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What changed in LANDS' END, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of LANDS' END, INC.'s 2023 and 2024 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 2024 report.

+329 added−293 removedSource: 10-K (2024-04-03) vs 10-K (2023-04-10)

Top changes in LANDS' END, INC.'s 2024 10-K

329 paragraphs added · 293 removed · 222 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+19 added−19 removed26 unchanged
Biggest changeOther 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.
Biggest changeAdjusted net income (loss) is also presented on a diluted per share basis • Company Operated stores – Lands’ End retail stores in the Retail distribution channel • Current Term Loan Facility – Term loan credit agreement, dated as of December 29, 2023, among the Company, Blue Torch Capital, as Administrative Agent and Collateral Agent, and the lenders party thereto • Debt Facilities – Collectively, the Current Term Loan Facility and ABL Facility • First Quarter 2024 – The 13 weeks ending May 3, 2024 • Fiscal 2024 – The 52 weeks ending January 31, 2025 • Fiscal 2023 – The 53 weeks ended February 2, 2024 • Fiscal 2022 – The 52 weeks ended January 27, 2023 • Fiscal 2021 – The 52 weeks ended January 28, 2022 • Former 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 • Fourth Quarter 2023 – The 14 weeks ended February 2, 2024 • GAAP – Accounting principles generally accepted in the United States • LIBOR – London inter-bank offered rate • SEC – United States Securities and Exchange Commission • Second Quarter 2023 – The 13 weeks ended July 28, 2023 • Second Quarter 2022 – The 13 weeks ended July 29, 2022 • SOFR – Secured Overnight Funding Rate 2 Table of Contents • Term Loan Adjusted SOFR – SOFR plus adjustments of either (a) 0.11448% for a one-month interest period, (b) 0.26161% for a three-month interest period, or (c) 0.42826% for a six-month interest period • Third Quarter 2023 – The 13 weeks ended October 27, 2023 Lands’ End, Inc. is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms.
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.
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 within various cultures and educational materials in support of building greater awareness and appreciation of our individual stories, experiences and lives.
McLean began his career as a strategy consultant with AT Kearney. Outside of his professional commitments, Mr. McLean has been an active supporter of the New York Fashion Tech Lab, an organization committed to supporting retail innovation among female entrepreneurs. Mr.
McLean began his career as a strategy consultant with AT Kearney. Outside of his professional commitments, Mr. McLean has been an active supporter of the New York Fashion Tech Lab, an organization committed to supporting retail innovation among female entrepreneurs.
McLean received his Bachelor’s degree in Engineering from the University of Manchester, a Master’s degree in Engineering Management from the University of Cambridge and an MBA from Harvard Business School. Mr. McLean brings extensive operational and strategic expertise and over 20 years of retail experience leading 10 Table of Contents organizational growth for several Fortune 500 and start-up companies. Mr.
Mr. 10 Table of Contents McLean received his Bachelor’s degree in Engineering from the University of Manchester, a Master’s degree in Engineering Management from the University of Cambridge and an MBA from Harvard Business School. Mr. McLean brings extensive operational and strategic expertise and over 20 years of retail experience leading organizational growth for several Fortune 500 and start-up companies.
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.
Lands’ End has an open-door philosophy. We regularly seek employee feedback through both formal and informal 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.
We are focused on advancing our technologies, challenging ourselves to think and operate differently, embracing change, testing and learning, and applying our learnings to best serve evolving customer needs. Stakeholder Responsibility. Lands’ End is committed to serving all of our stakeholders – our hard working and dedicated employees, the supportive communities in which we operate, our shareholders, and our customers.
We are focused on advancing our technologies, challenging ourselves to think and operate differently, embracing change, testing and learning, and applying our learning to best serve evolving customer needs. Stakeholder Responsibility. Lands’ End is committed to serving all of our stakeholders – our customers, our shareholders, our hard working and dedicated employees and the supportive communities in which we operate.
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.
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 benchmarks and evolves our benefit offerings to provide more inclusive options.
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.
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 and our common stock was listed on the Nasdaq Stock Market.
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.
Lands’ End has long been an innovator, epitomized as being an early adopter of eCommerce for apparel retail, through our 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.
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 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 2023, 2022 and 2021, ranking No. 2 for 2023 and 2022 and No.1 for 2021 for best customer service in the Online Retailers: Clothing in the Apparel category.
We have a focus on raising awareness and educating associates on reducing our internal use of consumables and natural resources. In addition, we have a broad range of recycling and waste management initiatives at our corporate office and distribution centers.
We have a focus on raising awareness and educating our employees on reducing our internal use of consumables and natural resources. In addition, we have a broad range of recycling and waste management initiatives at our corporate office 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.
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 in the U.S. to support our customer service and distribution centers. Recruitment and Retention Lands’ End leverages a multifaceted recruitment approach to source and hire top talent aligned with our corporate priorities.
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.
Our goal is to drive deep and meaningful engagement with all stakeholders to achieve our collective goals. 4 Table of Contents 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.
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.
During Fiscal 2023, our operating segments consisted of: U.S. eCommerce, Europe eCommerce, Outfitters, Third Party and Retail. During Fiscal 2022, our operating segments also included Japan eCommerce (See Note 8, Lands’ End Japan Closure ).
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.
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 mentorship programs 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.
We extended our paid parental leave in 2022 to be more inclusive and expanded domestic partner benefits. We have also enhanced our recruitment process to support more diverse and inclusive hiring practices.
We extended our paid parental leave in 2022 to be more inclusive and expanded domestic partner benefits. 8 Table of Contents We have also enhanced our recruitment process to support more diverse and inclusive hiring practices.
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.
In Fiscal 2023, we generated Net revenue of approximately $1.47 billion. Net revenue was generated worldwide with operations based in the United States, United Kingdom, and Germany. This network reinforces and supports sales across the distribution channels in which we do business.
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 the U.S. these include the following, among other benefits: • Comprehensive medical, dental, vision, life and disability, accident, and critical illness insurance coverage that is offered to full-time employees, spouses/domestic partners and dependent children • Paid parental leaves provide up to 20 paid days to all new parents for birth or adoption • 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/near-site medical clinics, group exercise classes, health coaching, nutritional counseling, massage therapy, and wellness incentive programs • Services designed to help employees balance work and life, including an Employee Assistance Plan, legal coverage plan, identity theft protection, 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.
Programs cover a variety of topics, including diversity and inclusion, cybersecurity, harassment free workplace, product updates, deployment of new technology and leadership development. Senior management regularly reviews organizational talent assessments to identify employees who possess the potential for advancement and to identify, recommend and address developmental needs.
Programs cover a variety of relevant topics, including diversity and inclusion, cybersecurity, harassment free workplace, product updates, deployment of new technology, interpersonal skills, and leadership development. Senior management 9 Table of Contents regularly reviews organizational talent to identify employees who possess the potential for advancement and to identify, recommend and address developmental needs.
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 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 the Lands’ End Women Group. The groups are open to all employees, including our international employees and allies who want to be supportive and involved.
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.
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, on-boarding, Early in Career networking, mentorship programs, workshops, self-paced learning and leader coaching.
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.
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. 6 Table of Contents Marketing We believe that our most important asset is our brand.
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.
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, long-term (cash and/or equity) incentive awards, sales incentive plans, peak incentives, and discretionary bonuses based on company performance.
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.
We are a vertically integrated digital retailer that manages most aspects of our design, marketing and distribution in-house. In Fiscal 2024, we plan to focus on the following five strategic pillars: Customer Obsessed.
McLean has a proven track record in the areas of global brand delivery and international strategy, marketing and customer experience. Bernard McCracken has been serving as the Interim Chief Financial Officer since January 2023. Mr. McCracken has served as the Vice President, Controller and Chief Accounting Officer of Lands’ End since April, 2014. Mr.
Mr. McLean has a proven track record in the areas of global brand delivery and international strategy, marketing and customer experience. Bernard McCracken was appointed Chief Financial Officer in September 2023 after serving as Interim Chief Financial Officer since January 2023. Mr.
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.
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 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.
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. It is important to us that our partners share the same core values as we do.
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.
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 55 Bernard McCracken Chief Financial Officer 62 Peter L. Gray Chief Commercial Officer, Chief Administrative Officer and General Counsel 56 Angela Rieger Executive Vice President, Chief Transformation Officer 56 Andrew J.
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.
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 full time U.S. employee base having a tenure of 10 years or more.
McCracken previously served as Vice President Corporate Controller/Business Transformation Office, Senior Director of Special Projects and Senior Director of Accounting at The Children’s Place, Inc. Mr. McCracken also served in the roles of Vice President of Finance (divisional CFO), Meldisco Division, and Assistant Controller at Footstar, Inc. from 1998 to 2003. Mr.
McCracken also served in the roles of Vice President of Finance (divisional CFO), Meldisco Division, and Assistant Controller at Footstar, Inc. from 1998 to 2003. Mr.
We continue to take advantage of opportunities to more efficiently source our products worldwide, consistent with our high standards of quality and value. Significant areas of non-product spend include transportation, information systems, marketing, packaging and catalog paper and print. For most of our products, we assume ownership at the port of the vendor’s manufacturing facility.
We continue to take advantage of opportunities to more efficiently source our products worldwide, consistent with our high standards of quality and value. Significant areas of non-product spend include logistics, information systems, marketing, packaging and catalog paper and print. We use third-party shipping companies to transport the product to our facilities.
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.
Therefore, we require that all vendors comply with applicable legal requirements, agree to our global compliance requirements and meet our product quality standards.
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.
Lands’ End was founded in 1963 by Gary Comer and his partners to sell sailboat hardware and equipment by catalog.
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 products are manufactured in approximately 20 countries and the majority are imported from Asia and South America. In Fiscal 2023, our top 10 vendors accounted for approximately 48% of our merchandise purchases in dollars and we worked with approximately 120 vendors that manufactured substantially all of our products. We generally do not enter into long-term merchandise supply contracts.
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.
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 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 but direct to consumers through third-party marketplace websites and through domestic wholesale relationships. • Retail sells products through Company Operated stores.
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.
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. Additionally, we are focused on creating more personal and compelling journeys geared toward our targeted key customer cohorts to drive higher quality sales with more productive inventories.
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.
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. During Fiscal 2023, we entered into licensing agreements for the Costco distribution channel, and all footwear products and all kids categories, excluding school uniforms.
He also serves as Chairman of the Board of Directors of the Tufts University Hillel Foundation. Sarah Rasmusen has served as Chief Innovation Officer of Lands’ End since February 2023.
He also serves as Chairman of the Board of Directors of the Tufts University Hillel Foundation. Angela Rieger has served as Executive Vice President, Chief Transformation Officer since January 2023.
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.
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.
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”.
We are committed to creating an inspiring culture that is welcoming, safe and inclusive for all who work and shop with 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.
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.
We believe our strength in work and life comes from the combination of our unique experiences, backgrounds and talents. 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.
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.
Net revenue is presented by distribution channel in the following table: (in thousands) Fiscal 2023 % of Net Revenue Fiscal 2022 % of Net Revenue Fiscal 2021 % of Net Revenue U.S. eCommerce $ 930,314 63.2% $ 955,752 61.4% $ 1,027,138 62.8% International (1) 112,855 7.7% 166,627 10.7% 220,997 13.5% Outfitters 269,943 18.3% 265,898 17.1% 254,191 15.5% Third Party 111,826 7.6% 118,996 7.7% 86,517 5.3% Retail 47,570 3.2% 48,156 3.1% 47,781 2.9% Total Net revenue $ 1,472,508 $ 1,555,429 $ 1,636,624 (1) Fiscal 2022 and Fiscal 2021 includes Net revenue of $32.7 million and $43.3 million, respectively, from the Japan eCommerce distribution channel.
We own and operate a distribution center in the United Kingdom based in Oakham, a community north of London. Our Oakham facility opened in 1998 and is approximately 185,000 square feet. Information Technology Our information technology systems provide comprehensive support for the design, merchandising, sourcing, marketing, distribution and sales of our Lands’ End products.
We own and operate a distribution center in the United Kingdom based in Oakham, a community north of London. Our Oakham facility is approximately 185,000 square feet. Information Technology Lands’ End employs a variety of third-party and internally-developed systems to enhance our customer experience and support efficient, cost-effective operations.
In addition, Inventory Planning partners with our Global Sourcing team through long range planning efforts designed to better manage supply chain costs. Consistent with our merchandising strategy, we make inventory investments intended to support the growth of key products. In addition, we strive to improve assortment efficiency to increase seasonal sell through.
Consistent with our merchandising strategy, we make inventory investments intended to support the growth of key products. In addition, we strive to improve assortment efficiency to increase seasonal sell through. We continue to leverage technology solutions to assist us in these strategic initiatives.
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.
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 approximately 34.0% of our yearly net revenue in the fourth quarters of Fiscal 2023, Fiscal 2022 and Fiscal 2021.
Net 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.
Long-lived assets by geographical location, which includes Property and equipment, net, are as follows: (in thousands) Fiscal 2023 Fiscal 2022 Fiscal 2021 United States $ 111,254 $ 120,311 $ 121,259 Europe 6,588 7,051 7,879 Asia 191 276 653 Total long-lived assets $ 118,033 $ 127,638 $ 129,791 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.
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.
When making compensation decisions, Lands’ End considers compensation market data primarily focused on apparel retail companies and other related industries.
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.
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.
Product Design and Merchandising We seek to develop new, innovative products for our customers by utilizing modern fabrics and quality construction to create timeless, affordable styles with excellent fit. We also seek to present our products in an engaging and inspiring way.
We expect to begin generating income from these licenses starting in Fiscal 2024. In line with our asset-light strategy, we will continue to explore additional licensing relationships. Product Design and Merchandising We seek to develop new, innovative products that provide solutions for our customers’ needs by utilizing modern fabrics and quality construction to create timeless, affordable styles with excellent fit.
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.
Lands’ End is well-recognized and has a deeply rooted tradition of excellent quality, value and service. Lands’ End is an iconic American brand with a large and loyal customer base. We invest significantly in brand development through our focus on providing excellent customer service, emphasis on digital and innovative product development.
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.
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. 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.
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.
Creative designs for these marketing platforms are developed in-house by our creative team with supplemental work by external agencies on a project basis. Customer Service We are committed to building on Lands’ End’s legacy of strong customer service. We believe we have a strong track record of improving the customer service experience through innovation.
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.
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.
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.
Sourcing and Vendors Our products are produced globally by independent manufacturers who are selected, monitored and coordinated by our sourcing team and external sourcing experts. In Fiscal 2023, the top five countries where our vendors are located accounted for approximately 70% of our merchandise purchases in dollars.
We employ approximately 5,000 employees: approximately 4,400 employees in the United States and approximately 600 employees outside the United States. This workforce consists of approximately 17% salaried employees, 33% hourly employees and 50% part-time employees.
It is what we do as people that makes this a great place to come to work”. We employ approximately 4,900 employees: approximately 4,400 employees in the United States and approximately 500 employees outside the United States. The U.S. workforce consists of approximately 50% part-time 7 Table of Contents employees, 32% hourly employees and 18% salaried employees.
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 offer products online at www.landsend.com , through third-party distribution channels and our own Company Operated stores. We also offer products to businesses and schools, for their employees and students, through the Outfitters distribution channel. We are a classic American lifestyle brand that creates solutions for life’s every journey.
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.
We believe that this commitment to our brand has helped to generate our large and loyal customer base for over sixty years. 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.
We believe we have a strong track record of improving the customer service experience through innovation. Lands’ End is focused on using our extensive customer data to make the shopping experience as effortless and personalized as possible, regardless of whether our customers shop online or in one of our Company Operated stores.
Lands’ End is focused on using our extensive customer data to make the shopping experience as effortless and personalized as possible. Customer service agents are available on the phone, via chat, email and social media, and we maintain a digital self-service platform.
Implementation of new systems is highly dependent on coordination of numerous software, hardware, cloud and system integration providers. See also Item 1A, Risk Factors , in this Annual Report on Form 10-K. Human Capital Management Philosophy and Approach Since our founding in 1963, Lands’ End has recognized that our people are a critical asset.
Human Capital Management Philosophy and Approach Since our founding in 1963, Lands’ End has recognized that our people are a critical asset. People, the individuals we employ, the customers we serve, and their families, are the heart of our company.
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.
Turnover within our workforce is closely monitored to alert management of potential issues aside from our normal and desired turnover. Our three-year average global salaried turnover rate is approximately 12%, and the turnover rate for our U.S. hourly full-time staff is approximately 11%.
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.
The product team also supports efforts to optimize product margin through active management 5 Table of Contents of in-season promotions and post-season clearance activities. In addition, the product teams partner with our global sourcing team through long range planning efforts designed to better manage global supply chain costs.
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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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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 other 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 • Adjusted net income (loss) – Net income (loss) appearing on the Consolidated Statements of Operations excluding significant non-recurring or non-operational items.
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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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See Note 8, Lands’ End Japan Closure . 3 Table of Contents In Fiscal 2023, we fulfilled orders to customers in approximately 135 countries outside the United States, totaling approximately 9% of Net revenue.
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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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Net revenue by the geographical location where the product is shipped is as follows: (in thousands) Fiscal 2023 % of Net Revenue Fiscal 2022 % of Net Revenue Fiscal 2021 % of Net Revenue United States $ 1,342,366 91.2% $ 1,368,518 88.0% $ 1,393,402 85.1% Europe 114,778 7.8% 135,878 8.7% 179,302 11.0% Asia (1) 569 0.0% 33,451 2.2% 44,383 2.7% Other 14,795 1.0% 17,582 1.1% 19,537 1.2% Total Net revenue $ 1,472,508 $ 1,555,429 $ 1,636,624 (1) Fiscal 2022 and Fiscal 2021 includes Net revenue of $32.7 million and $43.3 million, respectively, from the Japan eCommerce distribution channel.
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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.
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See Note 8, Lands’ End Japan Closure .
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From a design and merchandising perspective, we believe that we have experienced success adding relevant items into our product assortment, many of which have become customer favorites. We devote significant time and resources to quality assurance, fit testing and product compliance.
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We strive to operate with lower inventory levels to provide flexibility to refresh our assortment with new styles and fabrics on an ongoing basis. Product to Solve Life’s Issues.
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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.
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We plan to continue our solutions-focused merchandising strategy which drove higher quality sales resulting in enhanced gross margins and improved cash flow in Fiscal 2023 across key items, categories and franchises including swimwear, outerwear, bottoms, and school and business uniforms. 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 continue to leverage technology solutions to assist us in these strategic initiatives. Sourcing and Vendors Our products are produced globally by independent manufacturers who are selected, monitored and coordinated primarily by our Global Sourcing team based in Wisconsin and Hong Kong.
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With over 90% of our business being done online, we seek to leverage data and analytics to drive higher quality sales with improved gross margins and increased gross profit. Digital operations is a core competency and our conversion rate is consistently greater than two times apparel industry norms. Innovation.
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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.
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We compete principally on the basis of providing solutions for our customer’s needs through merchandise value (quality and price), product attributes and innovation, our established customer file and award-winning customer service.
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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.
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We also seek to present our products in an engaging and inspiring way. We devote significant time and resources to quality assurance, fit testing and product compliance. Our product teams seek to determine optimal inventory levels that align with merchandising and marketing plans and initiatives.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur 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.
Biggest changeOur 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 net debt leverage ratio could limit our ability to raise additional financing on satisfactory terms, which increases our vulnerability to an economic downturn or a change in market conditions, limits our flexibility in planning for, or reacting to changes in our business or industry, and decreases our ability to fund 14 Table of Contents working capital, capital expenditures, strategic acquisitions and other general corporate requirements; placing us at a competitive disadvantage compared to our competitors that are less leveraged; • the agreements governing our debt contain certain financial covenants, including a quarterly maximum total leverage ratio test, and a monthly minimum liquidity test (the “financial covenants”); and other covenants which limit our ability to pay dividends or make other restricted payments and investments; 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.
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.
While we have developed a 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.
Our inability to develop products that resonate with our existing customers and attract new customers, our inability to maintain our strict quality standards or to develop, produce and deliver innovative products in a timely manner, or any unfavorable publicity with respect to the foregoing or otherwise could negatively impact the image of our brand with our customers and could result in diminished loyalty to our brand.
Our inability to develop products that resonate with our existing customers and attract new customers, our inability to maintain our strict quality standards or to develop, produce and deliver innovative products in a timely manner, or any unfavorable publicity with respect to the foregoing or otherwise could negatively impact the image of our brand with our customers and could result in diminished appeal of our brand.
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.
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 relationships with third parties increases risk of brand damage.
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).
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.
While we operate compliance and monitoring programs to promote ethical and lawful business practices and verify compliance with safety standards, we do not exercise ultimate control over our independent vendors or their business practices and cannot guarantee their compliance with ethical and lawful business practices and safety standards.
While we operate compliance and monitoring programs to promote ethical and lawful business practices and verify compliance with safety standards, we do not exercise ultimate control over our independent vendors and licensing partners or their business practices and cannot guarantee their compliance with ethical and lawful business practices and safety standards.
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.
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, hostilities in the Middle East, increasing tensions in Southeast Asia, 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 22 Table of Contents • the failure of financial institutions in which we maintain cash deposits, including those where balances may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
An inability to overcome these potential competitive disadvantages or effectively market our products relative to our competitors could have an adverse effect on our business and results of operations. The success of our business depends on our overall marketing strategies for digital marketing and direct mail catalogs and customers’ use of our digital platform, including our eCommerce websites.
An inability to overcome these potential competitive disadvantages or effectively market our products relative to our competitors could have an adverse effect on our business and results of operations. 15 Table of Contents The success of our business depends on our overall marketing strategies for digital marketing and direct mail catalogs and customers’ use of our digital platform, including our eCommerce websites.
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.
Lampert, 21 Table of Contents 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.
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.
Due to the seasonal nature of our business, we rely heavily on flexible 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.
These fluctuations in cost, availability and quality of raw materials used to manufacture our merchandise may result in an increase in our costs to purchase products from our vendors and could have an adverse effect on our cost of goods.
These fluctuations in cost, availability and quality of raw 17 Table of Contents materials used to manufacture our merchandise may result in an increase in our costs to purchase products from our vendors and could have an adverse effect on our cost of goods.
Our reputation and customers’ willingness to purchase our products depend in part on our vendors’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, freedom of association, unlawful inducements, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their business and safety standards of materials.
Our reputation and customers’ willingness to purchase our products depend in part on our independent vendors and licensing partners compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, freedom of association, unlawful inducements, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their business and safety standards of materials.
Any significant compromise or breach of customer, employee or company data security, could significantly damage our reputation and result in additional costs, lost sales, fines and lawsuits. There is no guarantee that the procedures that we or our third-party providers have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches.
Any significant compromise or breach of customer, employee or company data security, could significantly damage our reputation and result in additional costs, lost sales, fines and lawsuits. There can be no assurance that the procedures that we or our third-party providers have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches.
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.
Macroeconomic pressures in the U.S. and the global economy such as rising interest rates, raw material costs and energy prices have created and may continue to create a challenging economic environment.
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.
If adequate funds required through debt issuance are not available on acceptable terms, we may be unable to fund our capital needs required to successfully develop or enhance our products, or respond to competitive pressures, any of which could negatively affect our business.
Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage, be unable to accurately record inventory transactions or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business.
Although some level of inventory shrinkage is unavoidable, if we were to experience higher than expected rates of inventory shrinkage, be unable to accurately record inventory transactions or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business.
Data Protection Act 2018, and a growing number of customer privacy initiatives throughout the world; • changes in United States and non-United States laws affecting the importation and taxation of goods, including duties, tariffs and quotas, enhanced security measures at United States ports, or imposition of new legislation relating to import quotas; • increases in shipping, labor, fuel, travel and other transportation costs; • the imposition of anti-dumping or countervailing duty proceedings resulting in the potential assessment of special anti-dumping or countervailing duties; • transportation delays and interruptions, including those due to the failure of vendors or distributors to comply with import regulations; • political instability, war, such as the current conflict between Russia and Ukraine, and acts of terrorism; and • changes in tariffs in the United States that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions.
Data Protection Act 2018, and a growing number of customer privacy initiatives throughout the world; • changes in United States and non-United States laws affecting the importation and taxation of goods, including duties, tariffs and quotas, enhanced security measures at United States ports, or imposition of new legislation relating to import quotas; • increases in shipping, labor, fuel, travel and other logistics costs; 19 Table of Contents • the imposition of anti-dumping or countervailing duty proceedings resulting in the potential assessment of special anti-dumping or countervailing duties; • transportation delays, including the Red Sea crisis, and interruptions and including those due to the failure of vendors or distributors to comply with import regulations; • political instability, war, such as the current conflict between Russia and Ukraine, hostilities in the Middle East, increasing tension in Southeast Asia, and acts of terrorism; and • changes in tariffs in the United States that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions.
We may need additional financing in the future for our general corporate purposes or growth strategies and anticipate the need to refinance our long-term debt and such financing may not be available on favorable terms, or at all, and may be dilutive to existing stockholders. We may need to seek additional financing for our general corporate purposes or growth strategies.
We may need additional financing in the future for our general corporate purposes or growth strategies and such financing may not be available on favorable terms, or at all, and may be dilutive to existing stockholders. We may need to seek additional financing for our general corporate purposes or growth strategies.
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.
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 and face major, established competitors. We may also experience barriers to entry.
Our competitors may enter into arrangements with suppliers that could impair our ability to sell those suppliers’ products, including by requiring suppliers to enter into exclusive arrangements, which could limit our access to such arrangements or products. Our merchandising sourcing strategies increase the efficiency and responsiveness of our supply chain and include both vendor rationalization and vendor productivity.
Our competitors may enter into arrangements with suppliers that could impair our ability to sell those suppliers’ products, including by requiring suppliers to enter into exclusive arrangements, which could limit our access to such arrangements or products. 18 Table of Contents Our merchandising sourcing strategies are designed to increase the efficiency and responsiveness of our supply chain and include both vendor rationalization, vendor productivity and third-party sourcing assistance.
We have been increasing our investment in digital marketing and optimizing our catalog productivity. Digital marketing costs now exceed direct mail catalog costs and this shift in marketing strategy could have a negative impact if customers that previously relied on the direct mail catalog do not respond as favorably through the digital marketing channel.
Digital marketing costs now exceed direct mail catalog costs and this shift in marketing strategy could have a negative impact if customers that previously relied on the direct mail catalog do not respond as favorably through the digital marketing channel.
Our ability to meet these covenants can be affected by events beyond our control, and we cannot assure that we will meet them. We could incur charges due to impairment of goodwill, other intangible assets and long-lived assets.
Our ability to meet these covenants can be affected by events beyond our control, and we cannot assure that we will meet them. We have incurred and could continue to incur non-cash charges due to impairment of intangible assets and long-lived assets.
If we do not adequately protect against cyber security threats or maintain the security and privacy of customer, employee or company information, we could experience significant business interruption, damage to our reputation, incur substantial additional costs, and become subject to litigation. Our information technology systems are potentially vulnerable to malicious intrusion and targeted or random cyber-attacks.
If we do not adequately protect against cyber security threats, maintain customer privacy, or secure employee and company information, we could experience significant business interruption and become subject to litigation. Our information technology systems are potentially vulnerable to malicious intrusion and targeted or random cyber-attacks.
In addition, if the cost of fuel rises or surcharges increase, the cost to deliver merchandise from distribution centers to customers may rise, and, although some of these costs are paid by our customers, such costs could have an adverse impact on our profitability.
The changing mix of our outbound freight carriers may result in higher costs and customer delays. In addition, if the cost of fuel rises or surcharges increase, the cost to deliver merchandise from distribution centers to customers may rise, and, although some of these costs are paid by our customers, such costs could have an adverse impact on our profitability.
Our business and results of operations could be negatively impacted by natural disasters, extreme weather conditions, public health or political crises or other catastrophic events.
Our business, results of operations and information technology systems could be negatively impacted by natural disasters, extreme weather conditions, public health emergencies, including pandemics, or political crises or other catastrophic events.
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.
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.
Any event that impacts our reputation could result in impairment charges for our trade name. Long-lived assets, primarily property and equipment, are also subject to testing for impairment if events or changes in circumstances indicate that the asset might be impaired. A significant amount of judgment is involved in our impairment assessment.
Long-lived assets, primarily property and equipment, are also subject to testing for impairment if events or changes in circumstances indicate that the asset might be impaired. A significant amount of judgment is involved in our impairment assessment.
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.
The ability to raise additional financing depends on numerous factors, 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, which are impacted by current macroeconomic conditions.
We must maintain sufficient inventory levels to operate our business successfully. Sufficient inventory levels are maintained by our ability to accurately forecast the product needs for each distribution channel, our ability to accurately report our inventory levels and our ability to protect those assets.
Sufficient inventory levels are maintained by our ability to accurately forecast the product needs for each distribution channel, our ability to accurately report our inventory levels and our ability to protect those assets.
In addition, increases in raw material cost has caused us to increase our prices, which may not be acceptable to our customers. If we do not accurately forecast our inventory needs, efficiently manage inventory levels and have proper controls to protect our inventory, our results of operations could be adversely affected.
Increases in raw material cost may cause us to increase our prices, which may not be acceptable to our customers. If we do not accurately forecast our inventory needs, efficiently manage inventory levels and have proper controls to protect our inventory, our results of operations could be adversely affected. We must maintain sufficient inventory levels to operate our business successfully.
We generally carry a significant amount of inventory, especially before the fourth quarter peak selling periods. If we are not successful in selling inventory during these periods, we may have to sell the inventory after the peak selling period at significantly reduced prices, which could adversely affect our business and results of operations.
If we are not successful in selling inventory during these periods, we may have to sell the inventory after the peak selling period at significantly reduced prices, which could adversely affect our business and results of operations.
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.
Dollar. 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.
Any increase in the cost of merchandise purchased from these vendors or restrictions on the merchandise made available by these vendors could have an adverse effect on our business and results of operations. We also sell our products globally.
These products are either imported directly by us or indirectly by distributors who, in turn, sell products to us. Any increase in the cost of merchandise purchased from these vendors or restrictions on the merchandise made available by these vendors could have an adverse effect on our business and results of operations. We also sell our products globally.
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.
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.
Any inability on our part to successfully operate in foreign jurisdictions and rely on our foreign sources of production, due to any of the factors listed above, could have an adverse effect on our business, results of operations and financial condition.
Any inability on our part to successfully operate in foreign jurisdictions and rely on our foreign sources of production, due to any of the factors listed above, could have an adverse effect on our business, results of operations and financial condition. Our efforts to expand our distribution channels and geographic reach may not be successful.
The lenders, under our existing or any future credit facilities, may not be able to meet their commitments if they experience shortages of capital and liquidity. If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants.
The lenders, under our existing or any future credit facilities, may not be able to meet their commitments if they experience shortages of capital and liquidity. With negative changes in market conditions, we may be subject to limitations on our operations due to restrictive covenants in current Debt Facilities.
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.
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: • Inflationary pressures may continue to cause increases in costs of core consumer products, such as gasoline, food and energy, which in turn are likely to reduce household spending on the consumer discretionary products we offer; • 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 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.
The multi-year price of paper may be subject to fluctuation under our contracts for the supply of paper and we are not guaranteed access to, or reasonable prices for, the amounts required for the operation of our business over the long term.
The multi-year price of paper may be subject to fluctuation under our contracts for the supply of paper and we are not guaranteed access to, or reasonable prices for, the amounts required for the operation of our business over the long term. 13 Table of Contents We also depend upon external vendors to print and mail our catalogs.
Any failure by a vendor to provide us with contracted-for services on a timely basis or within service level expectations and performance standards could result in a disruption of our business and have an adverse effect on our business and results of operations.
Any failure by a vendor to provide us with contracted-for services on a timely basis or within service level expectations and performance standards could result in a disruption of our business and have an adverse effect on our business and results of operations. 16 Table of Contents Our Company Operated stores may not be successful, and as a result our business and results of operations could be adversely affected.
We may be unable to obtain any desired additional financing on terms favorable to us, or at all, depending on market and other conditions.
We may be unable to obtain any desired additional financing on terms favorable to us, or at all, depending on macroeconomic or other market conditions which are outside of our control.
In addition, COVID may also heighten other risks described in this section, including but not limited to those related to consumer behavior and expectations, competition, brand reputation, implementation of strategic initiatives, cybersecurity threats, payment-related risks, technology systems disruption, global supply chain disruptions, labor availability and cost, litigation, operational risk as a result of remote work arrangements and regulatory requirements.
The occurrence of any of these events could disrupt our 12 Table of Contents operations and/or technology and therefore negatively impact sales of our products and may also heighten other risks described in this section, including but not limited to those related to consumer behavior and expectations, competition, brand reputation, implementation of strategic initiatives, cybersecurity threats, payment-related risks, technology systems disruption, global supply chain disruptions, labor availability and cost, litigation, operational risk as a result of remote work arrangements and regulatory requirements.
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.
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.
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.
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.
Our Company Operated stores may not be successful, and as a result our business and results of operations could be adversely affected. Our Company Operated stores are dependent on our ability to operate all locations effectively and attract customers with a compelling assortment. Our Company Operated store operations include managing the store and recruiting and hiring store management and associates.
Our Company Operated stores are dependent on our ability to operate all locations effectively and attract customers with a compelling assortment. Our Company Operated store operations include managing the store and recruiting and hiring store management and associates.
Our vendors are located throughout the world including in locations subject to natural disasters or extreme weather conditions, as well as other potential catastrophic events, such as public health emergencies, including COVID, terrorist attacks, political or military conflict. The occurrence of any of these events could disrupt our operations and negatively impact sales of our products.
Our vendors and operations are located throughout the world including locations subject to natural disasters or extreme weather conditions, public health emergencies, including pandemics, or terrorist attacks, political or military conflicts as well as other potential catastrophic events.
Our products and services must satisfy the desires of customers, whose preferences change over time. Sales of branded merchandise account for substantially all our total revenues and the Lands’ End brand is a critical differentiating factor for our business.
Sales of branded merchandise account for substantially all our total revenues and the Lands’ End brand is a critical differentiating factor for our business.
Our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events such as fires, tornadoes and hurricanes, and usage errors by our employees or vendors.
All systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events such as fires, tornadoes and hurricanes, and usage errors by our employees or vendors. Such damage or interruption, if pervasive or prolonged, may have a material adverse impact on our business or results of operation.
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. 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.
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, including delays experienced with the Red Sea crisis, 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 and the United Kingdom.
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.
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.
The apparel industry is dominated by large brands and national/mass retailers, where price competition, promotion, and branded product assortment drive differentiation between competitors. In order to be competitive, we must offer customers compelling products at attractive prices. In recent periods, the use of promotions and markdowns, as appropriate, is a strategy we have employed to offer attractive prices.
Our approach to merchandise promotions and markdowns to encourage consumer purchases could adversely affect our gross margins and results of operations. The apparel industry is dominated by large brands and national/mass retailers, where price competition, promotion, and branded product assortment drive differentiation between competitors. In order to be competitive, we must offer customers compelling products at attractive prices.
The cost to print catalogs may also fluctuate based on several factors beyond our control, including commodity prices for ink and solvents, changes in supply and demand, labor costs, and energy.
The cost to print catalogs may also fluctuate based on several factors beyond our control, including commodity prices for ink and solvents, changes in supply and demand, labor costs, and energy. Also, during Fiscal 2023, there was continued capacity reduction in the market which will continue to pressure pricing as contracts expire.
Heavy reliance on promotions and markdowns to encourage customers to purchase our merchandise could have a negative impact on our gross margins and results of operations.
In recent periods, the use of promotions and markdowns, as appropriate, is a strategy we have employed to offer attractive prices. Heavy reliance on promotions and markdowns to encourage customers to purchase our merchandise could have a negative impact on our gross margins and results of operations.
RISKS RELATED TO INFORMATION TECHNOLOGY, CYBERSECURITY AND DATA PRIVACY If we do not maintain our current information technology systems or fail to effectively implement new information technology systems, we could experience significant disruptions to our operations.
If our expansion efforts are not successful or do not deliver an appropriate return on our investments, our business could be adversely affected. RISKS RELATED TO INFORMATION TECHNOLOGY, CYBERSECURITY AND DATA PRIVACY If we fail to maintain or implement new information technology systems, we could experience significant disruptions to our operations.
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.
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 or long-lived assets, which could have an adverse effect on our results of operations.
The regulatory environment related to information security and privacy is increasingly rigorous with new and rapidly changing requirements applicable to our business. Compliance with the European Union General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), the California Privacy Rights Act (CPRA) and other privacy laws requires and will continue to require significant management and financial resources.
Compliance with the European Union General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), the California Privacy Rights Act 20 Table of Contents (CPRA) and other privacy laws requires and will continue to require significant management and financial resources.
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.
Violation of ethical, labor, safety, or other standards by independent vendors and licensing partners, or the divergence of an independent vendor’s or licensing partner’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.
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.
Paper for catalogs and promotional mailings is an essential resource in the success of our business. 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.
These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations. A change in the application of law, or an interpretation of the law that differs from our own may, if successful, adversely affect our business and results of operations.
These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations.
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.
We rely upon third-party land-based and air freight carriers for merchandise shipments from our distribution centers to customers. Accordingly, we are subject to the risks, including labor disputes, union organizing activity, trucking shortages, inclement weather and increased logistics costs, associated with such carriers’ ability to provide delivery services to meet outbound shipping needs.
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.
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.
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.
As such, we rely on trademark and copyright law, trade secret protection and confidentiality agreements with our associates, consultants, vendors and others to protect our proprietary rights. 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.
The agreements governing our debt contain various covenants that impose restrictions on us that may affect our ability to operate our business. We have significant debt service obligations. Our debt and debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities.
Our debt and debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities.
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.
As of February 2, 2024, our intangible asset consists of our trade name totaling $257.0 million, which is subject to testing for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Any event that impacts our reputation could result in impairment charges for our trade name.
Moreover, consumer tastes and trends may differ in many of these locations from those in our existing locations, and as a result, the sales of our products may not be successful or profitable. If our expansion efforts are not successful or do not deliver an appropriate return on our investments, our business could be adversely affected.
We may seek additional business partners or licensees to assist us in these efforts, however we may not be successful in establishing such relationships. Moreover, consumer tastes and trends may differ in many of these locations from those in our existing locations, and as a result, the sales of our products may not be successful or profitable.
We rely upon sophisticated systems to operate our business including web sites, point of sale, telecommunications, email, design and merchandising, production management, inventory management, warehouse management, and financial and human resources. Some of these systems are based on end-of-life or legacy technology, operate with minimal or no vendor support and are otherwise difficult to maintain.
We employ a variety of third-party and internally-developed systems including web sites, point of sale, telecommunications, email, design and merchandising, production management, inventory management, warehouse management, financial, and human resources systems to maintain our business. Some of these systems are aged and difficult to maintain.
Therefore, we are vulnerable to postal rate increases, changes in discounts for bulk mailings and sorting by zip code and carrier routes which we currently leverage for cost savings. Our approach to merchandise promotions and markdowns to encourage consumer purchases could adversely affect our gross margins and results of operations.
We currently use national mail carriers for distribution of substantially all our catalogs and a fluctuating quantity of our outbound customer deliveries. Therefore, we are vulnerable to postal rate increases, changes in discounts for bulk mailings and sorting by zip code and carrier routes which we currently leverage for cost savings.
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.
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 have an adverse impact on our business.
This could result in lower revenues and decreased customer interest in our product offerings, which, in turn, could adversely affect our business and results of operations. Our arrangements with our vendors are generally not exclusive. As a result, our vendors might be able to sell similar products to our competitors, some of which purchase products in significantly greater volume.
As a result, our vendors might be able to sell similar products to our competitors, some of which purchase products in significantly greater volume.
Any future privacy rules or other regulations could adversely impact our business to the extent we need to limit or change our digital marketing efforts. If we are unable to protect or preserve the image of our brands, our reputation and our intellectual property rights, our business may be adversely affected.
In addition, any future privacy rules or other regulations could adversely impact our business to the extent we need to limit or change our digital marketing efforts. We have been increasing our investment in digital marketing, social media and optimizing our catalog productivity.
We obtain substantially all our inventory from vendors located outside the United States.
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.
We regard our copyrights, service marks, trademarks, trade dress, trade secrets and similar intellectual property as critical to our success. As such, we rely on trademark and copyright law, trade secret protection and confidentiality agreements with our associates, consultants, vendors and others to protect our proprietary rights.
If we are unable to protect or preserve the image of our brands, our reputation and our intellectual property rights, our business may be adversely affected. We regard our copyrights, service marks, trademarks, trade dress, trade secrets and similar intellectual property as critical to our success.
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.
A potential labor shortage may impact our ability to hire and retain qualified personnel and impact our ability to operate our business effectively. Depending on their position, our employees either work 100% on-site or remotely from home or in hybrid work models which allows employees to work both remotely from home and in the office.
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.
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. This could result in lower revenues and decreased customer interest in our product offerings, which, in turn, could adversely affect our business and results of operations. Our arrangements with our vendors are generally not exclusive.
Removed
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.
Added
To manage customer demand, we need to maintain an appropriate, but large amount of inventory, especially increasing it before the fourth quarter peak selling periods.
Removed
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.
Added
In addition, future pricing and supply availability of catalog paper may be impacted in the United States and Europe.
Removed
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.
Added
Our total debt and the underlying debt agreements, which contain terms and conditions which impose restrictions on us, may affect our ability to operate our business, placing us at a competitive disadvantage in our industry.
Removed
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.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−0 removed4 unchanged
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.
Biggest changeWe also lease office space for our global sourcing office located in Kwun Tong, Hong Kong. Lands’ End Retail Properties As of February 2, 2024, our U.S. retail footprint consists of 26 Company Operated stores. The U.S. Company Operated stores are leased and average approximately 7,900 square feet.
Added
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+17 added−1 removed3 unchanged
Biggest changeMINE SAF ETY DISCLOSURES Not applicable. 25 Table of Contents PART II
Biggest changeLands’ End continues its vigorous defense of this case and believes the claims are without merit. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 27 Table of Contents PART II
Removed
For 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.
Added
Lands’ End is the defendant in three separate lawsuits, each of which allege adverse health events and personal property damage as a result of wearing uniforms manufactured by Lands’ End: (1) Gilbert et al. v.
Added
Lands’ End, Inc ., United States District Court for the Western District of Wisconsin, Civil Action No. 3:19-cv-00823-JDP, complaint filed October 3, 2019; (2) Andrews et al. v.
Added
Lands’ End, Inc. , United States District Court for the Western District of Wisconsin, Civil Action No. 3:19-cv-01066-JDP, complaint filed on December 31, 2019, on behalf of 521 named plaintiffs, later amended to include 1,089 named plaintiffs; and (3) Davis et al. v.
Added
Lands’ End, Inc. and Lands’ End Business Outfitters, Inc. , United States District Court for the Western District of Wisconsin, Case No. 3:20-cv-00195, complaint filed on March 4, 2020. Plaintiffs in Gilbert, Andrews, and Davis seek nationwide class certification on behalf of similarly situated Delta employees.
Added
By order dated April 20, 2020, the Court consolidated the Gilbert and Andrews cases (the “Consolidated Wisconsin Action”) and stayed the Davis case. Plaintiffs in the Consolidated Wisconsin Action and Davis each assert that the damages sustained by the members of the proposed class exceed $5,000,000.
Added
Plaintiffs in each case seek damages for personal injuries, pain and suffering, severe emotional distress, financial or economic loss, including 26 Table of Contents medical services and expenses, lost income and other compensable injuries.
Added
Plaintiffs in the Consolidated Wisconsin Action seek class certification with respect to performance of the uniforms and warranty claims and maintain individual claims for personal injury by numerous named plaintiffs. On August 18, 2021, the Court ruled on several pending motions in the Consolidated Wisconsin Action.
Added
The Court denied Plaintiffs’ motion for class certification with respect to performance of the uniforms and warranty claims. The Court denied Plaintiffs’ motion for partial summary judgment regarding crocking claims and granted Lands’ End’s motion for partial summary judgment related to certain warranty claims.
Added
In addition, giving effect to both the addition and voluntary dismissal of individual plaintiffs over the course of the litigation, the number of individual plaintiffs had been reduced from 1,089 to 603 as of August 18, 2021. On September 1, 2021, Plaintiffs filed a Rule 23(f) petition, seeking interlocutory review of the Court’s decision denying class certification.
Added
On September 22, 2021, the U.S. Court of Appeals for the Seventh Circuit denied plaintiffs’ petition. On July 8, 2022, the Court issued an Opinion and Order in the Consolidated Wisconsin Action (the “July 8 Opinion”), ruling in the Company’s favor on several additional pending motions.
Added
The Court granted the Company’s motion to exclude Plaintiffs’ expert opinions because the opinions were not based on reliably applied and scientifically valid methods.
Added
Accordingly, because Plaintiffs failed to submit evidence sufficient to show that the uniforms were defective or that a defect in the uniforms caused Plaintiffs’ alleged health problems, the Court granted the Company’s motion for summary judgement on Plaintiffs’ personal injury claims.
Added
After giving effect to the July 8 Opinion, the remaining claims under the Consolidated Wisconsin Action related to claims for property damage and breach of warranty.
Added
Following these rulings and an order of the court dated December 1, 2022, 277 named Plaintiffs remained in the case who claim they have suffered personal property damage as a result of dye transferring to personal items, with aggregate claims of approximately $110,000 in damages.
Added
The Court set a deadline for the parties to voluntarily resolve these remaining outstanding claims, and on July 19, 2023 the parties reported to the Court that they had reached a settlement in principle of the matter, and subsequently entered into a Confidential Settlement, fully resolving the outstanding property damage claims, which were the only remaining claims in the action.
Added
Following the entry of the Final Order by the Court on October 12, 2023, Plaintiffs filed an appeal to the Seventh Circuit. On November 13, 2023, the Court of Appeals for the Seventh Circuit issued an Order suspending the briefing schedule pending a remand to the district court for the limited purpose of issuing a revised final judgement order.
Added
On February 15, 2024, the Court of Appeals for the Seventh District remanded the case to the District Court for entry of a final judgement. On February 20, 2024, the District Court entered final judgement in favor of Lands’ End. The Court of Appeals for the Seventh Circuit has issued a briefing schedule.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−2 removed2 unchanged
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.
Biggest changeThe graph assumes an initial investment of $100 on February 1, 2019 in each of our common stock, the Nasdaq Composite Index, and the S&P 600 Apparel Retail Index. 2/1/2019 1/31/2020 1/29/2021 1/28/2022 1/27/2023 2/2/2024 Lands’ End, Inc. $ 100 $ 66 $ 155 $ 102 $ 51 $ 52 Nasdaq Composite Index $ 100 $ 126 $ 180 $ 190 $ 160 $ 215 S&P 600 Apparel Retail Index $ 100 $ 78 $ 94 $ 110 $ 104 $ 113 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.
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
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] 29 Table of Contents
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.
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 5,779 stockholders of record as of April 1, 2024.
(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.
(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 which authorization expired on February 2, 2024 (the “2022 Share Repurchase Program”).
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.
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 2023 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 (3) October 28 - November 24 239,273 $ 6.72 239,273 $ 30,180 November 25 - December 29 56,197 $ 6.97 56,197 $ 29,789 December 30 - February 2 12,890 $ 8.40 12,890 $ 29,680 Total 308,360 $ 6.84 308,360 $ 29,680 (1) All shares of common stock were retired following purchase.
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.
The 2024 Share Repurchase Program may be suspended or discontinued at any time. 28 Table of Contents Stock Performance Graph The following graph compares the cumulative total return to stockholders on Lands’ End common stock from February 1, 2019 through February 2, 2024 with the return on the Nasdaq Composite Index and S&P 600 Apparel Retail Index for the same period.
Removed
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.
Added
Amounts in this column represent the dollar value of shares that could have been purchased at such date under the 2022 Share Repurchase Program as of the last day of the listed period.
Removed
For comparison purposes and in accordance with SEC rules, we have included the Nasdaq Retail Smart Index in the performance graph below.
Added
On March 15, 2024, the Company announced that its Board of Directors authorized the Company to repurchase up to $25.0 million of the Company’s common stock through March 31, 2026 (the “2024 Share Repurchase Program”).

Item 7. Management's Discussion & Analysis

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

73 edited+52 added−24 removed34 unchanged
Biggest changeWhile Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and useful to investors, because: • EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax. • Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results.
Biggest changeFederal and State statutory rates. 33 Table of Contents While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and useful to investors because EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax. • Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results and are described below: • Goodwill and long-lived asset impairment – charges associated with the non-cash write down of goodwill and certain long-lived assets in Fiscal 2023 and Fiscal 2022. • Exit costs – charges associated to exit the kids and footwear lines of business including inventory excess and obsolescence reserves, inventory discounts and operational charges recorded in Fiscal 2023 in conjunction with our licensing arrangements commencing in Fiscal 2024. • Corporate restructuring – severance and benefit costs and other related costs associated with reduction in corporate positions in our corporate offices and Hong Kong sourcing office in Fiscal 2023. • Lands’ End Japan closure – net operating income (loss) from liquidation and closing costs recorded in Fiscal 2023 and Fiscal 2022 • Net gain or loss on disposal of property and equipment – disposal of property and equipment in Fiscal 2023 and Fiscal 2022. • Other – amortization of transaction related costs associated with our Third Party distribution channel in Fiscal 2023 and Fiscal 2022.
Events of Default The Debt Facilities include customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross defaults related to certain other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests and material judgments and change of control.
Events of Default The Debt Facilities include customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross defaults related to certain other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control.
Cash generated from our net revenue and profitability, and somewhat to a lesser extent our changes in working capital, are driven by the seasonality of our business, with a significant amount of net revenue and operating cash flows generally occurring in the fourth fiscal quarter of each year.
Cash generated from our net revenue and profitability, and to a lesser extent our changes in working capital, are driven by the seasonality of our business, with a significant amount of net revenue and operating cash flows generally occurring in the fourth fiscal quarter of each year.
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.
Description of Material Indebtedness Debt Arrangement s Our $275.0 million committed 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.
Application of Critical Accounting Policies and Estimates Our Consolidated Financial Statements have been prepared in accordance with GAAP, which requires management to make estimates and judgments that affect amounts reported in the Consolidated Financial Statements and accompanying notes.
Application of Critical Accounting Estimates Our Consolidated Financial Statements have been prepared in accordance with GAAP, which requires management to make estimates and judgments that affect amounts reported in the Consolidated Financial Statements and accompanying notes.
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.
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 margin and Selling and administrative expenses in evaluating the performance of our business.
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 Note 11, 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. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This document contains forward-looking statements.
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
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. 44 Table of Contents
We expect that our cash on hand and cash flows from operations, along with borrowings on the ABL Facility, will be adequate to meet our capital requirements and operational needs for at least the next 12 months.
We expect that our cash on hand and cash flows from operations, along with revolving on the ABL Facility, will be adequate to meet our capital requirements and operational needs for at least the next 12 months.
We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our sales return allowance. However, if the actual rate of sales returns increases significantly, our operating results could be adversely affected.
We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our sales return allowance. 43 Table of Contents However, if the actual rate of sales returns increases significantly, our operating results could be adversely affected.
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.
Thus, lower than expected fourth quarter net revenue may have an adverse impact on our annual operating results. 31 Table of Contents 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, and typically decrease during the fourth quarter of the fiscal year as inventory is sold.
If actual results fall short of our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material. Goodwill impairment assessments We test goodwill for impairment using a one-step quantitative test. The quantitative test compares the reporting unit’s fair value to its carrying value.
If actual results fall short of our estimates and assumptions used in estimating future cash flows and asset fair values, we may incur future impairment charges that could be material. Goodwill impairment assessments We test goodwill for impairment using a one-step quantitative test. The quantitative test compares the reporting unit’s fair value to its carrying value.
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.
We review the trade name for impairment on an annual basis during the fourth fiscal quarter, or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The fair value of the trade name indefinite-lived intangible asset is estimated using the relief from royalty method.
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.
See “Cautionary Statement 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 February 2, 2024 as compared to the year ended January 27, 2023.
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.
Adjusted EBITDA As a result of the above factors, Adjusted EBITDA was $84.3 million in Fiscal 2023, compared to $70.5 million in Fiscal 2022. 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.
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.
Goodwill and Trade Name Impairment Analysis Goodwill and the trade name indefinite-lived intangible asset are tested separately for impairment annually or are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The interest rates per annum applicable to the loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to, at the borrower’s election, either (1) an adjusted LIBOR (with a minimum rate of 1.00%) plus 9.75% or (2) an alternative base rate (which is the greater of (i) the prime rate published in the Wall Street Journal, (ii) the federal funds rate, which shall be no lower than 0.00% plus ½ of 1.00%, or (iii) the one month LIBOR rate plus 1.00% per annum) plus 8.75%.
Prior to the First Amendment to the Former Term Loan Facility, the interest rate per annum applicable to the loans under the Former Term Loan Facility was based on a fluctuating rate of interest measured by reference to, at the borrower’s election, either (1) a LIBOR rate (with a minimum rate of 1.00%) plus 9.75% or (2) an alternative base rate (which was the greater of (i) the prime rate published in the Wall Street Journal, (ii) the federal funds rate, which was to be no lower than 0.00% plus ½ of 1.00%, or (iii) the one month LIBOR rate plus 1.00% per annum) plus 8.75%.
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.
For Fiscal 2024, we plan to invest approximately $30.0 million in capital expenditures for strategic investments and infrastructure, primarily in technology and general corporate needs. Cash Flows from Financing Activities Net cash used in financing activities was $110.1 million during Fiscal 2023 compared to net cash provided by financing activities of $73.5 million during Fiscal 2022.
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.
For a discussion and analysis of the year ended January 27, 2023 compared to January 28, 2022, 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 27, 2023, filed with the SEC on April 10, 2023.
Cash Flows from Investing Activities Net cash used in investing activities was $29.8 million and $25.2 million during Fiscal 2022 and Fiscal 2021, respectively. Cash used in investing activities for both years was primarily used for investments to update our digital information technology infrastructure.
Cash Flows from Investing Activities Net cash used in investing activities was $34.9 million and $29.8 million during Fiscal 2023 and Fiscal 2022, respectively. Cash used in investing activities for both years was primarily used for investments to update our digital information technology infrastructure.
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.
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 February 2, 2024, we were in compliance with our financial covenants in the Debt Facilities.
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.
The Current Term Loan Facility contains financial covenants, including a quarterly maximum total leverage ratio test and a monthly minimum liquidity test. 39 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 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.
The excess and obsolete reserve balances were $18.1 41 Table of Contents million and $13.9 million as of February 2, 2024, and January 27, 2023, respectively. For the inventory marked down to net realizable value, a one percentage point increase in our assumed recovery rates at February 2, 2024, would have had an immaterial impact on our Consolidated Financial Statements.
The Term Loan Facility is secured by a first priority security interest in certain property and assets of the borrowers and guarantors, including certain fixed assets such as real estate, stock of the subsidiaries and intellectual property, in each case, subject to certain exceptions.
The Current Term Loan Facility is secured by a second priority security interest in the same collateral, with certain exceptions. The Current Term Loan Facility is secured by a first priority security interest in certain property, including certain fixed assets such as real estate, stock of subsidiaries and intellectual property, in each case, subject to certain exceptions.
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.
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 approximately 34.0% of our yearly net revenue in the fourth quarters of Fiscal 2023 and Fiscal 2022.
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.
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.
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.
The United States inventory accounted for using the LIFO method as of percentage of the total inventory was 93% at February 2, 2024 and 92% at January 27, 2023. We continually make assessments as to whether the carrying cost of inventory exceeds its market value and, if so, by what dollar amount.
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.
These global supply chain challenges caused manufacturing, transport and receipt of inbound product delays that increased our logistics costs during the first half of Fiscal 2022. These global supply chain challenges began to normalize in the second half of Fiscal 2022 and throughout Fiscal 2023.
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.
Net (Loss) Income As a result of the above factors, Net loss was $130.7 million, or diluted loss per share of $4.09 in Fiscal 2023 compared to $12.5 million, or diluted loss per share of $0.38 in Fiscal 2022.
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.
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, (ii) customary letter of credit fees and (iii) customary annual agent fees.
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 relief from royalty 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.
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.
Retail Net revenue was $47.6 million in Fiscal 2023, a decrease of $0.6 million or 1.2% from $48.2 million in Fiscal 2022. Our U.S. Company Operated Stores experienced an increase of 3.1% in Same Store Sales as compared to Fiscal 2022. On February 2, 2024, there were 26 U.S. Company Operated stores compared to 28 U.S.
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.
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 no balance outstanding as of February 2, 2024, other than letters of credit.
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.
Company Operated stores on January 27, 2023. Gross Profit In Fiscal 2023, total Gross profit increased 5.3% to $625.5 million compared to $593.8 million for Fiscal 2022. Gross margin increased 430 basis points to 42.5% of total Net revenue in Fiscal 2023 from 38.2% of total Net revenue in Fiscal 2022.
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.
For base rate loans, the 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% (“Applicable Borrowing Margin”).
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.
Discussion and Analysis Fiscal 2023 Compared to Fiscal 2022 Net Revenue Total Net revenue was $1.47 billion in Fiscal 2023, a decrease of $82.9 million or 5.3% from $1.56 billion in Fiscal 2022.
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.
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 Same Store Sales as a key measure in 34 Table of Contents evaluating performance. A Company Operated store is included in U.S.
Interest; Fees The Third Amendment to the ABL Facility, effective July 31, 2021, lowered the applicable margin interest rates applicable to the referenced rate, selected at the borrower’s election, either (1) adjusted LIBOR or (2) a base rate which is the greater of (a) the federal funds rate plus 0.50%, (b) the one-month LIBOR rate plus 1.00%, or (c) the Wells 33 Table of Contents Fargo “prime rate”.
Prior to the Fourth Amendment to the ABL Facility, the interest rate, selected at the borrower’s election, was either (1) LIBOR (plus the Applicable Borrowing Margin), or (2) a base rate (plus the Applicable Borrowing Margin) which was the greater of (a) the federal funds rate plus 0.50%, (b) the one-month LIBOR rate plus 1.00%, or (c) the Wells Fargo “prime rate”.
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.
The fiscal periods in this report are presented as follows, unless the context otherwise requires: Fiscal Year Ended Weeks 2023 February 2, 2024 53 2022 January 27, 2023 52 The following table sets forth, for the periods indicated, selected income statement data: Fiscal 2023 Fiscal 2022 (in thousands) $’s % of Net Revenue $’s % of Net Revenue Net revenue $ 1,472,508 100.0 % $ 1,555,429 100.0 % Cost of sales (excluding depreciation and amortization) 846,981 57.5 % 961,663 61.8 % Gross profit 625,527 42.5 % 593,766 38.2 % Selling and administrative 550,211 37.4 % 527,374 33.9 % Depreciation and amortization 38,465 2.6 % 38,741 2.5 % Goodwill impairment 106,700 7.2 % — 0.0 % Other operating expense, net 7,666 0.5 % 2,926 0.2 % Operating (loss) income (77,515 ) (5.3 )% 24,725 1.6 % Interest expense 48,291 3.3 % 39,768 2.6 % Loss on extinguishment of debt 6,666 0.5 % — 0.0 % Other income, net (655 ) (0.0 )% (364 ) (0.0 )% Loss before income taxes (131,817 ) (9.0 )% (14,679 ) (0.9 )% Income tax benefit (1,133 ) (0.1 )% (2,149 ) (0.1 )% Net loss $ (130,684 ) (8.9 )% $ (12,530 ) (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.
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 borrowing margin for ABL Adjusted SOFR 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%.
For sales transacted at stores, revenue is recognized when the customer receives and pays for the merchandise at the register. We record an allowance for estimated returns based on our historical return patterns and various other assumptions that management believes to be reasonable.
Revenue Recognition We record an allowance for estimated returns based on our historical return patterns and various other assumptions that management believes to be reasonable.
Macroeconomic Challenges Macroeconomic issues, such as recent inflationary pressures, have had an impact on our business.
Macroeconomic Challenges Macroeconomic issues, such as high interest rates and inflationary pressures have continued to have an impact on our business.
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.
The $8.5 million increase was driven by higher applicable interest rates under the Debt Facilities and Former Term Loan Facility and outstanding balances on the revolving ABL Facility. Loss on Extinguishment of Debt Loss on extinguishment of debt was $6.7 million in Fiscal 2023, compared to none in Fiscal 2022.
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.
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 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. 30 Table of Contents • Third Party sells the same products as U.S. eCommerce but direct to consumers through third-party marketplace websites and through domestic wholesale relationships. • Retail sells products through Company Operated stores.
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.
Net revenue is presented by distribution channel in the following table: (in thousands) Fiscal 2023 % of Net Revenue Fiscal 2022 % of Net Revenue U.S. eCommerce $ 930,314 63.2% $ 955,752 61.4% International 112,855 7.7% 166,627 10.7% Outfitters 269,943 18.3% 265,898 17.1% Third Party 111,826 7.6% 118,996 7.7% Retail 47,570 3.2% 48,156 3.1% Total Net revenue $ 1,472,508 $ 1,555,429 U.S. eCommerce Net revenue was $930.3 million in Fiscal 2023, a decrease of $25.5 million or 2.7% from $955.8 million in Fiscal 2022.
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).
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. 40 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 February 2, 2024, 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) $ 34,951 $ 7,682 $ 11,043 $ 9,674 $ 6,552 Principal payments on long-term debt 260,000 13,000 26,000 221,000 — Interest on Term Loan Facility and ABL Facility fees 154,378 34,893 64,383 55,102 — Purchase obligations (2) 152,280 152,280 — — — Total contractual obligations $ 601,609 $ 207,855 $ 101,426 $ 285,776 $ 6,552 (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).
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 (Income) Expense Other income was $0.7 million in Fiscal 2023 compared to $0.4 million in Fiscal 2022. 36 Table of Contents Income Tax (Benefit) Expense Income tax benefit of $1.1 million was recorded for Fiscal 2023 which resulted in an effective tax rate of 0.9%.
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.
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.
Online sales and sales generated through our in-store web portal are considered revenue in our U.S. eCommerce and International distribution channels and are excluded from Same Store Sales.
Same Store Sales calculations when it has been open for at least 14 months. Online sales and sales generated through our in-store web portal are considered revenue in our U.S. eCommerce and are excluded from U.S. Same Store Sales.
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.
We multiply the selected royalty rate by the forecasted net revenue stream to calculate the cost savings (relief from royalty payment) associated with the asset.
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.
There was no balance outstanding as of February 2, 2024. The balance outstanding as of January 27, 2023 was $100.0 million. The balance of outstanding letters of credit was $9.1 million and $10.6 million as of February 2, 2024 and January 27, 2023, respectively.
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.
The following table sets forth, for the periods indicated, selected income statement data, both in dollars and as a percentage of Net revenue and a reconciliation of Net loss to Adjusted EBITDA: (in thousands) Fiscal 2023 Fiscal 2022 Net loss $ (130,684 ) (8.9 )% $ (12,530 ) (0.8 )% Income tax benefit (1,133 ) (0.1 )% (2,149 ) (0.1 )% Interest expense 48,291 3.3 % 39,768 2.6 % Loss on extinguishment of debt 6,666 0.5 % — — Other income, net (655 ) (0.0 )% (364 ) (0.0 )% Operating (loss) income (77,515 ) (5.3 )% 24,725 1.6 % Depreciation and amortization 38,465 2.6 % 38,741 2.5 % Goodwill and long-lived asset impairment 106,700 7.2 % 468 0.0 % Exit costs 9,279 0.6 % — — Corporate restructuring 7,305 0.5 % — — Landsʼ End Japan closure (215 ) (0.0 )% 6,133 0.4 % Loss (gain) on disposal of property and equipment 93 0.0 % (530 ) (0.0 )% Other 189 0.0 % 960 0.1 % Adjusted EBITDA $ 84,301 5.7 % $ 70,497 4.5 % In assessing the operational performance of our business, we consider a variety of financial measures.
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.
Executive Overview Description of the Company Lands’ End, Inc. is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms. We offer products online at www.landsend.com , through third-party distribution channels and our own Company Operated stores. We also offer products to businesses and schools, for their employees and students, through the Outfitters distribution channel.
As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.
Adjusted net income (loss) and Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as these measures may exclude a number of important cash and non-cash recurring items. Adjusted net income (loss) is defined as net income (loss) excluding significant non-recurring or non-operational items as set forth below.
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 are a classic American lifestyle brand that creates solutions for life’s every journey. Lands’ End was founded in 1963 by Gary Comer and his partners to sell sailboat hardware and equipment by catalog.
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.
Additionally, interest expense could be negatively affected by any rate increases due to the variable interest rates associated with our Debt Facilities. These macroeconomic challenges have led to increased cost of raw materials, packaging materials, labor, energy, fuel and other inputs necessary for the production and distribution of our products.
The amount available to borrow is the lesser of the $275.0 million facility limit and the Borrowing Base which is calculated from Eligible Inventory, Trade Receivables and Credit Card Receivables, all terms as defined in the ABL Facility. The balance outstanding as of January 27, 2023 was $100.0 million. There was no balance outstanding as of January 28, 2022.
The amount available to borrow is the lesser of (1) the Aggregate Commitments of $275.0 million (“ABL Facility Limit”) or (2) the Borrowing Base or Loan Cap which is calculated from Eligible Inventory, Trade Receivables and Credit Card Receivables, all foregoing capitalized terms not defined herein are as defined in the ABL Facility.
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.
As a result, our gross margins may not be comparable to other entities that include depreciation and amortization related to the sale of their product in their gross margin measure.
It is subject to mandatory prepayments in an amount equal to a percentage of the borrower’s excess cash flows in each fiscal year, ranging from 0% to 75% depending on our total leverage ratio, and with the proceeds of certain asset sales, casualty events and extraordinary receipts.
Depending upon the Company’s Total Leverage Ratio, as defined in the Current Term Loan Facility, mandatory prepayments in an amount equal to a percentage of the Company’s excess cash flows in each fiscal year, ranging from 0% to 75% are required.
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.
There was no balance outstanding as of February 2, 2024. The balance outstanding as of January 27, 2023 was $100.0 million. The balance of outstanding letters of credit was $9.1 million and $10.6 million as of February 2, 2024 and January 27, 2023, 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.
Origination costs, including a 3% original issue discount of $7.8 million and debt origination fees of $2.9 million, were incurred in connection with entering into the Current Term Loan Facility. As a result of the Former Term Loan Facility repayment before the scheduled maturity date, the transaction was subject to a 1% prepayment premium of $2.3 million.
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.
The fair value of the trade name indefinite-lived intangible asset was estimated using the relief from royalty method and the testing resulted in no impairment to the Lands’ End trade name. In Fiscal 2023 and Fiscal 2022 we performed the annual testing of the indefinite-lived intangible asset, the Lands’ End trade name.
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.
Other significant estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements.
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 methods we use to calculate our non-GAAP financial measures may differ significantly from methods other companies use to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.
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.
Should actual results be different than our estimates, we could be exposed to gains or losses from differences that may be material. Inventory Valuation Our inventories consist of merchandise purchased for resale and are recorded at the lower of cost or net realizable value.
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.
The basis point improvement in Gross margin was predominantly driven by leveraging the strength in product solutions and newness across the channels, reduction in clearance inventory and improvements in supply chain costs for Fiscal 2023 compared to prior year. 35 Table of Contents Selling and Administrative Expenses Selling and administrative expenses were $550.2 million, or 37.4% of total Net revenue in Fiscal 2023 compared to $527.4 million, or 33.9% of total Net revenue in Fiscal 2022.
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.
Third Party Net revenue was $111.8 million in Fiscal 2023, a decrease of $7.2 million or 6.0% from $119.0 million in Fiscal 2022. The decrease was primarily driven by a decline in demand with one wholesale partner partially offset by growth in online sales through other existing marketplaces.
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.
Definitions, Reconciliations and Uses of Non-GAAP Financial Measures In addition to our Net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, we report the following non-GAAP measures: Adjusted net income (loss) and Adjusted EBITDA. Adjusted net income (loss) is also expressed on a diluted per share basis.
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.
Outfitters Net revenue was $269.9 million in Fiscal 2023, an increase of $4.0 million or 1.5% from $265.9 million in Fiscal 2022.
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.
Cash Flows from Operating Activities Operating activities generated net cash of $130.6 million and used net cash of $36.4 million in Fiscal 2023 and Fiscal 2022, respectively. In Fiscal 2023, net cash generated by operating activities increased $167.0 million compared to Fiscal 2022 primarily due to the year-over-year improvement in inventory flow and productivity.
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.
See Note 2, Summary of Significant Accounting Policies and Note 10, Goodwill and Indefinite-Lived Intangible Asset . Other Operating Expense, Net Other operating expense, net was $7.7 million in Fiscal 2023 compared to $2.9 million in Fiscal 2022.
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.
(2) Purchase obligations primarily represent open purchase orders for inventory. Financial Instruments with Off-Balance-Sheet Risk The $275.0 million committed revolving ABL Facility includes a $70.0 million sublimit for letters of credit and has a maturity date of July 29, 2026. The ABL Facility is available for working capital and other general corporate liquidity needs.
The $2.2 million increase was primarily attributed to $3.0 million of recorded Lands’ End Japan one-time closing costs offset by the change in net gain/loss from disposal of property and equipment and non-cash write down of certain long-lived assets in Fiscal 2022 compared to Fiscal 2021.
The $4.8 million increase was primarily attributed to $7.3 million of corporate restructuring costs, primarily severance and benefit costs, related to reduction in corporate positions in our corporate offices and Hong Kong sourcing office, compared to $3.0 million of Lands’ End Japan closing costs recorded in Fiscal 2022.
Removed
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.
Added
During Fiscal 2023, our operating segments consisted of: U.S. eCommerce, Europe eCommerce, Outfitters, Third Party and Retail. Our operating segments included Japan eCommerce during Fiscal 2022. See Note 8, Lands’ End Japan Closure .
Removed
We 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.
Added
Corporate Restructuring We reduced approximately 10% of positions in the corporate offices and the Hong Kong sourcing office during Fiscal 2023.
Removed
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.
Added
We incurred $7.3 million of total corporate restructuring costs, which includes $6.2 million of employee severance and benefit costs and $1.1 million of other related costs, which was recorded in Other operating expense, net in the Consolidated Statements of Operations.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed3 unchanged
Biggest changeAs 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.
Biggest changeAs of February 2, 2024, the Company had $6.7 million of cash and cash equivalents denominated in foreign currency, principally in British pound sterling, Hong Kong dollar, euro and Japanese yen.
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.
Interest Rate Risk The Company is subject to interest rate risk with the Current Term Loan Facility and the ABL Facility, as both require the Company to pay interest on outstanding borrowings at variable rates.
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
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. 45 Table of Contents
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.
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 8% of our total net revenue in Fiscal 2023.
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.
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 gains, net, for Fiscal 2023 totaled approximately $1.0 million related to our international subsidiaries in United Kingdom, Germany and Japan.
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.
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 2023 net revenue would have increased or decreased by approximately $11.3 million.
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.
Each one percentage point change in interest rates (above the 2% SOFR floor) associated with the Current Term Loan Facility would result in a $2.5 million change in our annual cash interest expenses.

Other LE 10-K year-over-year comparisons