Lands' End posts $3M profit in 2Q

Don Hogsett, August 10, 2001

Dodgeville, WI — Boosting sales in its core apparel and home fashions catalogs, and at the same time cutting costs, direct-mailer Lands' End Inc. posted a $3.0 million second-quarter profit, recovering from a $1.9 million year-ago loss and easily beating Wall Street expectations.

Overall Lands' End sales advanced by 3.7 percent, to $285.8 million from $275.6 million, with merchandise sales increasing by 2.9 percent, to $262.9 million, and shipping and handling revenues jumping up by 14.3 percent to $22.9 million, now accounting for slightly more than 8 percent of total sales.

Breaking sales out by segment, Lands' End reported that sales in core apparel catalogs increased by 6 percent; sales of Kids and Coming Home moved up in the mid-single-digits, while the entire specialty segment inched up just 1 percent; and international sales fell off by 7 percent, mostly due to the effect of the strong dollar against weaker foreign currencies. Internet sales grew by almost a third, rising by 32 percent, to $51 million from $39 million last year.

Boosting the bottom line, in addition to stronger sales, the company reduced its overhead costs by 300 basis points, to 45.5 percent of sales from 48.5 percent the prior year. Measured in absolute dollars, costs were whittled down by 3.5 percent, to $119.7 million from $124.0 million, a cash savings of $4.3 million.

Lower costs, the company said, were "due to a significant reduction in national TV advertising expenses, partially offset by an increase in magazine advertising, bringing our overall advertising spending more in line with recent historical levels. Additionally, stronger customer response resulted in increased productivity per catalog page, resulting in relatively lower catalog costs. These improvements were partially offset by higher bonus and profit-sharing expenses, due to improved profitability."

Looking ahead, the retailer said it expects sales for all of this year will increase in the single-digit range, "and we expect gross profit margin to show continued improvement compared to the prior year. As a result, we expect an increase in diluted earnings per share of at least 20 percent for the year as a whole."

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