Lands End is slowly dying for reasons not their fault. Sears keeps closing the stores where they are located.
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Lands' End, Inc. operates as a multi-channel retailer in the United States, the United Kingdom, Germany, and Japan. The company operates through two segments, Direct and Retail. It offers casual clothing, accessories, footwear, and home products. The company sells its products online through landsend.com, and affiliated specialty and international Websites; direct mail catalogs; and retail locations primarily at Lands' End Shops at Sears, Lands' End Inlet stores, and international shop-in-shops. As of January 27, 2017, it operated 216 Lands' End Shops at Sears; and 14 Lands' End Inlet stores. Lands' End, Inc. was founded in 1963 and is headquartered in Dodgeville, Wisconsin. Company description from FinViz.com.
Earnings Nov 30th.
Hardly a month goes by without Sears (SHLD) announcing the closure of several dozen additional stores. The Lands End retail base is slowly eroding.
For Q2 they announced a loss of 12 cents and analysts were expecting 9 cents. Revenue of $303.3 million did beat estimates for $292.6 million only because analysts were so negative on the outlook. The company reported a 5.5% increase in direct sales but the retail segment posted a 7.4% decline in revenue. They blamed that decline on the hundreds of stores Sears has closed or announced to be closed in 2017. On the positive side the remaining retail stores produced a 3.8% increase in same store sales.
Unfortunately, the light at the end of the tunnel is a train coming right at them with Sears holding the equivalent of a going out of business sale from now through Black Friday with everything in the store marked down from 10% to 50%. I would not be surprised to see a drastic restructuring of Sears announced after the holidays. With Sears closing dozens of stores per quarter they only have about 450 left and those could be cut in half or worse at year end.
Every bounce in LE is sold and they are only about 20 cents from a record low close.
Sell short LE shares, currently $10.95, initial stop loss $11.95.
Alternate position: Buy Dec $10 put, currently $45 cents, no initial stop loss.
The plan would be to hold the put over the Nov 30 earnings.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps more than $1.00 at the market open.