Skip to main content

Lands' End Inc(LE-Q)
NASDAQ

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

Why Lands' End Stock Tumbled on Thursday

Motley Fool - Thu Dec 1, 2022

What happened

Shares of Lands' End(NASDAQ: LE) were down 26% as of 10:53 a.m. ET on Thursday after delivering disappointing earnings results for the fiscal third quarter.

Revenue was lower than analysts expected, which also led to a loss on the bottom line, as higher transportation costs and supply problems continue to pressure the business. Uncertainty over consumer spending has been a headache for retailers all year. Year to date, Lands' End stock has fallen 56%, and the situation may get worse before it gets better.

So what

Lands' End reported revenue of $249 million, down 4.6% year over year. The bright spot was a 60% year-over-year increase in third-party revenue, representing strong growth from Kohl's and other online marketplaces that sell Lands' End.

While management believes they have enough inventory to satisfy demand during the holidays, they don't expect inventory to normalize until the spring or summer of next year. Elevated inventory has pressured the company's free cash flow this year, with gross profit falling 11% over the year-ago quarter. This problem may continue to weigh on the company's profitability in the new year.

Now what

Investors certainly didn't like the revised outlook. Management now expects full-year revenue to be between $1.54 billion to $1.56 billion, down from the previous guidance of $1.6 billion to $1.64 billion. Most concerning was the downward revision to earnings, which is now expected to come in at a loss instead of a profit.

The inflation and supply chain headwinds are continuing to take their toll on the consumer, as reflected by earnings results across the industry. Investors should be cautious before pulling the trigger right now. There are good values in the retail industry, but some stocks could hit new lows before the business outlook improves.

The safest course is to focus on apparel companies that are holding profits up in this environment, as they will be in the best position to deliver satisfactory returns over the long term.

10 stocks we like better than Lands' End
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Lands' End wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of December 1, 2022

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.

More from The Globe