Editor's Note

Land's End said it was a disruptive quarter with aggressive discounting and promotional activity. This quarter is not likely to get any better.


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LE - Land's End - Company Profile

Land's End operates as a multi-channel retailer. The company operates through two segments, Direct and Retail. It offers casual clothing, accessories, footwear, and home products. The company sells its products through its e-commerce Websites, direct mail catalogs, dedicated LandsÂ’ End Shops at Sears, stand-alone LandsÂ’ End Inlet stores, and international shop-in-shops. As of January 29, 2016, it operated 227 LandsÂ’ End Shops at Sears; and 14 LandsÂ’ End Inlet stores in the United States, as well as 5 United Kingdom based shop-in-shops.

Land's End operated in the world of Amazon and they are getting crushed. They use the term multi-channel because they retail a lot online. Unfortunately, in an Amazon dominated environment they are finding it hard to sell sheets, blankets, towels, shoes and apparel and still make a profit.

In their recent report they lost 18 cents compared to analyst estimates for 2 cents. Revenue of $273.4 million that was below the $299.4 million in the comparison quarter. Retail segment revenue declined -10.4% with same store sales falling -7.1%. Even worse, inventory rose 8.9% to $309.9 million up from $284.6 million. Cash balanced declined -$50 million. Stale inventory is rising, they are burning cash and sales are falling. That is not a recipe for earnings growth.

The retailer was forced to remove Gloria Steinem from their online website and from their catalog after the feminist made some comments on abortion rights. Customers, including numerous religions groups, promised a large scale boycott if Steinem was not removed from all advertising.

The summer months are not likely to be kind to Land's End. They will be forced to further discount products to move them out of inventory in a period where customers are vacationing rather than shopping.

Earnings Sept 1st.

When the market finally rolls over, we could see selling in LE accelerate due to a lack of interest in holding for a Q4 rebound. The historic closing low is $15.81.

Sell short LE shares, currently $15.95, initial stop loss $17.25.