lawsuits against the company.
This usually requires us to order merchandise and enter into commitments for the purchase of such 19 Table of Contents merchandise well in advance of the time these products will be offered for sale, which makes responding to changing markets challenging.
Some of these vendors require lengthy advance notice of order requirements in order to be able to supply products in the quantities requested. 18 Table of Contents This usually requires us to order merchandise and enter into commitments for the purchase of such merchandise well in advance of the time these products will be offered for sale, which makes responding to changing markets challenging.
Accordingly, we are subject to the risks, including labor disputes, union organizing activity, trucking shortages, inclement weather and increased transportation costs, associated with such carriers’ ability to provide delivery services to meet outbound shipping needs.
Accordingly, we are subject to the risks, including labor disputes, union organizing activity, trucking shortages, inclement weather and increased transportation costs, associated with such carriers’ ability to provide delivery services to meet outbound shipping needs. The changing mix of our outbound freight carriers may result in higher costs and customer delays.
Furthermore, with the seasonal nature of our business, over 1,500 flexible part-time employees join us each year to support our peak seasons, especially the fourth quarter holiday shopping season.
Furthermore, with the seasonal nature of our business, over 1,500 flexible part-time employees join us each year to support our fourth quarter holiday shopping season. An inability to attract qualified flexible part-time personnel could interrupt our sales during such peak seasons.
The impact of economic conditions on consumer discretionary spending and customers has in the past and could, in the future, adversely affect our financial performance. Apparel purchases are discretionary expenditures that historically have been influenced by domestic and global economic conditions. The U.S.
RISKS RELATED TO MACROECONOMIC CONDITIONS The impact of economic conditions on consumer discretionary spending and customers has in the past and could, in the future, adversely affect our financial performance. Apparel purchases are discretionary expenditures that historically have been influenced by domestic and global economic conditions. Higher prices for consumer goods may result in less discretionary spending for consumers.
The interests of ESL, which has investments in other companies (including Sears Holdings and Transform Holdco), may from time to time diverge from the interests of our other stockholders. Our common stock price may decline if ESL decides to sell a portion of its holdings of our common stock.
Lampert, who has direct and indirect investments in other companies, including ESL Investments, Inc., may from time to time diverge from the interests of our other stockholders. Our common stock price may decline if Mr. Lampert decides to sell a portion of his holdings of our common stock. Mr.
Accordingly, ESL could have substantial influence over many, if not all, actions to be taken or approved by our stockholders, including in the election of directors and any transactions involving a change of control.
Lampert beneficially owned 51.9% of our outstanding shares of common stock as of March 16, 2022. Accordingly, Mr. Lampert could have substantial influence over many, if not all, actions to be taken or approved by our stockholders, including in the election of directors and any transactions involving a change of control. The interests of Mr.
GENERAL RISKS Failure to retain our existing workforce and to attract qualified new personnel in the current labor market and remote and hybrid work models could adversely affect our business and results of operations.
Lampert that he has decided to sell shares of our common stock, could have an adverse impact on the price of our common stock. GENERAL RISKS Failure to retain our existing workforce and to attract qualified new personnel in the current labor market and remote and hybrid work models could adversely affect our business and results of operations.
Further, when the market price of a company’s common stock drops significantly, stockholders often initiate securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our senior management and other resources. Your percentage ownership in Lands’ End may be diluted in the future.
A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our senior management and other resources. Your percentage ownership in Lands’ End may be diluted in the future.
ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. 25 Table of Contents
ITEM 1B. UNRESOLV ED STAFF COMMENTS Not applicable. 24 Table of Contents
Failure to retain our executive management team and to attract qualified new personnel could adversely affect our business and results of operations. We depend on the talents and continued efforts of our executive management team. The loss of members of our executive management may disrupt our business and adversely affect our results of operations.
We depend on the talents and continued efforts of our executive management team. The loss of members of our executive management may disrupt our business and adversely affect our results of operations. Furthermore, our ability to manage further expansion will require us to continue to train, motivate and manage employees and to attract, motivate and retain additional qualified personnel.
The COVID pandemic has changed the way businesses operate with companies allowing employees to work 100% remotely from home or in hybrid work models which allows employees to work both remotely from home and in the office. We may not be able to attract, hire or retain qualified personnel if competing companies offer a more desirable work model.
The COVID pandemic has changed the way businesses operate with companies allowing employees to work 100% remotely from home or in hybrid work models which allows employees to work both remotely from home and in the office.
Any difficulties encountered in completing these activities, as well as problems in technical resources, system performance or system adequacy, including loss or corruption of data, could delay implementation and deployment 22 Table of Contents of new technologies .
The interdependence of these systems and teams is a significant risk to the successful completion and the failure could have a material adverse effect on our overall business growth trajectory. 21 Table of Contents Any difficulties encountered in completing these activities, as well as problems in technical resources, system performance or system adequacy, including loss or corruption of data, could delay implementation and deployment of new technologies.
The interdependence of these systems and teams is a significant risk to the successful completion and the failure could have a material adverse effect on our overall business growth trajectory.
Implementation of these systems is highly dependent on coordination of numerous software and system providers and internal business teams. The interdependence of these systems is a significant element for the successful completion and the failure could have a material adverse effect on our overall information technology infrastructure.
An inability to attract qualified flexible part-time personnel could interrupt our sales during such peak seasons. 14 Table of Contents Fluctuations and anticipated incr eases in the cost and availability of catalog paper, printing services, distribution, and postage have had and could continue to have an adverse effect on our business and results of operations.
Fluctuations and anticipated increases in the cost and availability of catalog paper, printing services, distribution, and postage have had and could continue to have an adverse effect on our business and results of operations. Catalog mailings are an important aspect of our marketing efforts.
RISKS RELATED TO MAJORITY OWNERSHIP ESL, whose interests may be different from the interests of other stockholders, may be able to exert substantial influence over our company. According to an amendment to Schedule 13D filed with the SEC on November 3, 2021, ESL beneficially owned 51.9% of our outstanding shares of common stock as of November 1, 2021.
RISKS RELATED TO MAJORITY OWNERSHIP Edward Lampert and his investment affiliates, whose interests may be different from the interests of other stockholders, may be able to exert substantial influence over Lands’ End. According to an amendment to Schedule 13D filed with the SEC on March 16, 2022, Edward S.
During Fiscal 2021, operations at factories in Vietnam, where some of our product is produced, were suspended due to COVID. The products that we purchase are shipped to our distribution centers in Wisconsin, the United Kingdom and Japan.
From time to time, some of our factories that produce our product have experienced temporary suspension of operations due to labor issues and other disruptions. The products that we purchase are shipped to our distribution centers in Wisconsin and the United Kingdom (and formerly Japan).
We started the implementation of a multi-year project during Fiscal 2021 for a new warehouse management and transportation management system. Implementation of these systems is highly dependent on coordination of numerous software and system providers and internal business teams.
We started the planning of a multi-year project during Fiscal 2021 for a new warehouse management and transportation management system. The transportation management system was implemented during Fiscal 2022 and the warehouse management system implementation is expected to begin during Fiscal 2023.
Paper for catalogs and promotional mailings is an essential resource in the success of our business. The COVID pandemic has caused major changes to the global paper market through plant closures and equipment conversion and lower available volume of specialty paper grades. The market price for paper has fluctuated significantly and may continue to fluctuate in the future.
The continuous changes to the global paper market have resulted in plant closures and equipment conversion and lower available volume of specialty paper grades. The market price for paper has fluctuated significantly and may continue to fluctuate in the future. In addition, future pricing and supply availability of catalog paper may be impacted in the United States and Europe.
Furthermore, our ability to manage further expansion will require us to continue to train, motivate and manage employees and to attract, motivate and retain additional qualified personnel. Competition for these types of personnel is intense, and we may not be successful in attracting, assimilating and retaining the personnel required to grow and operate our business profitably.
Competition for these types of personnel is intense, and we may not be successful in attracting, assimilating and retaining the personnel required to grow and operate our business profitably. Other factors may have an adverse effect on our business, results of operations and financial condition.
The interdependence of these systems is a significant element for the successful completion and the failure could have a material adverse effect on our overall information technology infrastructure. We expect this implementation to drive operational efficiencies, working capital improvements, labor savings, package consolidation and optimization of third-party carrier rates.
We expect this implementation to drive operational efficiencies, working capital improvements, labor savings, package consolidation and optimization of third-party carrier rates.
ESL is not subject to any contractual obligation to maintain its ownership position in us. Consequently, we cannot assure you that ESL will maintain its ownership interest in us.
Lampert is not subject to any contractual obligation to maintain his ownership position in Lands’ End, and we cannot assure you that he will. Any sale by Mr. Lampert of our common stock, or any announcement by Mr.
If inflation continues to increase, we may not be able to offset cost increases to our products through price increases without negatively impacting customer demand, which could adversely affect our sales and results of operations. The global supply chain challenges have resulted in a significant increase in inbound transportation costs and delays in receiving product.
Bureau of Labor Statistics published its most recent annual inflation rate of 6.0% for February 2023. If inflation increases or remains at these high levels, we may not be able to offset cost increases to our products through price increases without negatively impacting customer demand, which could adversely affect our sales and results of operations.
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RISKS RELATED TO MACROECONOMIC CONDITIONS The COVID pandemic continues to affect our business, financial condition and results of operations in many respects.
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Changes in consumer spending have resulted and may continue to result in reduced demand for our products, increased inventories, lower revenues, higher discounts, pricing pressures and lower gross margins. According to the U.S. Bureau of Labor Statistics, the COVID pandemic era inflation rate peaked at 9.1% in June, 2022. The U.S.
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The continuing impact of the COVID pandemic is highly unpredictable and volatile and is affecting certain business operations, in-stock positions, costs of doing business, availability of labor, access to inventory, supply chain operations, our ability to predict future performance and our financial performance, among other things.
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Global economic conditions have had and could, in the future, adversely affect our business, operating results and financial condition. Global economic conditions have impacted, and will likely continue to impact, businesses around the world.
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The COVID pandemic has resulted in widespread and continuing impacts on the global economy and on our employees, customers, suppliers and vendors.
Added
Macroeconomic pressures in the U.S. and the global economy such as rising interest rates and energy prices have created and may continue to create a challenging economic environment.
Removed
There is considerable uncertainty regarding the extent to which COVID will continue to spread and the extent and duration of measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business and government shutdowns.
Added
The following factors attributable to uncertain economic and financial market conditions could have a material adverse effect on our business, operating results and financial condition: • Continued volatility in the availability and prices for commodities and raw materials that we use in our products and in our supply chain (such as cotton); • Our interest expense could increase if prevailing interest rates increase, because a substantial portion of our debt bears interest at variable rates; • Our International distribution channel conducts business in various currencies, which creates exposure to fluctuations in foreign currency rates relative to the U.S.
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The COVID pandemic and any preventative or protective actions that governments or we may take may result in business disruption, reduced sales, and increased operating expenses.
Added
Dollar. In particular, the recent strengthening of the U.S. Dollar relative to major foreign currencies, including the Pound sterling, Euro and Japanese yen, unfavorably impacted our Fiscal 2022 results. Continued significant fluctuations of foreign currencies against the U.S. Dollar may further negatively impact our business.
Removed
Demand for certain products has fluctuated and may continue to fluctuate as the COVID pandemic progresses and consumer behaviors change, which may challenge our ability to anticipate and/or adjust inventory levels to meet that demand. Delays in inventory receipts due to global supply chain challenges has caused and may continue to cause lost sales from out of stock product.
Added
In the current uncertain economic environment, we cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on our business, results of operations, cash flows and financial position. 12 Table of Contents The COVID pandemic may affect our business, financial condition and results of operations in many respects.
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Failure to appropriately respond, or the perception of an inadequate response to evolving events around the COVID pandemic, could cause reputational harm to our brand and subject us to lost sales.
Added
We must also avoid accumulating excess inventory, which increases working capital needs, increases carrying costs of the inventory, including an increase in interest expense on variable rate debt, and could lower gross margins. On the other hand, if we underestimate demand for a particular product we may experience inventory shortages resulting in lost revenues.
Removed
Additionally, a future outbreak of confirmed cases of COVID in our facilities could result in temporary or sustained workforce shortages or facility closures, which would negatively impact our business and results of operations. The COVID pandemic had the most effect on our Outfitters and Retail distribution channels in Fiscal 2020.
Added
We obtain substantially all our inventory from vendors located outside the United States.
Removed
The Outfitters business sales were affected by reductions in travel, school closures and the economic effect on small to mid-size business customers. The Retail distribution channel was closed for a portion of 2020 and has seen a slow recovery in sales as the COVID pandemic continues to affect the economy.
Added
While we have developed a hybrid work model that we believe is best for operating our business, we may not be able to attract, hire or retain qualified personnel if competing companies offer a more desirable work model. Failure to retain our executive management team and to attract qualified new personnel could adversely affect our business and results of operations.
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Bureau of Labor Statistics published its most recent annual inflation rate of 7.9% for February 2022, the highest rate since January 1982. Higher prices for consumer goods may result in less discretionary spending for consumers.
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These delays have a negative effect on customer demand due to lack of product 13 Table of Contents availability, increased cost due to backorder fulfillment and increased transportation costs to expedite late product deliveries.
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Our sales and margins during the fourth quarter were lower than expected in Fiscal 2021 due to global supply chain challenges and costs increases.
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Catalog mailings are an important aspect of our marketing efforts.
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In addition, future pricing and supply availability of catalog paper may be impacted in the United States and Europe.
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Our ability to mitigate the adverse impacts of these events depends in part upon the effectiveness of our disaster preparedness and response planning, as well as business continuity planning.
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As a result of shifting consumer behavior due to the COVID pandemic, certain freight carriers are deemphasizing historical, large commercial customers in favor of higher margin individual customers. The changing mix of our outbound freight carriers may result in higher costs and customer delays.
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We must also avoid accumulating excess inventory, which increases working capital needs and could lower gross margins. We obtain substantially all our inventory from vendors located outside the United States. Some of these vendors require lengthy advance notice of order requirements in order to be able to supply products in the quantities requested.
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Any sale by ESL of our common stock, or any announcement by ESL that it has decided to sell shares of our common stock, could have an adverse impact on the price of our common stock. Potential liabilities may arise related to the Separation, which could have an adverse effect on our financial condition and our results of operations.
Removed
The Official Committee of Unsecured Creditors of Sears Holdings Corporation has filed a lawsuit against ESL, former Sears directors and others alleging that several transactions, including the Separation, can be avoided as fraudulent transfers, and attacking the Separation and the decision to undertake the Separation on other similar theories of liability.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease office space in Shin Yokohama, Japan for a customer sales/service center as well as general administrative offices and a distribution center in Fujieda, Japan. We also lease office space for an international sourcing office in Kwun Tong, Hong Kong. Lands’ End Retail Properties As of January 28, 2022, our U.S. retail footprint consists of 30 Company Operated stores.
Biggest changeWe also lease office space for a global sourcing office in Kwun Tong, Hong Kong. Lands’ End Retail Properties As of January 27, 2023, our U.S. retail footprint consists of 28 Company Operated stores. The U.S. Company Operated stores are leased and average approximately 7,600 square feet. Additionally, we have one smaller school uniform showroom that is used for fittings.
ITEM 2. PROPERTIES Facilities and Store Locations We own or lease domestic and international properties used as offices, customer sales/service centers, distribution centers and Company Operated stores. We believe that our existing facilities are well maintained and are sufficient to meet our current needs.
ITEM 2. PR OPERTIES Facilities and Store Locations We own or lease domestic and international properties used as offices, customer service centers, distribution centers and Company Operated stores. We believe that our existing facilities are well maintained and are sufficient to meet our current needs.
International Offices, Customer Service and Distribution Properties We own a distribution center and customer sales/service center in Oakham, United Kingdom that supports our northern European business. We lease two buildings in Mettlach, Germany for customer sales/service center supporting our central European business.
We also own customer service and distribution centers in Reedsburg and Stevens Point, Wisconsin. International Offices, Customer Service and Distribution Properties We own a distribution center and customer service center in Oakham, United Kingdom that supports our European business. We lease two buildings in Mettlach, Germany for offices and a customer service center supporting our European Union business.
The Dodgeville campus includes approximately 1.7 million square feet of building space between multiple different buildings that are all owned by the Company. The primary functions of these buildings are customer sales/service, distribution center and corporate headquarters. We also own customer sales/service and distribution centers in Reedsburg and Stevens Point, Wisconsin.
Domestic Headquarters, Customer Service and Distribution Properties The headquarters for our business is located on an approximately 200 acre campus in Dodgeville, Wisconsin. The Dodgeville campus includes approximately 1.8 million square feet of building space between multiple different buildings that are all owned by the Company. The primary functions of these buildings are customer service, distribution center and corporate headquarters.
We review all leases set to expire in the short term to determine the appropriate action to take with respect to them, including moving or closing Company Operated stores or entering into new leases. Domestic Headquarters, Customer Service and Distribution Properties The headquarters for our business is located on an approximately 200 acre campus in Dodgeville, Wisconsin.
We review all leases with upcoming expiration dates in the short term to determine the appropriate action to take with respect to them, including exercising an option to renew, if any, moving or closing facilities or entering into new leases.
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The U.S. Company Operated stores average approximately 7400 square feet. Additionally, we have one smaller school uniform showroom that is used for fittings.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−0 removed3 unchanged
Biggest changeFor a description of our legal proceedings, see Part II, Item 8, Financial Statements and Supplementary Data and Notes to Consolidated Financial Statements, Note 10, Commitments and Contingencies , of this Annual Report on Form 10-K, which description of legal proceedings is incorporated by reference herein. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 26 Table of Contents PART II
Biggest changeFor a description of our legal proceedings, see Part II, Item 8 , Financial Statements and Supplementary Data and Notes to Consolidated Financial Statements, Note 12 , Commitments and Contingencies , of this Annual Report on Form 10-K, which description of legal proceedings is incorporated by reference herein. ITEM 4.
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MINE SAF ETY DISCLOSURES Not applicable. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−1 removed1 unchanged
Biggest changeThe graph assumes an initial investment of $100 on January 27, 2017 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Retail Smart Index. 1/27/2017 2/2/2018 2/1/2019 1/31/2020 9/18/2020 1/29/2021 1/28/2022 Lands’ End, Inc. $ 100 $ 107 $ 116 $ 76 $ 101 $ 180 $ 118 NASDAQ Composite Index $ 100 $ 128 $ 128 $ 162 $ 191 $ 231 $ 243 NASDAQ Retail Smart Index $ 100 $ 119 $ 114 $ 125 $ 137 $ 156 $ 177 NASDAQ Global Retail Index $ 100 $ 131 $ 129 $ 147 $ 178 $ — $ — 27 Table of Contents This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act or incorporated by reference into any of our filings, as amended, with the SEC, except as shall be expressly set forth by specific reference in such filing.
Biggest changeWe do not plan to include the Nasdaq Retail Smart Index in next year’s performance graph. 26 Table of Contents The graph assumes an initial investment of $100 on February 2, 2018 in each of our common stock, the Nasdaq Composite Index, the S&P 600 Apparel Retail Index and the Nasdaq Retail Smart Index. 2/2/2018 2/1/2019 1/31/2020 1/29/2021 1/28/2022 1/27/2023 Lands’ End, Inc. $ 100 $ 109 $ 71 $ 169 $ 111 $ 55 Nasdaq Composite Index $ 100 $ 100 $ 126 $ 181 $ 190 $ 160 S&P 600 Apparel Retail Index $ 100 $ 109 $ 84 $ 102 $ 119 $ 113 Nasdaq Retail Smart Index $ 100 $ 95 $ 105 $ 131 $ 148 $ 142 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act or incorporated by reference into any of our filings, as amended, with the SEC, except as shall be expressly set forth by specific reference in such filing.
Dividends Since the Separation we have not paid and we do not expect to pay in the foreseeable future, dividends on our common stock.
Dividends We have not paid and we do not expect to pay in the foreseeable future, dividends on our common stock.
Additionally, the Debt Facilities contain various representations and warranties and restrictive covenants that, among other things, and subject to specified exceptions, restrict the ability of Lands’ End and its subsidiaries to make dividends or distributions with respect to capital stock. ITEM 6. SELECTED FINANCIAL DATA Not applicable. 28 Table of Contents
Additionally, the Debt Facilities contain various representations and warranties and restrictive covenants that, among other things, and subject to specified exceptions, restrict the ability of Lands’ End and its subsidiaries to make dividends or distributions with respect to capital stock. ITEM 6. [Reserved] 27 Table of Contents
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Lands’ End’s common stock is traded on the NASDAQ Stock Market under the ticker symbol LE. There were 6,475 stockholders of record as of March 21, 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Lands’ End’s common stock is traded on the Nasdaq Stock Market under the ticker symbol LE. There were 6,151 stockholders of record as of April 5, 2023.
Stock Performance Graph The following graph compares the cumulative total return to stockholders on Lands’ End common stock from January 27, 2017 through January 28, 2022, with the return on the NASDAQ Composite Index and the NASDAQ Retail Smart Index (NQSSRE) for the same period. On September 18, 2020 the NASDAQ Global Retail Index was terminated.
Stock Performance Graph The following graph compares the cumulative total return to stockholders on Lands’ End common stock from February 2, 2018 through January 27, 2023 with the return on the Nasdaq Composite Index and S&P 600 Apparel Retail Index for the same period.
In accordance with SEC rules, the most recent available information for the NASDAQ Global Retail Index is presented below, in addition to the NASDAQ Retail Smart Index which we have selected to replace the NASDAQ Global Retail Index for our Stock Performance Graph.
For comparison purposes and in accordance with SEC rules, we have included the Nasdaq Retail Smart Index in the performance graph below.
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The cumulative total stockholder return as of September 18, 2020 (the last day information was made available by NASDAQ Global Retail Index) was $178.
Added
Issuer Purchases of Equity Securities The following table presents a month-to-month summary of information with respect to purchases of common stock made during the fourth quarter of Fiscal 2022 pursuant to the Share Repurchase Program announced on June 28, 2022: Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Plans or Programs October 29 - November 25 — $ — — $ 44,774 November 26 - December 30 263,084 $ 8.44 263,084 $ 42,553 December 31 - January 27 116,522 $ 8.58 116,522 $ 41,553 Total 379,606 $ 8.49 379,606 $ 41,553 (1) All shares of common stock were retired following purchase.
Added
(2) Average price paid per share excludes broker commissions. (3) On June 28, 2022, the Company announced that its Board of Directors authorized the Company to repurchase up to $50.0 million of the Company’s common stock through February 2, 2024 (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or discontinued at any time.
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We are using the S&P 600 Apparel Retail Index for the first time in our performance graph this year because we believe the retail companies comprising that index are more closely aligned with the segment of the retail industry in which we operate, and that it provides a more relevant comparison against which to measure our stock performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+21 added−36 removed49 unchanged
Biggest changeWe have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations. ▪ Corporate restructuring – severance costs associated with the reduction in corporate positions in Fiscal 2020. ▪ Goodwill and long-lived asset impairment – charges associated with the non-cash write-down of goodwill and certain long-lived assets in Fiscal 2020. ▪ Other – amortization of transaction related costs associated with our Third Party distribution channel in Fiscal 2021 and Fiscal 2020. ▪ Loss on disposal of property and equipment – management considers the net gain or loss on asset valuation to result from investing decisions rather than ongoing operations in Fiscal 2021 and Fiscal 2020.
Biggest changeWe have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations. ▪ Lands’ End Japan closure – $3.1 million net operating loss related to the liquidation of product commencing September 2022 through the end of Fiscal 2022 and $3.0 million of one-time closing costs recorded in Fiscal 2022. ▪ Long-lived assets impairment – non-cash write-down of certain long-lived assets in Fiscal 2022. 30 Table of Contents ▪ (Gain) loss on disposal of property and equipment – disposal of property and equipment in Fiscal 2022 and Fiscal 2021. ▪ Other – amortization of transaction related costs associated with our Third Party distribution channel in Fiscal 2022 and Fiscal 2021.
Our management uses Adjusted EBITDA to evaluate the operating performance of our business for comparable periods and as the basis for an executive compensation metric. The methods we use to calculate our non-GAAP financial measures may differ significantly from methods other companies use to compute similar measures.
Our management uses Adjusted EBITDA to evaluate the operating performance of our business for comparable periods and as a basis for an executive compensation metric. The methods we use to calculate our non-GAAP financial measures may differ significantly from methods other companies use to compute similar measures.
The Term Loan Facility contains certain financial covenants, including a quarterly maximum total leverage ratio test, a weekly minimum liquidity test and an annual maximum capital expenditure amount. 36 Table of Contents Under the ABL Facility, if excess availability falls below the greater of 10% of the Loan Cap amount or $15.0 million, we will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0.
The Term Loan Facility contains certain financial covenants, including a quarterly maximum total leverage ratio test, a weekly minimum liquidity test and an annual maximum capital expenditure amount. 34 Table of Contents Under the ABL Facility, if excess availability falls below the greater of 10% of the Loan Cap amount or $15.0 million, we will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0.
In addition to our Net income determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted EBITDA measurement. Adjusted EBITDA is computed as Net income appearing on the Consolidated Statements of Operations net of Income tax expense, Interest expense, Depreciation and amortization and certain significant items set forth below.
In addition to our Net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted EBITDA measurement. Adjusted EBITDA is computed as Net income (loss) appearing on the Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items set forth below.
See Note 2, Summary of Significant Accounting Policies , and Note 8, Goodwill and Indefinite-Lived Intangible Assets , of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for more information about these assets and the related impairment charges.
See Note 2, Summary of Significant Accounting Policies , and Note 10, Goodwill and Indefinite-Lived Intangible Asset , of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for more information about these assets and the related impairment charges.
We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable securities laws and regulations. 41 Table of Contents
We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable securities laws and regulations. 39 Table of Contents
See Note 9, Income Taxes, for further details on the valuation allowance. We believe the judgments and estimates discussed above are reasonable. However, if actual results fall short of our estimates or assumptions, we may be exposed to losses or gains that could be material. 40 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This document contains forward-looking statements.
See Note 11, Income Taxes, for further details on the valuation allowance. 38 Table of Contents We believe the judgments and estimates discussed above are reasonable. However, if actual results fall short of our estimates or assumptions, we may be exposed to losses or gains that could be material. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This document contains forward-looking statements.
See “Cautionary Statements Concerning Forward-Looking Statements” below and Item 1A, Risk Factors, in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. This section discusses our results of operations for the year ended January 28, 2022 as compared to the year ended January 29, 2021.
See “Cautionary Statements Concerning Forward-Looking Statements” below and Item 1A, Risk Factors, in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. This section discusses our results of operations for the year ended January 27, 2023 as compared to the year ended January 28, 2022.
Executive Overview Description of the Company Lands’ End is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. Operating out of America’s heartland, we believe our vision and values make a strong connection with our core customers. We offer products online at www.landsend.com , through our own Company Operated stores and through third-party distribution channels.
Executive Overview Description of the Company Lands’ End is a leading digital retailer of casual clothing, swimwear, outerwear, accessories, footwear and home products. Operating out of America’s heartland, we believe our vision and values make a strong connection with our core customers. We offer products online at www.landsend.com , through our own Company Operated stores and through third-party distribution channels.
The Debt Facilities contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances. As of January 28, 2022, we were in compliance with all of our covenants in the Debt Facilities.
The Debt Facilities contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances. As of January 27, 2023, we were in compliance with all of our covenants in the Debt Facilities.
We believe the accounting policies discussed below represent the accounting policies we apply that are the most critical to understanding our Consolidated Financial Statements. Inventory Valuation Our inventories consist of merchandise purchased for resale and are recorded at the lower of cost or market.
We believe the accounting policies discussed below represent the accounting policies we apply that are the most critical to understanding our Consolidated Financial Statements. Inventory Valuation Our inventories consist of merchandise purchased for resale and are recorded at the lower of cost or net realizable value.
We operate in five separate distribution channels for revenue reporting purposes: U.S. eCommerce, International, Outfitters, Third Party and Retail. A key measure in the evaluation of our business is revenue performance by 32 Table of Contents distribution channel. We also consider G ross profit and Selling and administrative expenses in evaluating the performance of our business.
We operate in five separate distribution channels for revenue reporting purposes: U.S. eCommerce, International, Outfitters, Third Party and Retail. A key measure in the evaluation of our business is revenue performance by distribution channel. We also consider Gross profit and Selling and administrative expenses in evaluating the performance of our business.
For a discussion and analysis of the year ended January 29, 2021 compared to January 31, 2020, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended January 29, 2021, filed with the SEC on March 25, 2021.
For a discussion and analysis of the year ended January 28, 2022 compared to January 29, 2021, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended January 28, 2022, filed with the SEC on March 24, 2022.
(2) Purchase obligations primarily represent open purchase orders for inventory. 37 Table of Contents Financial Instruments with Off-Balance-Sheet Risk The $275.0 million ABL Facility includes a $70.0 million sublimit for letters of credit and the Third Amendment to the ABL Facility extended the maturity from November 16, 2022 to the earlier of (a) July 29, 2026 and (b) June 9, 2025 if, on or prior to such date, the Term Loan Facility has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness.
Financial Instruments with Off-Balance-Sheet Risk The $275.0 million ABL Facility includes a $70.0 million sublimit for letters of credit and the Third Amendment to the ABL Facility extended the maturity from November 16, 2022 to the earlier of (a) July 29, 2026 and (b) June 9, 2025 if, on or prior to such date, the Term Loan Facility has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness.
After the initial two-year period, a prepayment premium of 3% applies to voluntary prepayments and certain mandatory prepayments made after September 9, 2022 and on or prior to September 9, 2023, 1% for such prepayments made after September 9, 2023 and on or prior to September 9, 2024, and no premium on such prepayments thereafter.
A prepayment premium of 3% applies to voluntary prepayments and certain mandatory prepayments made after September 9, 2022 and on or prior to September 9, 2023, 1% for such prepayments made after September 9, 2023 and on or prior to September 9, 2024, and no premium on such prepayments thereafter.
Cash Flows from Operating Activities Operating activities generated net cash of $70.6 million and $91.6 million in Fiscal 2021 and Fiscal 2020, respectively. Our primary source of operating cash flows is the sale of merchandise goods and services to customers, while the primary use of cash in operations is the purchase of merchandise inventories.
Cash Flows from Operating Activities Operating activities used net cash of $36.4 million and generated $70.6 million in Fiscal 2022 and Fiscal 2021, respectively. Our primary source of operating cash flows is the sale of merchandise goods and services to customers, while the primary use of cash in operations is the purchase of merchandise inventories.
Seasonality We experience seasonal fluctuations in our net revenue and operating results and historically have realized a significant portion of our yearly net revenue and earnings during our fourth fiscal quarter. We generated 33.9% and 37.7% of our yearly net revenue in the fourth quarter of Fiscal 2021 and Fiscal 2020 respectively.
Seasonality We experience seasonal fluctuations in our net revenue and operating results and historically have realized a significant portion of our yearly net revenue and earnings during our fourth fiscal quarter. We generated 34.0% and 33.9% of our yearly net revenue in the fourth quarter of Fiscal 2022 and Fiscal 2021, respectively.
We completed our Fiscal 2021 and Fiscal 2020 annual goodwill impairment analysis during the fourth quarter and determined that the fair value of the U.S. eCommerce and Outfitters reporting units exceeded their carrying values by 91.2% and 65.5%, respectively in Fiscal 2021 and 61.7% and 108.8%, respectively in Fiscal 2020, and as such, we did not record a goodwill impairment charge.
We completed our Fiscal 2022 and Fiscal 2021 annual goodwill impairment analysis during the fourth quarter of each year and determined that the fair value of the U.S. eCommerce and Outfitters reporting units exceeded their carrying values by 13.2% and 26.7%, respectively in Fiscal 2022 and 91.2% and 65.5%, respectively in Fiscal 2021, and as such, we did not record a goodwill impairment charge.
The United States inventory accounted for using the LIFO method as of percentage of the total inventory was 86% at January 28, 2022 and 87% at January 29, 2021. We continually make assessments as to whether the carrying cost of inventory exceeds its market value and, if so, by what dollar amount.
The United States inventory accounted for using the LIFO method as of percentage of the total inventory was 92% at January 27, 2023 and 86% at January 28, 2022. 36 Table of Contents We continually make assessments as to whether the carrying cost of inventory exceeds its market value and, if so, by what dollar amount.
Adjusted EBITDA As a result of the above factors, Adjusted EBITDA increased 39.0% to $120.9 million in Fiscal 2021, compared to Adjusted EBITDA of $87.0 million in Fiscal 2020. Liquidity and Capital Resources Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, debt service and for general corporate purposes.
Adjusted EBITDA As a result of the above factors, Adjusted EBITDA was $70.5 million in Fiscal 2022, compared to $120.9 million in Fiscal 2021. Liquidity and Capital Resources Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, debt service and for general corporate purposes.
As a result, gross profit may not be comparable to other entities that include depreciation and amortization related to the sale of their product in their gross profit measure. 31 Table of Contents Net Income and Adjusted EBITDA We recorded Net income of $33.4 million and $10.8 million for Fiscal 2021 and Fiscal 2020, respectively.
As a result, gross profit may not be comparable to other entities that include depreciation and amortization related to the sale of their product in their gross profit measure. Net Income (Loss) and Adjusted EBITDA We recorded a Net loss of $12.5 million and Net income of $33.4 million for Fiscal 2022 and Fiscal 2021, respectively.
Other significant estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements. In response to the COVID pandemic, during First Quarter 2020 we tested our Outfitters and Japan eCommerce reporting units for goodwill impairment.
Other significant estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements. During First Quarter 2020, in response to the COVID pandemic, we recorded full impairment of the $3.3 million of goodwill allocated to our Japan eCommerce reporting unit.
For LIBOR loans, commencing July 31, 2021 the borrowing margin is, where the average daily total loans outstanding for the previous quarter are (i) less than $95.0 million, 1.25%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 1.50%, and (iii) greater than or equal to $180.0 million, 1.75%.
For all loans, the borrowing margin is based upon the average daily total loans outstanding for the previous quarter. The applicable borrowing margin for LIBOR loans is (i) less than $95.0 million, 1.25%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 1.50%, and (iii) greater than or equal to $180.0 million, 1.75%.
The ABL Facility is available for working capital and other general corporate liquidity needs. There was no balance outstanding on January 28, 2022 and $25.0 million outstanding on January 29, 2021. The balance of outstanding letters of credit was $23.5 million and $27.1 million on January 28, 2022 and January 29, 2021, respectively.
The ABL Facility is available for working capital and other general corporate liquidity needs. The balance outstanding as of January 27, 2023 was $100.0 million. There was no balance outstanding as of January 28, 2022. The balance of outstanding letters of credit was $10.6 million and $23.5 million as of January 27, 2023 and January 28, 2022, respectively.
Origination costs, including an Original Issue Discount (OID) of 3% and $5.1 million in debt origination fees were paid in connection with entering into the Term Loan Facility. Interest; Fees The Third Amendment to the ABL Facility lowered the interest rates applicable to borrowings under the ABL Facility.
Origination costs, including an Original Issue Discount (OID) of 3% and $5.1 million in debt origination fees were paid in connection with entering into the Term Loan Facility.
Indefinite-lived intangible asset impairment assessments Our indefinite-lived intangible asset is the Lands’ End trade name. We review the trade name for impairment on an annual basis during our fourth fiscal quarter or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We review the trade name for impairment on an annual basis during our fourth fiscal quarter or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The fair value of the trade name indefinite-lived intangible asset is estimated using the relief from royalty valuation method.
Net Income As a result of the above factors, Net income was $33.4 million, or $0.99 per diluted share in Fiscal 2021 compared to $10.8 million, or $0.33 per diluted share in Fiscal 2020.
Net (Loss) Income As a result of the above factors, Net loss was $12.5 million, or diluted loss per share of $0.38 in Fiscal 2022 compared to $33.4 million, or diluted earnings per share of $0.99 in Fiscal 2021.
Description of Material Indebtedness Debt Arrangement s Our $275.0 million revolving ABL Facility includes a $70.0 million sublimit for letters of credit and is available for working capital and other general corporate liquidity needs. There was no balance outstanding on January 28, 2022 and $25.0 million outstanding on January 29, 2021.
Description of Material Indebtedness Debt Arrangement s Our $275.0 million revolving ABL Facility includes a $70.0 million sublimit for letters of credit and is available for working capital and other general corporate liquidity needs.
We use Net revenue to evaluate revenue performance for the U.S. eCommerce, International, Outfitters and Third Party distribution channels. For our Retail distribution channel, we use Company Operated stores Same Store Sales as a key measure to evaluate performance.
We use Net revenue to evaluate revenue performance for the U.S. eCommerce, International, Outfitters and Third Party distribution channels. For our Retail distribution channel, we use Company Operated stores Same Store Sales as a key measure to evaluate performance. A store is included in Same Store Sales calculations when it has been open for at least 14 months.
Effective with the Third Amendment to the ABL Facility, the ABL Facility fees include (i) commitment fees of 0.25% based upon the average daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter and (ii) customary letter of credit fees.
The ABL Facility fees include (i) commitment fees of 0.25% based upon the average daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter and (ii) customary letter of credit fees. Customary agency fees are payable in respect of the Debt Facilities.
Retail Net revenue was $47.8 million in Fiscal 2021, an increase of $19.3 million or 67.9% from $28.5 million in Fiscal 2020. Our U.S. Company Operated Stores experienced an increase of 32.4% in Same Store Sales as compared to the Fourth Quarter 2020. On January 28, 2022, there were 30 U.S. Company Operated stores compared to 31 U.S.
Retail Net revenue was $48.2 million in Fiscal 2022, an increase of $0.4 million or 0.8% from $47.8 million in Fiscal 2021. Our U.S. Company Operated Stores experienced an increase of 1.5% in Same Store Sales as compared to Fiscal 2021. On January 27, 2023, there were 28 U.S. Company Operated stores compared to 30 U.S.
Goodwill impairment charges may be recognized in future periods to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, retail industry or in the equity markets, deterioration in our performance or our future projections, or changes in our plans for the reporting unit.
Goodwill impairment charges may be recognized in future periods to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, retail industry or in the equity markets, deterioration in our performance or our future projections, or changes in our plans for the reporting unit. 37 Table of Contents Indefinite-lived intangible asset impairment assessments Our indefinite-lived intangible asset is the Lands’ End trade name.
This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class.
The relief from royalty method of the income approach was most appropriate for analyzing our indefinite-lived asset. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class.
The fiscal periods in this report are presented as follows, unless the context otherwise requires: Fiscal Year Ended Weeks 2021 January 28, 2022 52 2020 January 29, 2021 52 The following table sets forth, for the periods indicated, selected income statement data: Fiscal 2021 Fiscal 2020 (in thousands) $’s % of Net Revenue $’s % of Net Revenue Net revenue $ 1,636,624 100.0 % $ 1,427,448 100.0 % Cost of sales (excluding depreciation and amortization) 945,164 57.8 % 821,595 57.6 % Gross profit 691,460 42.2 % 605,853 42.4 % Selling and administrative 571,767 34.9 % 518,897 36.4 % Depreciation and amortization 39,166 2.4 % 37,343 2.6 % Other operating expense, net 741 0.0 % 8,471 0.6 % Operating income 79,786 4.9 % 41,142 2.9 % Interest expense 34,445 2.1 % 27,754 1.9 % Other (income) expense, net (628 ) (0.0 )% 796 0.1 % Income before income taxes 45,969 2.8 % 12,592 0.9 % Income tax expense 12,600 0.8 % 1,756 0.1 % Net income $ 33,369 2.0 % $ 10,836 0.8 % Depreciation and amortization are not included in our cost of sales because we are a reseller of inventory and do not believe that including depreciation and amortization is meaningful.
The fiscal periods in this report are presented as follows, unless the context otherwise requires: Fiscal Year Ended Weeks 2022 January 27, 2023 52 2021 January 28, 2022 52 29 Table of Contents The following table sets forth, for the periods indicated, selected income statement data: Fiscal 2022 Fiscal 2021 (in thousands) $’s % of Net Revenue $’s % of Net Revenue Net revenue $ 1,555,429 100.0 % $ 1,636,624 100.0 % Cost of sales (excluding depreciation and amortization) 961,663 61.8 % 945,164 57.7 % Gross profit 593,766 38.2 % 691,460 42.3 % Selling and administrative 527,374 33.9 % 571,767 35.0 % Depreciation and amortization 38,741 2.5 % 39,166 2.4 % Other operating expense, net 2,926 0.2 % 741 0.0 % Operating income 24,725 1.6 % 79,786 4.9 % Interest expense 39,768 2.6 % 34,445 2.1 % Other (income), net (364 ) (0.0 )% (628 ) (0.0 )% (Loss) income before income taxes (14,679 ) (0.9 )% 45,969 2.8 % Income tax (benefit) expense (2,149 ) (0.1 )% 12,600 0.8 % Net (loss) income $ (12,530 ) (0.8 )% $ 33,369 2.0 % Depreciation and amortization are not included in our cost of sales because we are a reseller of inventory and do not believe that including depreciation and amortization is meaningful.
For the inventory marked down to net realizable value, a one percentage point increase in our assumed recovery rates at January 28, 2022, would have had an immaterial impact on our Consolidated Financial Statements.
The excess and obsolete reserve balances were $13.9 million and $15.2 million as of January 27, 2023, and January 28, 2022, respectively. For the inventory marked down to net realizable value, a one percentage point increase in our assumed recovery rates at January 27, 2023, would have had an immaterial impact on our Consolidated Financial Statements.
Our cash and cash equivalents and the ABL Facility serve as sources of liquidity for short-term working capital needs and general corporate purposes. There was no balance outstanding for the revolving ABL Facility on January 28, 2022 other than for letters of credit.
Our cash and cash equivalents and the ABL Facility serve as sources of liquidity for short-term working capital needs and general corporate purposes. The ABL Facility had a balance outstanding of $100.0 million as of January 27, 2023, other than for letters of credit.
Company Operated stores on January 29, 2021. Gross Profit In Fiscal 2021, total Gross profit increased 14.1% to $691.5 million compared with $605.9 million for Fiscal 2020. Gross margin decreased 10 basis points to 42.3% of total Net revenue in Fiscal 2021 from 42.4% of total Net revenue in Fiscal 2020.
Company Operated stores on January 28, 2022. Gross Profit In Fiscal 2022, total Gross profit decreased 14.1% to $593.8 million compared to $691.5 million for Fiscal 2021. Gross margin decreased 410 basis points to 38.2% of total Net revenue in Fiscal 2022 from 42.3% of total Net revenue in Fiscal 2021.
Distribution Channels We identify five separate distribution channels for revenue reporting purposes: • U.S. eCommerce offers products through our eCommerce website. • International offers products primarily to consumers located in Europe and Japan through our eCommerce international websites and third-party affiliates. • Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S. 29 Table of Contents • Third Party sells the same products as U.S. eCommerce direct to consumers through third-party marketplace websites and through domestic wholesale customers . • Retail sells products through Company Operated stores.
See Note 8 , Landsʼ End Japan Closure . • Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S. • Third Party sells the same products as U.S. eCommerce direct to consumers through third-party marketplace websites and through domestic wholesale customers. 28 Table of Contents • Retail sells products through Company Operated stores.
We multiplied the selected royalty rate by the forecasted net revenue stream to calculate the cost savings (relief from royalty payment) associated with the asset.
We multiplied the selected royalty rate by the forecasted net revenue stream to calculate the cost savings (relief from royalty payment) associated with the asset. The cash flows are then discounted to present value using the selected discount rate and compared to the carrying value of the asset.
Fiscal 2021 Fiscal 2020 (in thousands) $’s % of Net Revenue $’s % of Net Revenue Net income $ 33,369 2.0 % $ 10,836 0.8 % Income tax expense 12,600 0.8 % 1,756 0.1 % Other (income) expense, net (628 ) (0.0 )% 796 0.1 % Interest expense 34,445 2.1 % 27,754 1.9 % Operating income 79,786 4.9 % 41,142 2.9 % Depreciation and amortization 39,166 2.4 % 37,343 2.6 % Corporate restructuring — — % 2,941 0.2 % Goodwill and long-lived asset impairment — — % 3,844 0.3 % Other 1,189 0.1 % 383 0.0 % Loss on disposal of property and equipment 741 0.0 % 1,303 0.1 % Adjusted EBITDA $ 120,882 7.4 % $ 86,956 6.1 % In assessing the operational performance of our business, we consider a variety of financial measures.
Fiscal 2022 Fiscal 2021 (in thousands) $’s % of Net Revenue $’s % of Net Revenue Net (loss) income $ (12,530 ) (0.8 )% $ 33,369 2.0 % Income tax (benefit) expense (2,149 ) (0.1 )% 12,600 0.8 % Other (income), net (364 ) (0.0 )% (628 ) (0.0 )% Interest expense 39,768 2.6 % 34,445 2.1 % Operating income 24,725 1.6 % 79,786 4.9 % Depreciation and amortization 38,741 2.5 % 39,166 2.4 % Lands’ End Japan closure 6,133 0.4 % — — % Long-lived asset impairment 468 0.0 % — — % (Gain) loss on disposal of property and equipment (530 ) (0.0 )% 741 0.0 % Other 960 0.1 % 1,189 0.1 % Adjusted EBITDA $ 70,497 4.5 % $ 120,882 7.4 % In assessing the operational performance of our business, we consider a variety of financial measures.
Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak shipping/selling periods and typically decrease during the fourth quarter of the fiscal year as inventory is shipped/sold.
Thus, lower than expected fourth quarter net revenue may have an adverse impact on our annual operating results. Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak selling periods and typically decrease during the fourth quarter of the fiscal year as inventory is sold.
During Fiscal 2021, the COVID pandemic impacted our distribution process, third-party manufacturing partners and logistics partners, including shipping delays due to port congestion, and closure of certain third-party manufacturing facilities and production lines.
Global Supply Chain Challenges Like many industries, we experienced global supply chain challenges that impacted our distribution process, third-party manufacturing partners and logistics partners, including shipping delays due to port congestion and closure of certain third-party manufacturing facilities and production lines.
We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore, the results of our operating segments are aggregated into one external reportable segment.
During Fiscal 2022, our operating segments consisted of: U.S. eCommerce, Europe eCommerce, Japan eCommerce (see Note 8 , Lands’ End Japan Closure ), Outfitters, Third Party and Retail. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore, the results of our operating segments are aggregated into one external reportable segment.
Net revenue is presented by distribution channel in the following table: (in thousands) Fiscal 2021 % of Net Revenue Fiscal 2020 % of Net Revenue U.S. eCommerce $ 1,027,138 62.8% $ 961,911 67.4% International 220,997 13.5% 222,878 15.6% Outfitters 254,191 15.5% 174,260 12.2% Third Party 86,517 5.3% 39,945 2.8% Retail 47,781 2.9% 28,454 2.0% Total Net revenue $ 1,636,624 $ 1,427,448 U.S. eCommerce Net revenue was $1.03 billion in Fiscal 2021, an increase of $65.2 million or 6.8% from Fiscal 2020.
Net revenue is presented by distribution channel in the following table: (in thousands) Fiscal 2022 % of Net Revenue Fiscal 2021 % of Net Revenue U.S. eCommerce $ 955,752 61.4% $ 1,027,138 62.8% International 166,627 10.7% 220,997 13.5% Outfitters 265,898 17.1% 254,191 15.5% Third Party 118,996 7.7% 86,517 5.3% Retail 48,156 3.1% 47,781 2.9% Total Net revenue $ 1,555,429 $ 1,636,624 U.S. eCommerce Net revenue was $955.8 million in Fiscal 2022, a decrease of $71.4 million or 7.0% from $1.03 billion in Fiscal 2021.
The fair value exceeded the carrying value by 68.9 % and 61.2% in Fiscal 2021 and Fiscal 2020, respectively, and as such , no trade name impairment charges were recorded .
In Fiscal 2022 and Fiscal 2021 we performed the annual testing of the indefinite-lived intangible asset, the Lands’ End trade name. The fair value exceeded the carrying value by 13.3% and 68.9% in Fiscal 2022 and Fiscal 2021, respectively, and as such, no trade name impairment charges were recorded.
These global supply chain challenges caused manufacturing, transport and receipt of inbound product delays, and resulted, at times, in lower inventory positions and higher than normal back orders. In addition, due to the global supply chain challenges we experienced increased transportation and distribution costs during the second half of Fiscal 2021.
These global supply chain challenges caused manufacturing, transport and receipt of inbound product delays that began to normalize in the second half of Fiscal 2022. The Company experienced increased transportation costs during the second half of Fiscal 2021 and the first half of Fiscal 2022.
For Base Rate loans, 35 Table of Contents the borrowing margin is, where the average daily total loans outstanding for the previous quarter are (i) less than $95.0 million, 0.50%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 0.75%, and (iii) greater than or equal to $180.0 million, 1.00%.
For base rate loans, the applicable borrowing margin is (i) less than $95.0 million, 0.50%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 0.75%, and (iii) greater than or equal to $180.0 million, 1.00%. The Third Amendment to the ABL Facility replaced the 0.75% LIBOR floor with a 0.00% LIBOR floor.
Cash used in investing activities for both years was primarily used for investments to update our digital information technology infrastructure. For Fiscal 2022, we plan to invest approximately $37.0 million in capital expenditures for strategic investments and infrastructure, primarily in technology and general corporate needs.
For Fiscal 2023, we plan to invest approximately $35.0 million in capital expenditures for strategic investments and infrastructure, primarily in technology and general corporate needs. Cash Flows from Financing Activities Net cash provided by financing activities was $73.5 million during Fiscal 2022 compared to $45.1 million used in financing activities during Fiscal 2021.
Goodwill and Trade Name Impairment Assessments Goodwill and the trade name indefinite-lived intangible asset are tested separately for impairment annually, during the fourth quarter, or are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 38 Table of Contents Frequently our impairment loss calculations contain multiple uncertainties because the calculation requires management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting cash flows under different scenarios.
Goodwill and Trade Name Impairment Assessments Goodwill and the trade name indefinite-lived intangible asset are tested separately for impairment annually, during the fourth quarter, or are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Based upon Fiscal 2021 results, in accordance with the Term Loan Facility, there is no prepayment required. The loan may not be voluntarily prepaid during the first two years of its term, without significant penalties.
The loan could not be voluntarily prepaid during the first two years of its term, without significant penalties.
Interest Expense Interest expense was $34.4 million in Fiscal 2021, compared with $27.8 million in Fiscal 2020. The increase of $6.6 million in Interest expense was driven by higher interest rates associated with the Term Loan Facility. Other (Income) Expense Other income was $0.6 million in Fiscal 2021 compared to Other expense of $0.8 million in Fiscal 2020.
The $5.4 million increase was driven by higher applicable interest rates under the Debt Facilities and higher outstanding balances on the revolving ABL Facility. 32 Table of Contents Other (Income) Expense Other income was $0.4 million in Fiscal 2022 compared to Other income of $0.6 million in Fiscal 2021.
Selling and Administrative Expenses Selling and administrative expenses were $571.8 million, or 35.0% of total Net revenue in Fiscal 2021 compared with $518.9 million, or 36.4% of total Net revenue in Fiscal 2020.
Selling and Administrative Expenses Selling and administrative expenses were $527.4 million, or 33.9% of total Net revenue in Fiscal 2022 compared to $571.8 million, or 35.0% of total Net revenue in Fiscal 2021. The approximately 110 basis points improvement was driven by continued expense controls across the business.
While our product focus has shifted significantly over the years, we have continued to adhere to our founder’s motto as one of our guiding principles: “Take care of the customer, take care of the employee and the rest will take care of itself.” We seek to provide a common customer experience regardless of whether our customers are interacting with us on our company websites, at Company Operated stores or through third-party distribution channels.
While our product focus has shifted significantly over the years, we have continued to adhere to our founder’s motto as one of our guiding principles: “Take care of the customer, take care of the employee and the rest will take care of itself.” We have one external reportable segment and identify our operating segments according to how our business activities are managed and evaluated.
Information concerning our obligations and commitments to make future payments under contracts such as lease agreements and other contingent commitments, as of January 28, 2022, is aggregated in the following table: Payments Due by Period (in thousands) Total 1 Year or less 2-3 Years 3-4 Years After 5 years Operating leases (1) $ 48,063 $ 9,240 $ 13,880 $ 10,843 $ 14,100 Principal payments on long-term debt 257,813 13,750 27,500 216,563 — Interest on long-term debt and ABL Facility fees 102,450 30,566 56,218 15,666 — Purchase obligations (2) 423,956 423,956 — — — Total contractual obligations $ 832,282 $ 477,512 $ 97,598 $ 243,072 $ 14,100 (1) Operating lease obligations consist primarily of future minimum lease commitments related to our operating leases (refer to Note 4, Leases , of the Consolidated Financial Statements for further details).
Contractual Obligations and Off-Balance-Sheet Arrangements We have no material off-balance-sheet arrangements other than the guarantees and contractual obligations that are discussed below. 35 Table of Contents Information concerning our obligations and commitments to make future payments under contracts such as lease agreements and other contingent commitments, as of January 27, 2023, is aggregated in the following table: Payments Due by Period (in thousands) Total 1 Year or less 2-3 Years 3-4 Years After 5 years Operating leases (1) $ 45,301 $ 7,516 $ 13,215 $ 12,720 $ 11,850 Principal payments on long-term debt 344,063 13,750 330,313 — — Interest on Term Loan Facility and ABL Facility fees 86,736 34,907 51,829 — — Purchase obligations (2) 201,874 201,874 — — — Total contractual obligations $ 677,974 $ 258,047 $ 395,357 $ 12,720 $ 11,850 (1) Operating lease obligations consist primarily of future minimum lease commitments related to our operating leases (refer to Note 4, Leases , of the Consolidated Financial Statements for further details).
The decrease in Other expense was attributed to a final payment in Second Quarter 2020 associated with the transitioning of a sourcing office. 34 Table of Contents Income Tax Expense Income tax expense of $12.6 million was recorded for Fiscal 2021 which resulted in an effective tax rate of 27.4%.
Income Tax (Benefit) Expense Income tax benefit of $2.1 million was recorded for Fiscal 2022 which resulted in an effective tax rate of 14.6%. This compared to Income tax expense of $12.6 million in Fiscal 2021 which resulted in an effective tax rate of 27.4%.
Other Operating Expense, Net Other operating expense, net was $0.7 million in Fiscal 2021 compared to $8.5 million in Fiscal 2020. The decrease of $7.8 million was primarily related to the $3.3 million impairment charge of goodwill allocated to our Japan eCommerce reporting unit and $2.9 million of corporate restructuring costs in Fiscal 2020.
Depreciation and Amortization Depreciation and amortization were $38.7 million in Fiscal 2022, a decrease of $0.5 million or 1.3%, compared to $39.2 million in Fiscal 2021. Other Operating Expense, Net Other operating expense, net was $2.9 million in Fiscal 2022 compared to $0.7 million in Fiscal 2021.
Operating Income Operating income was $79.8 million in Fiscal 2021, compared with $41.1 million in Fiscal 2020. The increase of $38.7 million was driven by the increase in Gross profit from the increased revenue partially offset by higher shipping costs attributed to the global supply chain challenges and higher Selling and administrative expenses.
Operating Income Operating income was $24.8 million in Fiscal 2022, compared to $79.8 million in Fiscal 2021. The decrease of $55.0 million was driven by the decrease in Gross profit offset by lower Selling and administrative expenses. Interest Expense Interest expense was $39.8 million in Fiscal 2022, compared to $34.4 million in Fiscal 2021.
Third Party Net revenue was $86.5 million in Fiscal 2021, an increase of $46.6 million or 116.6% from $39.9 million in Fiscal 2020.
Third Party Net revenue was $119.0 million in Fiscal 2022, an increase of $32.5 million or 37.5% from $86.5 million in Fiscal 2021. The increase was driven by growth in the Kohl’s marketplace and existing and new online marketplaces.
In Fiscal 2021, net cash provided by operating activities decreased $21.0 million compared to Fiscal 2020. The increase in net income was offset by changes in working capital. Cash Flows from Investing Activities Net cash used in investing activities was $25.2 million and $30.1 million for Fiscal 2021 and Fiscal 2020, respectively.
In Fiscal 2022, net cash generated by operating activities decreased $106.9 million compared to Fiscal 2021 as a result of the decrease in operating income and an increase in changes in working capital, primarily inventory.
International Net revenue was $221.0 million in Fiscal 2021, a decrease of $1.9 million or 0.8% from $222.9 million in Fiscal 2020. The decrease in International was due to softer demand in the second half of Fiscal 2021 primarily related to the delayed inventory receipts due to global supply chain challenges.
International Net revenue was $166.6 million in Fiscal 2022, a decrease of $54.4 million or 24.6% from $221.0 million in Fiscal 2021.
This compared to Income tax expense of $1.8 million in Fiscal 2020 which resulted in an effective tax rate of 13.9%. The Fiscal 2020 tax rate was lower than Fiscal 2021 due to a $3.1 million benefit as a result of the CARES Act.
The Fiscal 2021 tax rate was higher than Fiscal 2022 due to a pretax loss in Fiscal 2022 compared to a pretax income in Fiscal 2021.
Removed
We have one external reportable segment and identify our operating segments according to how our business activities are managed and evaluated. Our operating segments consist of: U.S. eCommerce, Europe eCommerce, Japan eCommerce, Outfitters, Third Party, and Retail.
Added
Distribution Channels We identify five separate distribution channels for revenue reporting purposes: • U.S. eCommerce offers products through our eCommerce website. • International offers products primarily to consumers located in Europe and Japan through eCommerce international websites and third-party affiliates.
Removed
Impact of the COVID Pandemic COVID surfaced in late 2019 and in March 2020, the World Health Organization declared COVID a pandemic. The onset of the COVID pandemic had a disruptive impact on our business operations and an unfavorable impact on our results of operations during the first half of Fiscal 2020.
Added
Macroeconomic Challenges Macroeconomic issues, such as recent inflationary pressures, have had an impact on our business.
Removed
During the Second Quarter 2020, we began a recovery that continued to build on the momentum experienced before the COVID pandemic. Our strong foundation and ongoing enhancements across our four strategic pillars of product, digital, uni-channel distribution and infrastructure and business processes have supported us during the COVID pandemic and continue to support our financial performance and encouraging customer metrics.
Added
Since apparel purchases are discretionary expenditures that historically have been influenced by domestic and global economic conditions, higher prices of consumer goods due to inflation may result in less discretionary spending for consumers which may negatively impact customer demand and require higher levels of promotion in order to attract and retain customers.
Removed
The ultimate timing and impact of customer demand levels across all distribution channels will depend on the duration and scope of the COVID pandemic, overall economic conditions and consumer preferences. Health and Safety of Employees and Consumers From the beginning of the COVID pandemic, our priority has been the safety of employees and customers.
Added
These macroeconomic challenges have led to increased cost of raw materials, packaging materials, labor, transportation, energy, fuel and other inputs necessary for the production and distribution of our products which have negatively impacted our gross margin.
Removed
On March 16, 2020 , we temporarily closed our Company Operated stores. These stores reopened during Second Quarter 2020. Since the onset of the COVID pandemic, we have taken extra precautions in our offices, distribution centers and Company Operated stores, which have varied from time to time based on the then current guidance from global, federal and state health authorities.
Added
Discussion and Analysis Fiscal 2022 Compared to Fiscal 2021 Net Revenue Total Net revenue was $1.56 billion in Fiscal 2022, a decrease of $81.2 million or 5.0% from $1.64 billion in Fiscal 2021.
Removed
These measures have included retail guidelines, work-from-home policies, social distancing, masking, thermal scanning and partitions in facilities. With the emergence of COVID variants and periodic increases in the number of reported cases affecting different regions, we have been required to keep these measures in place longer than anticipated.
Added
The decrease in U.S. eCommerce was caused by lower consumer demand as a result of 31 Table of Contents delayed receipts of key products caused by the global supply chain challenges in the first half of Fiscal 2022, macroeconomic challenges impacting consumer discretionary spending and industry-wide promotional activity in the second half of Fiscal 2022.
Removed
Supply Chain As with all industries, we experienced global supply chain challenges and we continually monitor our supply chain for manufacturing and transportation delays caused or exacerbated by the COVID pandemic.
Added
The decrease in International was driven by lower demand in Europe resulting from macroeconomic and geopolitical challenges impacting consumer discretionary spending, the closure of the Japan eCommerce distribution channel in the fourth quarter of Fiscal 2022 and foreign currency translation exposure.
Removed
We expect these global supply chain challenges and increases in transportation costs to continue throughout Fiscal 2022. These shipping delays and additional costs may continue to impact our future net sales, gross margin and net earnings depending upon the ultimate timing of delivery and availability of product.
Added
Outfitters Net revenue was $265.9 million in Fiscal 2022, an increase of $11.7 million or 4.6% from $254.2 million in Fiscal 2021. The increase was primarily attributed to stronger demand within our travel-based national accounts and school uniforms households returning to historical purchasing patterns.
Removed
Labor Shortage We have and may continue to experience a U.S. labor shortage affecting our ability to staff and operate our U.S. distribution centers.
Added
The decrease was attributable to incremental transportation costs due to the global supply chain challenges in addition to increased industry-wide promotional activity in the second half of Fiscal 2022.
Removed
Due to the seasonal nature of our business, we rely heavily on flexible part-time employees to staff our distribution centers in support of our peak seasons, including the back-to-school shopping season and fourth fiscal quarter holiday shopping season.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+6 added−255 removed0 unchanged
Biggest changeAs of January 28, 2022, the Company had $10.9 million of cash and cash equivalents denominated in foreign currency, principally in British pound sterling, Euro and Japanese yen. We do not utilize financial instruments for trading purposes or hedging and have not used any derivative financial instruments. We do not consider our foreign earnings to be permanently reinvested.
Biggest changeThe Company does not utilize financial instruments for trading purposes or hedging and have not used any derivative financial instruments to limit foreign currency exchange rate exposures. The Company does not consider our foreign earnings to be permanently reinvested.
The Company is subject to interest rate risk with the Term Loan Facility and the ABL Facility, as both require the Company to pay interest on outstanding borrowings at variable rates.
Interest Rate Risk The Company is subject to interest rate risk with the Term Loan Facility and the ABL Facility, as both require the Company to pay interest on outstanding borrowings at variable rates.
Each one percentage point change in interest rates (above the 1% LIBOR floor) associated with the Term Loan Facility would result in a $2.6 million change in our annual cash interest expenses.
Each one percentage point change in interest rates (above the 1% LIBOR floor) associated with the Term Loan Facility would result in a $2.4 million change in our annual cash interest expenses.
Assuming our ABL Facility was fully drawn to a principal amount equal to $275.0 million, each one percentage point change in interest rates would result in a $2.8 million change in our annual cash interest expense. 42 Table of Contents ITEM 8.
Assuming our ABL Facility was fully drawn to a principal amount equal to $275.0 million, each one percentage point change in interest rates would result in a $2.8 million change in our annual cash interest expense. 40 Table of Contents
Removed
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in currency rates.
Added
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk The Company’s international subsidiaries operate with functional currencies other than the U.S. dollar.
Removed
We have not been materially impacted by fluctuations in foreign currency exchange rates as a significant portion of our business is transacted in United States dollars and is expected to continue to be transacted in United States dollars or United States dollar-based currencies.
Added
Since the Company’s Consolidated Financial Statements are presented in U.S. dollars, the Company must translate all components of these financial statements from the functional currencies into U.S. dollars at exchange rates in effect during or at the end of the reporting period. Net revenue generated from the International distribution channel represented 11% of our total net revenue in Fiscal 2022.
Removed
FI NANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm 44 Consolidated Statements of Operations for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 2020 47 Consolidated Statements of Comprehensive Operations for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 2020 48 Consolidated Balance Sheets at January 28, 2022 and January 29, 2021 49 Consolidated Statements of Cash Flows for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 20 20 50 Consolidated Statements of Changes in Stockholders’ Equity for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 2020 51 Notes to Consolidated Financial Statements 52 43 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Lands’ End, Inc.
Added
The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of net revenues, expenses, assets and liabilities. Assuming a 10% change in foreign currency exchange rates, Fiscal 2022 net revenue would have increased or decreased by approximately $16.7 million.
Removed
Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Lands’ End, Inc. and subsidiaries (the "Company") as of January 28, 2022 and January 29, 2021, the related consolidated statements of operations, comprehensive operations, cash flows, and changes in stockholders’ equity, for each of the three fiscal years in the period ended January 28, 2022, and the related notes (collectively referred to as the “financial statements”).
Added
Translation gains or losses, which are recorded in other comprehensive income or loss, result from translation of the assets and liabilities of our international subsidiaries into U.S. dollars. Foreign currency translation losses, net, for Fiscal 2022 totaled approximately $4.4 million related to our international subsidiaries in United Kingdom, Germany and Japan.
Removed
We also have audited the Company’s internal control over financial reporting as of January 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Added
Additionally, the Company has foreign currency denominated intercompany receivables and payables that when settled result in a transaction gain or loss. A 10% change in foreign currency exchanges rates would not result in a significant transaction gain or loss in earnings.
Removed
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 28, 2022 and January 29, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2022, in conformity with accounting principles generally accepted in the United States of America.
Added
As of January 27, 2023, the Company had $6.4 million of cash and cash equivalents denominated in foreign currency, principally in British pound sterling, Japanese yen and Euro.
Removed
Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
Removed
Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.
Removed
Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
Removed
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Removed
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Removed
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Removed
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Removed
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
Removed
We believe that our audits provide a reasonable basis for our opinions. 44 Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Removed
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Removed
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Removed
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Removed
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Removed
Goodwill & Indefinite-Lived Intangible Asset — Refer to Notes 2 and 8 to the financial statements Critical Audit Matter Description The Company has goodwill and a trade name that are indefinite-lived intangible assets. As of January 28, 2022, the consolidated carrying value of the goodwill is $106.7 million, and is associated with the U.S. eCommerce and Outfitters reporting units.
Removed
The consolidated carrying value of the indefinite lived trade name is $257.0 million. Goodwill and the indefinite-lived trade name intangible asset are tested separately for impairment on an annual basis during the fourth fiscal quarter or more frequently whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Removed
The Company estimates fair value of the reporting units using a discounted cash flow model, commonly referred to as the income approach. The fair value of the trade name indefinite-lived intangible asset is estimated using the relief-from-royalty valuation method.
Removed
The discounted cash flow model uses projections based on management’s best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs, and estimates of future expected changes in operating margins.
Removed
Other significant estimates and assumptions include terminal value growth rates, weighted average cost of capital, and changes in future working capital requirements. The relief from royalty valuation method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class.
Removed
The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a forecasted net revenue stream and discounting the resulting cash flows to determine a present value.
Removed
If actual results fall short of the Company’s estimates and assumptions used in estimating future cash flows and asset fair values, the Company may be exposed to losses that could be material. 45 Table of Contents We identified goodwill and the indefinite-lived intangible asset as a critical audit matter due to the considerable amount of management judgment required to estimate fair value, especially as it relates to the projection of future operating cash flows, including growth rates in revenues, costs, estimates of future expected changes in operating margins and selection of the weighted-average cost of capital and royalty rate.
Removed
Auditing these estimates requires a higher degree of audit effort including the need to engage specialists to assist with our evaluation of the valuation assumptions used .
Removed
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the projected future operating cash flows, and the selection of the weighted-average cost of capital for the U.S. eCommerce and Outfitters reporting units and royalty rate and weighted-average cost of capital for the trade name included the following, among others: • We tested the effectiveness of controls over goodwill and the indefinite-lived intangible asset, including those over the projected future operating cash flows and the selection of the weighted-average cost of capital and royalty rate. • We evaluated the reasonableness of management’s projected future operating cash flows, by comparing to (1) current and historical performance, (2) external market and industry data, and (3) forecasted information included in Company press releases and internal communications to management and the Board of Directors as well as performing a sensitivity analysis to understand those judgments made by management which have the biggest impact on the determination of fair value. • We evaluated the impact of changes in management’s forecasts from the annual measurement date to January 28, 2022. • With the assistance of our fair value specialists, we evaluated management’s judgments as it relates to the selection of the weighted-average cost of capital, terminal growth rate, royalty rate, and selected valuation methodologies, including testing the underlying source information and the mathematical accuracy of the calculations by developing a range of independent estimates and comparing those to the rates selected by management. /s/ Deloitte & Touche LLP Chicago, Illinois March 24, 2022 We have served as the Company’s auditor since 2012. 46 Table of Contents LANDS’ END, INC.
Removed
Consolidated Statements of Operations for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 2020 (in thousands except per share data) 2021 2020 2019 REVENUES Net revenue $ 1,636,624 $ 1,427,448 $ 1,450,201 Cost of sales (excluding depreciation and amortization) 945,164 821,595 828,309 Gross profit 691,460 605,853 621,892 Selling and administrative 571,767 518,897 543,962 Depreciation and amortization 39,166 37,343 31,136 Other operating expense, net 741 8,471 1,357 Total costs and expenses 611,674 564,711 576,455 Operating income 79,786 41,142 45,437 Interest expense 34,445 27,754 25,987 Other (income) expense, net (628 ) 796 (1,912 ) Income before income taxes 45,969 12,592 21,362 Income tax expense 12,600 1,756 2,072 NET INCOME $ 33,369 $ 10,836 $ 19,290 NET INCOME PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS Basic: $ 1.01 $ 0.33 $ 0.60 Diluted: $ 0.99 $ 0.33 $ 0.60 Basic weighted average common shares outstanding 32,929 32,566 32,343 Diluted weighted average common shares outstanding 33,681 32,652 32,345 See accompanying Notes to Consolidated Financial Statements. 47 Table of Contents LANDS’ END, INC.
Removed
Consolidated Statements of Comprehensive Operations for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 2020 (in thousands) 2021 2020 2019 NET INCOME $ 33,369 $ 10,836 $ 19,290 Other comprehensive (loss) income, net of tax Foreign currency translation adjustments (1,421 ) 1,767 195 COMPREHENSIVE INCOME $ 31,948 $ 12,603 $ 19,485 See accompanying Notes to Consolidated Financial Statements. 48 Table of Contents LANDS’ END, INC.
Removed
Consolidated Balance Sheets (in thousands except per share data) January 28, 2022 January 29, 2021 ASSETS Current assets Cash and cash equivalents $ 34,301 $ 33,933 Restricted cash 1,834 1,861 Accounts receivable, net 49,668 37,574 Inventories, net 384,241 382,106 Prepaid expenses and other current assets 36,905 40,356 Total current assets 506,949 495,830 Property and equipment, net 129,791 145,288 Operating lease right-of-use asset 31,492 35,475 Goodwill 106,700 106,700 Intangible asset, net 257,000 257,000 Other assets 4,702 5,215 TOTAL ASSETS $ 1,036,634 $ 1,045,508 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 13,750 $ 13,750 Accounts payable 145,802 134,007 Lease liability - current 5,617 5,183 Other current liabilities 146,263 161,982 Total current liabilities 311,432 314,922 Long-term borrowings on ABL Facility — 25,000 Long-term debt, net 234,474 245,632 Lease liability - long-term 32,731 37,811 Deferred tax liabilities 46,191 47,346 Other liabilities 5,110 5,094 TOTAL LIABILITIES 629,938 675,805 Commitments and contingencies STOCKHOLDERS' EQUITY Common stock, par value $0.01 - authorized: 480,000 shares; issued and outstanding: 32,985 and 32,614, respectively 330 326 Additional paid-in capital 374,413 369,372 Retained earnings 44,595 11,226 Accumulated other comprehensive loss (12,642 ) (11,221 ) TOTAL STOCKHOLDERS' EQUITY 406,696 369,703 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,036,634 $ 1,045,508 See accompanying Notes to Consolidated Financial Statements. 49 Table of Contents LANDS’ END, INC.
Removed
Consolidated Statements of Cash Flows for Fiscal Years Ended January 28, 2022, January 29, 2021 and January 31, 2020 (in thousands) 2021 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 33,369 $ 10,836 $ 19,290 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39,166 37,343 31,136 Amortization of debt issuance costs 3,194 3,110 1,722 Loss (gain) on disposal of property and equipment 741 1,303 (266 ) Stock-based compensation 10,156 9,201 8,690 Deferred income taxes (782 ) (10,770 ) (456 ) Goodwill impairment — 3,300 — Other (661 ) 1,852 1,635 Change in operating assets and liabilities: Accounts receivable, net (13,170 ) 15,012 (13,741 ) Inventories (4,213 ) (4,081 ) (53,819 ) Accounts payable 13,089 (21,208 ) 32,716 Other operating assets 4,080 (376 ) (3,167 ) Other operating liabilities (14,400 ) 46,111 3,549 Net cash provided by operating activities 70,569 91,633 27,289 CASH FLOWS FROM INVESTING ACTIVITIES Sales of property and equipment — — 906 Purchases of property and equipment (25,238 ) (30,149 ) (38,878 ) Net cash used in investing activities (25,238 ) (30,149 ) (37,972 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings under ABL Facility 143,000 235,000 99,550 Payments of borrowings under ABL Facility (168,000 ) (210,000 ) (99,550 ) Proceeds from issuance on long-term debt, net — 266,750 — Principal payments on long-term debt, net (13,750 ) (388,825 ) (105,150 ) Payments for taxes related to net share settlement of equity awards (5,111 ) (483 ) (763 ) Payment of debt issuance costs (1,232 ) (5,517 ) — Net cash used in financing activities (45,093 ) (103,075 ) (105,913 ) Effects of exchange rate changes on cash, cash equivalents and restricted cash 103 (1,912 ) 540 NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 341 (43,503 ) (116,056 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR 35,794 79,297 195,353 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR $ 36,135 $ 35,794 $ 79,297 SUPPLEMENTAL CASH FLOW DATA Unpaid liability to acquire property and equipment $ 2,627 $ 3,245 $ 7,364 Income taxes paid, net of refunds $ 24,868 $ 288 $ 3,069 Interest paid $ 31,421 $ 21,595 $ 23,728 See accompanying Notes to Consolidated Financial Statements. 50 Table of Contents LANDS’ END, INC.
Removed
Consolidated Statements of Changes in Stockholders’ Equity (Accumulated Accumulated Additional Deficit) / Other Total Common Stock Issued Paid-in Retained Comprehensive Stockholders' (in thousands) Shares Amount Capital Earnings Loss Equity Balance at February 1, 2019 32,220 $ 320 $ 352,733 $ (17,159 ) $ (13,183 ) $ 322,711 Net income — — — 19,290 — 19,290 Cumulative translation adjustment, net of tax — — — — 195 195 Change in accounting principle related to lease accounting, net of tax — — — (1,741 ) — (1,741 ) Stock-based compensation expense — — 8,690 — — 8,690 Vesting of restricted shares 210 4 (4 ) — — — Common stock withheld related to net share settlement of equity awards (48 ) — (763 ) — — (763 ) Balance at January 31, 2020 32,382 324 360,656 390 (12,988 ) 348,382 Net income — — — 10,836 — 10,836 Cumulative translation adjustment, net of tax — — — — 1,767 1,767 Stock-based compensation expense — — 9,201 — — 9,201 Vesting of restricted shares 299 2 (2 ) — — — Common stock withheld related to net share settlement of equity awards (67 ) — (483 ) — — (483 ) Balance at January 29, 2021 32,614 326 369,372 11,226 (11,221 ) 369,703 Net income — — — 33,369 — 33,369 Cumulative translation adjustment, net of tax — — — — (1,421 ) (1,421 ) Stock-based compensation expense — — 10,156 — — 10,156 Vesting of restricted shares 567 4 (4 ) — — — Common stock withheld related to net share settlement of equity awards (196 ) — (5,111 ) — — (5,111 ) Balance at January 28, 2022 32,985 $ 330 $ 374,413 $ 44,595 $ (12,642 ) $ 406,696 See accompanying Notes to Consolidated Financial Statements. 51 Table of Contents LANDS’ END, INC.
Removed
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BACKGROUND AND BASIS OF PRESENTATION Description of Business Lands’ End, Inc. (“Lands’ End” or the “Company”) is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. Lands’ End offers products online at www.landsend.com , through Company Operated stores and through third-party distribution channels.
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Terms that are commonly used in the Company’s Notes to the Consolidated Financial Statements are defined as follows: • ABL Facility – Asset-based senior secured credit agreements, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo, N.A. and certain other lenders, as amended to date • Adjusted EBITDA – Net income (loss) appearing on the Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items • ASC – Financial Accounting Standards Board Accounting Standards Codification, which serves as the source for authoritative GAAP, as supplemented by rules and interpretive releases by the SEC which are also sources of authoritative GAAP for SEC registrants • ASU – Financial Accounting Standards Board Accounting Standards Update • CARES Act – The Coronavirus Aid, Relief and Economic Security Act signed into law on March 27, 2020 • Company Operated stores – Lands’ End retail stores in the Retail distribution channel • COVID – Coronavirus disease 2019 (COVID-19) caused by severe respiratory syndrome coronavirus 2 (SARS-CoV-2) • Debt Facilities – Collectively, the Term Loan Facility and ABL Facility • Deferred Awards – Time vesting stock awards • EPS – Earnings per share • ESL – ESL Investments, Inc. and its investment affiliates, including Edward S.
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Lampert • FASB – Financial Accounting Standards Board • First Quarter 2020 – The 13 weeks ended May 1, 2020 • First Quarter 2021 – The 13 weeks ended April 30, 2021 • Fiscal 2021 – The 52 weeks ended January 28, 2022 • Fiscal 2022 – The Company’s next fiscal year representing the 52 weeks ending January 27, 2023 • GAAP – Accounting principles generally accepted in the United States • LIBOR – London inter-bank offered rate • Option Awards – Stock option awards • Performance Awards – Performance-based stock awards 52 Table of Contents • Sears Holdings – Sears Holdings Corporation, a Delaware corporation, and its consolidated subsidiaries • SEC – United States Securities and Exchange Commission • Second Quarter 2020 – The 13 weeks ended July 31, 2020 • Separation – On April 4, 2014 Sears Holdings distributed 100% of the outstanding common stock of Lands’ End to its stockholders • Term Loan Facility – Term loan credit agreement, dated as of September 9, 2020, among the Company, Fortress Credit Corp., as Administrative Agent and Collateral Agent, and the lenders party thereto • Third Quarter 2021 – The 13 weeks ended October 29, 2021 • Transform Holdco – Transform Holdco LLC, an affiliate of ESL, which on February 11, 2019 acquired from Sears Holdings substantially all of the go-forward retail footprint and other assets and component businesses of Sears Holdings as a going concern • UTBs – Gross unrecognized tax benefits Basis of Presentation The Consolidated Financial Statements include the accounts of Lands’ End, Inc. and its subsidiaries.
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All intercompany transactions and balances have been eliminated. The accompanying Consolidated Financial Statements have been prepared in accordance with GAAP. In the opinion of management, all material adjustments are of a normal and recurring nature necessary for a fair presentation of the results have been reflected for the periods presented.
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Dollar amounts are reported in thousands, except per share data, unless otherwise noted. Impact of the COVID Pandemic COVID surfaced in late 2019 and in March 2020, the World Health Organization declared COVID a pandemic.
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The onset of the COVID pandemic had a disruptive impact on the Company’s business operations and an unfavorable impact on the Company’s results of operations during the first half of Fiscal 2020. During the Second Quarter 2020, the Company began a recovery that continued to build on the momentum experienced before the COVID pandemic.
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The Company’s strong foundation and ongoing enhancements across the four strategic pillars of product, digital, uni-channel distribution and infrastructure and business processes have supported the Company during the COVID pandemic and continue to support the Company’s financial performance and encouraging customer metrics.
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The ultimate timing and impact of customer demand levels across all distribution channels will depend on the duration and scope of the COVID pandemic, overall economic conditions and consumer preferences. Health and Safety of Employees and Consumers From the beginning of the COVID pandemic, the Company’s priority has been the safety of employees and customers.
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On March 16, 2020 , the Company temporarily closed its Company Operated stores. These stores reopened during Second Quarter 2020.
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Since the onset of the COVID pandemic, the Company has taken extra precautions in its offices, distribution centers and Company Operated stores, which have varied from time to time based on the then current guidance from global, federal and state health authorities. These measures have included retail guidelines, work-from-home policies, social distancing, masking, thermal scanning and partitions in facilities.
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With the emergence of COVID variants and periodic increases in the number of reported cases affecting different regions, the Company has been required to keep these measures in place longer than anticipated. 53 Table of Contents Supply Chain As with all industries, the Company experienced global supply chain challenges and the Company continually monitors its supply chain for manufacturing and transportation delays caused or exacerbated by the COVID pandemic.
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During Fiscal 2021, the COVID pandemic impacted the Company’s distribution process, third-party manufacturing partners and logistics partners, including shipping delays due to port congestion, and closure of certain third-party manufacturing facilities and production lines.
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These global supply chain challenges caused manufacturing, transport and receipt of inbound product delays, and resulted, at times, in lower inventory positions and higher than normal back orders. In addition, due to the global supply chain challenges the Company experienced increased transportation and distribution costs during the second half of Fiscal 2021.
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The Company expects these global supply chain challenges and increases in transportation costs to continue throughout Fiscal 2022. These shipping delays and additional costs may continue to impact the Company’s future net sales, gross margin and net earnings depending upon the ultimate timing of delivery and availability of product.
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Labor Shortage The Company has and may continue to experience a U.S. labor shortage affecting its ability to staff and operate its U.S. distribution centers.
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Due to the seasonal nature of its business, the Company relies heavily on flexible part-time employees to staff its distribution centers in support of its peak seasons, including the back-to-school shopping season and fourth fiscal quarter holiday shopping season.
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Goodwill and Indefinite-Lived Intangible Asset The Company considered the COVID pandemic to be a triggering event in First Quarter 2020 for the Company’s Outfitters and Japan eCommerce reporting units and therefore completed an interim test for impairment of goodwill for these reporting units as of May 1, 2020.
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This testing resulted in no impairment of the Company’s Outfitters reporting unit and full impairment of the $3.3 million of goodwill allocated to the Company’s Japan eCommerce reporting unit recorded in the First Quarter 2020. There was not a triggering event or impairment charge for any reporting unit in Fiscal 2021 and the remaining fiscal quarters of Fiscal 2020.
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Corporate Restructuring During Second Quarter 2020, t he Company reduced approximately 10% of corporate positions. The Company incurred total severance costs of approximately $2.9 million related to the reduction of corporate positions which was recorded in Other operating expense (income), net in the Consolidated Statements of Operations. NOTE 2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fiscal Year The Company’s fiscal year end is on the Friday preceding the Saturday closest to January 31 each year.
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The fiscal periods in this report are presented as follows, unless the context otherwise requires: Fiscal Year Ended Weeks 2021 January 28, 2022 52 2020 January 29, 2021 52 2019 January 31, 2020 52 54 Table of Contents Seasonality The Company’s operations have historically been seasonal, with a disproportionate amount of net revenue occurring in the fourth fiscal quarter, reflecting increased customer demand during the year-end holiday selling season.
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The impact of seasonality on results of operations is more pronounced since the level of certain fixed costs, such as occupancy and overhead expenses, do not vary with sales.
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The Company’s results of operations also may fluctuate based upon such factors as the timing of certain holiday season dates and promotions, the amount of net revenue contributed by new and existing stores, the timing and level of markdowns, competitive factors, weather and general economic conditions.
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Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak shipping/selling periods and, accordingly, typically decrease during the fourth quarter of the fiscal year as inventory is shipped/sold.
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Cash provided by operating activities is typically higher in the fourth quarter of the fiscal year due to reduced working capital requirements during that period.
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Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportable amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period.
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Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents consist of highly liquid temporary instruments purchased with original maturities of three months or less. It also includes deposits in-transit from banks for payments related to third-party credit card and debit card transactions.
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Restricted cash The Company classifies cash balances pledged as collateral as Restricted cash on the Consolidated Balance Sheets. Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts based on historical loss experience, collection experience, delinquency trends, economic conditions and specific identification.
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The Accounts receivable balance on the Consolidated Balance Sheets is presented net of the Company’s allowance for doubtful accounts and is comprised of various customer-related accounts receivable.
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Changes in the balance of the allowance for doubtful accounts are as follows: (in thousands) Fiscal 2021 Fiscal 2020 Beginning balance $ 680 $ 511 Provision 158 286 Write-offs (213 ) (117 ) Ending balance $ 625 $ 680 55 Table of Contents Inventory Inventories primarily consist of merchandise purchased for resale.
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For financial reporting and tax purposes, the Company’s United States inventory, primarily merchandise held for sale, is stated at last-in, first-out (“LIFO”) cost, which is lower than net realizable value. The Company accounts for its non-United States inventory on the first-in, first-out (“FIFO”) method.
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The United States inventory accounted for using the LIFO method was 86% of total inventory as of January 28, 2022 and 87% as of January 29, 2021.
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If the FIFO method of accounting for inventory had been used, the effect on inventory would have been an increase of $0.8 million and $0.2 million as of January 28, 2022 and January 29, 2021, respectively. The Company maintains a reserve for excess and obsolete inventory. The reserve is calculated based on historical experience related to liquidation/disposal of identified inventory.
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The excess and obsolescence reserve balances were $15.2 million and $22.8 million as of January 28, 2022 and January 29, 2021, respectively.
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The $7.6 million decrease in the excess and obsolescence reserve is primarily due to the Company’s ability to sell through returned embroidered, hemmed or damaged product compared to the prior year when the COVID pandemic limited the Company’s distribution options to sell this merchandise.
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Deferred Catalog Costs and Marketing Costs incurred for direct response marketing consist primarily of catalog production and mailing costs that are generally amortized within two months from the date catalogs are mailed. Unamortized marketing costs reported as prepaid assets were $10.8 million and $10.2 million as of January 28, 2022 and January 29, 2021, respectively.
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The Company expenses the costs of marketing for website, magazine, newspaper, radio and other general media when the marketing takes place. Marketing expenses, including catalog costs amortization, digital-related costs and other print media were $220.0 million, $195.4 million and $194.9 million for Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively.

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