Lands' End, Inc. (LE) Earnings

Management highlights

### Post-Joint Venture (JV) Strategic Transformation with WHP Global - The 50/50 JV (WHP holds controlling interest) closed April 1, 2026, after Land’s End contributed its brand intellectual property (IP) for $300 million in gross proceeds. Land’s End received 50% ownership of the JV and the option to exchange its JV stake for WHP Global equity if WHP executes a monetization event (e.g., IPO, sale). - Immediate strategic and financial benefits included full repayment of Land’s End’s term loan, deleveraging the balance sheet, cutting annual interest expense from ~$37 million to ~$4 million, and creating significant financial flexibility. - WHP launched a $45 per share tender offer for ~$100 million of Land’s End common stock, acquiring ~7% of outstanding shares at a premium, signaling WHP’s confidence in the brand. - Under the long-term license structure, Land’s End pays the JV minimum annual royalties of $50 million and receives 50% of all JV profits quarterly; the JV is expected to hold EBITDA margins of at least 85%. WHP’s proven licensing platform is expected to accelerate brand expansion into new categories, geographies, and partners faster than Land’s End could do standalone. - The exchange option for WHP equity gives Land’s End shareholders upside from higher valuation multiples that scaled brand management firms command relative to traditional retail. Illustrative scenarios show the JV stake could be worth $22 to $38 per Land’s End share in a monetization event. ### Operational Highlights - The 1-week backlog from U.S. distribution center upgrades and warehouse management system implementation is fully cleared; operations are back to steady state, with expected efficiency gains, faster delivery, and improved customer experience going forward. - Core product franchises are performing well: Women’s Apparel and Swim delivered positive comps with lower return rates, driven by product and fit improvements; the Totes category is a standout double-digit growth driver, and the number one entry point for younger new-to-brand customers, showcasing Land’s End’s competitive embroidery and personalization strength. - New-to-brand customer acquisition grew low single digits YoY, U.S. digital traffic grew mid-teens, and social followership increased more than 30% YoY, demonstrating success in expanding the customer base to younger cohorts. - Early JV progress: Within 60 days of closing, the JV extended and consolidated three existing major licenses to 2033 with higher guaranteed minimum royalties, agreed in principle to a 7-year footwear partnership extension, and selected a new home textiles partner, delivering over $150 million in long-term guaranteed royalty value. More than a dozen new licenses are in the pipeline.

Guidance

- For Q2 FY2026: Management guides net revenue of $290 million to $310 million, adjusted net income of $2 million to $5 million, adjusted diluted EPS of $0.06 to $0.16, and adjusted EBITDA of $11 million to $14 million, expecting positive revenue comps after resolving Q1 distribution disruption. - For full year FY2026: Management guides net revenue of $1.3 billion to $1.4 billion, adjusted net income of $10 million to $20 million, adjusted diluted EPS of $0.32 to $0.65, adjusted EBITDA of $68 million to $78 million, and $40 million in total capital expenditures. Full year guidance incorporates current higher tariff rates and the new JV royalty structure. - Three-year targets under the new JV structure: mid-single-digit annual revenue growth driven by core DTC and Outfitters businesses; adjusted EBITDA margin expansion to the high single digits, supported by merchandise margin improvements, cost discipline, operating leverage, and growing high-margin JV profit contributions. - The new balance sheet strength and financial flexibility supports deliberate capital allocation: reinvestment for profitable growth, disciplined cost management, and opportunistic share repurchases under the authorized $100 million program (expiring March 31, 2029) when shares trade below intrinsic value.

Segment performance

Total Q1 FY2026 revenue was $239 million, a 9% year-over-year (YoY) decrease, driven by temporary distribution center disruption and deliberate third-party marketplace revenue prioritization of profitability over low-quality sales. 1. U.S. e-commerce: Revenue decreased 10% YoY, entirely due to temporary warehouse management system rollout disruption; the issue is fully resolved, with positive comps expected in Q2. This segment represents the majority of Land’s End total revenue. 2. Land’s End Outfitters (B2B): Revenue decreased 10% YoY, also impacted by distribution center disruption and timing of school promotional activity. Excluding disruption, underlying demand and pipeline are healthy, with positive comps expected after delayed volume shifts to Q2. This segment is a high-growth core business. 3. Third-party marketplaces: Revenue decreased 6% YoY, driven by a deliberate strategic pullback from low-margin promotional volume to prioritize profitability and brand positioning. Performance at Amazon and full-price selling at Nordstrom remained solid. This segment contributes a small single-digit share of total revenue. 4. European e-commerce: Sales grew 15% YoY, with gross margin increasing 70 basis points. Growth was driven by strategic assortment localization, a franchise-first product strategy, and brand-building activations, with no distribution disruption. This segment contributes approximately 10-15% of total revenue.

Risks & headwinds

- Uncertainty around U.S. trade policy and tariff rates creates ongoing margin pressure; management is currently booking product costs at the current higher 15% tariff rate, with uncertain future policy outcomes. - The new JV structure requires alignment between Land’s End and WHP Global on brand positioning, and there is inherent execution risk to expanding licensing into new categories and geographies, even with WHP’s proven track record. - Macroeconomic weakness in markets like the U.K. could pressure regional revenue and performance, offsetting strength in other European markets like Germany. - Actual outcomes from the JV, including royalty growth and the value of the exchange option, depend on WHP’s future performance and the timing/terms of any potential monetization event, which cannot be guaranteed.

Analyst Q&A

• Q: Is the distribution center upgrade fully complete, any hangover into Q2? How is Land’s End managing tariff risk? And how does Land’s End protect brand quality for new JV licenses, when will new licenses launch, and how was WHP’s $45 per share tender price set? /

  A: The distribution center implementation is fully complete, with only a 1-week backlog that has been cleared, no hangover into Q2. Q2 started with positive revenue comps through and after Memorial Day, with a strong swim season underway. For tariffs, Land’s End is booking all inventory at the current 25% higher rate, has consolidated its supply base with flexible manufacturers that can shift production between countries to mitigate changes, and is already receiving cash refunds for previously ruled illegal tariffs. Land’s End maintains brand quality via joint JV governance with Land’s End representation on the JV board, and WHP aligns all new licensing with existing Land’s End brand direction from the company’s in-house design team. Existing license renegotiations are already done, new licenses from the pipeline will start contributing royalties in fall 2026, with most new licenses launching in 2027. The $45 tender price was set by WHP, not Land’s End, and illustrative scenarios for the JV exchange option show potential long-term value above this level.

• Q: Does Land’s End have brand approval rights for new JV licenses to avoid misaligned, dilutive extensions of the brand? And can Land’s End force an early monetization of the JV stake if shares remain undervalued? /

  A: Land’s End has contractual approval rights for major brand direction changes to prevent inappropriate licensing that would dilute the brand, and WHP shares the same vision for growing Land’s End appropriately, so conflict is unlikely. There is no ability to force an early JV monetization; Land’s End remains partnered with WHP for the long term, and will use its $100 million share repurchase authorization to buy back undervalued shares in the interim. The exchange option only activates when WHP executes its own monetization event, at which point Land’s End converts its stake at WHP’s valuation multiple.

• Q: How does expanded consumer personalization/embroidery benefit the business, and does the new financial flexibility open the door to acquisitions? /

  A: Land’s End already operates the largest embroidery infrastructure in the U.S. to support its B2B Outfitters business, so expanding personalization for DTC consumers leverages existing fixed infrastructure for incremental high-margin revenue. Personalization resonates with both long-time tenured customers and new younger customers acquired via social media, adds incremental margin, and drives stronger customer engagement. Yes, the new deleveraged balance sheet gives Land’s End the flexibility to pursue complementary acquisitions if they deliver attractive returns for shareholders, alongside opportunistic share repurchases, opening multiple paths to value creation.

• Q: What benefits will the distribution center upgrade deliver going forward? What is the new long-term baseline for gross margin? /

  A: The new real-time warehouse management system cuts standard delivery time by 20-25% by enabling same-day order fulfillment, improves the customer experience, and enables future opportunities like Amazon Prime badging for broader distribution. The new structural baseline for gross margin post-JV is ~43% (per the recast FY2025 baseline), reflecting the new royalty structure, and management expects to deliver gradual annual improvements to this margin over time.