Lands' End returns to its classic roots — and sees positive results

Lands’ End has come home, and it looks like a good place to be.

After years in the increasingly desolate Sears wilderness and a short but painful spell of imagining itself to be a high-fashion brand, the Dodgeville-based retailer of classic chinos, cable-knit sweaters and toasty squall jackets is seeing positive results from an updated back-to-the-basics approach.

Sales have improved, customers are returning and the last of the leases on Lands’ End departments in Sears stores — an ill-fated marriage that some believe tarnished the Dodgeville firm’s brand — will expire by the end of January.

“I do think there are signs that they’re fixing some of the key problems,” said Hart Posen, a business professor at the University of Wisconsin-Madison who has long kept an eye on Lands’ End.

While it’s too soon to call Lands’ End a turnaround story, the company now is in “the most positive situation since the Sears spinoff for sure,” Posen said.

Purchased by Sears in 2002 and spun off in 2014, Lands’ End saw revenue sag during the last few years of Sears’ ownership. Seeking to steer a new course, the board brought in as CEO Federica Marchionni, a glamorous New Yorker who promptly set out to make Lands’ End more fashion-forward.

It didn’t work. Sales kept falling, and Marchionni didn’t win friends in Dodgeville by deciding to remain in New York rather than move to Wisconsin.

She lasted little more than a year and a half. Her successors quickly scrapped her signature initiative, a line of glossier, slimmer-fitting clothing that sold so poorly that millions in inventory was written off the Lands’ End books.

Under CEO Jerome Griffith, who took over in March 2017, sales have trended upward even as more than 160 of the Lands’ End shops inside Sears stores closed. Revenue is down through the first three quarters of 2019, but those nine months account for most of the Sears shop closings during Griffith’s tenure.

Lands’ End did not respond to requests to speak with Griffith. But he has talked in detail about the company at recent investor conferences.

Speaking last June at the Jefferies 2019 Consumer Conference, Griffith described Lands’ End as “kind of in disarray” when he and Chief Operating Officer James Gooch joined the firm, according to a transcript of Griffith’s presentation.

He said the customer database was shrinking and that the “previous management” was selling expensive, high-fashion merchandise — not what the firm’s customers wanted.

“One of the first things we did was change designers because I wanted a head designer that really loved who our customer was,” Griffith said.

The company stepped up use of its vast trove of data — a little over 90% of its sales are made online — and eliminated slow-moving products from its offerings.

“When I started we were selling 4,000 to 4,200 items at any given time,” Griffith said at a September conference sponsored by investment bank C.L. King. “We’ve honed that to about 2,400 while continuing to increase our business.”

Another initiative — the decision in early 2018 to sell Lands’ End clothing through online behemoth Amazon — came only after internal debate.

The worry was that existing customers would simply migrate to Amazon and buy Lands’ End products there, but it turned out that 52% of the Amazon customers were new to the Dodgeville retailer, Griffith said at the conference in September.

Another 26% were lapsed Lands’ End shoppers who hadn’t bought anything for at least 13 months, he said.

“On top of that,” Griffith said, “what we found was our customers on Amazon pay full price, so we’re getting better margins for it.”

Meanwhile, Lands’ End is expanding its small fleet of standalone stores.

As of Nov. 1, the firm had 22 company-operated stores in the U.S., up from 14 in early 2017.

Lands’ End plans to add another 10 to 15 stores in 2020 and expects to have about 70 by the end of 2022, Griffith said in September at the C.L. King conference.

That’s a good move, said Paula Rosenblum, co-founder and managing partner at retail consultant RSR Research. Even though Lands’ End’s legacy is as a catalog and online merchant, “more and more retailers are finding out that stores are a very profitable channel,” Rosenblum said by email.

Posen agreed. Much of the retail clothing industry has realized in the last couple of years that online and brick-and-mortar complement each other.

“As much as anything else it is a story about brand familiarity for customers,” he said.

But while Lands’ End has made progress, and its slumping stock price is up by 50% since it released its third-quarter financial results in early December, Rosenblum said the company so far has faced soft comparisons.

“The key question is, how will it do in 2020 and 2021,” she said. “That remains to be seen.”

But Posen, who like Rosenblum was interviewed before Lands’ End issued its latest quarterly report, sees cause for optimism.

“Numbers wise, things are starting to reflect sort of the rebirth of this as a meaningful brand,” he said.