Long-only investment, evaluating companies from an operational, buy-and-hold perspective.Quipus Capital does not focus on market-driven dynamics and future price action. Instead, our articles focus on operational aspects, understanding the long-term earnings power of companies, the competitive dynamics of the industries where they participate, and buying companies that we would like to hold independently of how the price moves in the future. Most QC calls will be holds, and that is by design. Only a very sm ...

Group 1 - The core focus of Quad 7 Capital is to provide investment opportunities through their BAD BEAT Investing platform, emphasizing both long and short trades [1] - The team consists of 7 analysts with diverse expertise in business, policy, economics, mathematics, game theory, and sciences, aiming to educate investors on proficient trading [1] - Since May 2020, the company has maintained an average position of 95% long and 5% short, showcasing a strategic approach to market conditions [1] Group 2 - BAD BEAT Investing offers various benefits, including weekly well-researched trade ideas, access to multiple chat rooms, and daily summaries of key analyst upgrades and downgrades [2] - The platform also provides education on basic options trading and extensive trading tools to enhance investor knowledge and skills [2]

Financial Performance - For the 13 weeks ended May 2, 2025, net revenue was $261.2 million, a decrease of 8.5% from $285.5 million for the same period in 2024[96]. - Gross profit for the first quarter of 2025 was $132.7 million, representing a gross margin of 50.8%, compared to 48.7% in the first quarter of 2024[96]. - The net loss for the first quarter of 2025 was $8.3 million, or 3.2% of net revenue, compared to a net loss of $6.4 million, or 2.3% of net revenue, in the first quarter of 2024[96]. - Adjusted net loss for the first quarter of 2025 was $5.4 million, with an adjusted diluted loss per share of $0.18, compared to an adjusted net loss of $6.2 million and an adjusted diluted loss per share of $0.20 in the first quarter of 2024[102]. - Net revenue for Q1 2025 was $261.2 million, a decrease of $24.3 million or 8.5% from $285.5 million in Q1 2024[108]. - Gross profit for Q1 2025 was $132.7 million, a decrease of $6.3 million or 4.5% from $139.0 million in Q1 2024, while gross margin improved to 50.8%[114]. - Selling and administrative expenses decreased by $3.9 million to $123.5 million, representing 47.3% of total net revenue in Q1 2025[115]. - Adjusted EBITDA for Q1 2025 was $9.5 million, down from $11.6 million in Q1 2024[124]. - Net loss for Q1 2025 was $8.3 million, with a diluted loss per share of $0.27, compared to a net loss of $6.4 million and diluted loss per share of $0.20 in Q1 2024[122]. Restructuring and Operational Changes - The company incurred restructuring charges of $3.3 million in the first quarter of 2025, compared to $0.3 million in the first quarter of 2024[91]. - The company reduced approximately 6% of corporate office positions to align with evolving business needs and invest in key growth areas[89]. - Approximately $2.4 million of restructuring costs incurred as of May 2, 2025, remain unpaid and are included in accrued expenses[92]. Revenue by Distribution Channel - U.S. eCommerce net revenue increased slightly by $0.2 million or 0.1% to $170.7 million in Q1 2025, driven by strong outerwear sales[109]. - Europe eCommerce net revenue decreased by $7.1 million or 28.4% to $17.9 million in Q1 2025, attributed to a strategic relaunch as a premium brand[112]. - The company operates through multiple distribution channels, including U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing, and Retail[90]. - The company’s net revenue from the Europe eCommerce distribution channel represented approximately 7% of total net revenue during Year-to-Date 2025[153]. Cash Flow and Financing Activities - Net cash used in operating activities was $22.5 million during First Quarter 2025, a decrease from $25.8 million in First Quarter 2024, attributed to changes in working capital[143]. - Net cash used in investing activities was $8.3 million in First Quarter 2025, compared to $6.7 million in First Quarter 2024, primarily for investments in digital information technology infrastructure[144]. - Net cash provided by financing activities was $32.4 million in First Quarter 2025, down from $35.0 million in First Quarter 2024, mainly due to increased share repurchases[145]. - As of May 2, 2025, the company had $40.0 million outstanding on the ABL Facility, unchanged from the previous year, with outstanding letters of credit totaling $11.0 million[147]. - The ABL Facility had a balance outstanding of $40.0 million as of May 2, 2025, with borrowing availability of $86.8 million[129]. Economic and Market Conditions - Macroeconomic challenges, including inflation and high interest rates, continue to impact consumer discretionary spending and may require higher promotional efforts[88]. - Seasonal fluctuations resulted in approximately 34% of net revenue generated in the fourth quarters of both Fiscal 2024 and Fiscal 2023[94]. - A 10% change in foreign currency exchange rates would have resulted in a potential $1.8 million increase or decrease in net revenue for Year-to-Date 2025[153]. - Each one percentage point change in interest rates associated with the Term Loan Facility would result in a $2.4 million change in annual cash interest expenses[155]. - The Term Loan Facility has a fluctuating interest rate based on the Total Leverage Ratio, with margins ranging from 7.75% to 8.25% depending on the leverage ratio[134]. - As of May 2, 2025, the company was in compliance with its financial covenants in the Debt Facilities[141].

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $261 million, a decrease of 9% year-over-year, and a 4% decrease when excluding the impact of transitioning kids and footwear inventory to licensees [19][20] - Adjusted EBITDA was $10 million, aligning with guidance, while gross profit decreased by 5% year-over-year [20][23] - The company reported a net loss of $8.3 million or $0.27 per share, with an adjusted net loss of $5.4 million or $0.18 per share, both within guidance [23] Business Line Data and Key Metrics Changes - The asset-light B2C licensing business saw revenues increase over 60% year-over-year, indicating strong growth in this segment [12][22] - The U.S. e-commerce business experienced flat sales and gross profit compared to Q1 2024, driven by strong outerwear performance but a slow start to swim assortments [21] - Sales from the Lands' End Outfitters increased by 1% year-over-year, while the Business Uniform channel saw slight growth and the School Uniform channel experienced a slight decline [21] Market Data and Key Metrics Changes - European e-commerce sales decreased by 28% year-over-year as new leadership repositioned the brand as more premium [22] - The third-party marketplace business saw gross profit dollars decrease by 11% year-over-year, primarily due to challenges in one marketplace, although overall marketplaces improved in April [21][22] Company Strategy and Development Direction - The company is focusing on building its brand through customer-centric strategies, including innovative marketing campaigns and a diverse sourcing network to mitigate tariff impacts [6][9] - The strategic exploration of alternatives, including potential sale or merger, is ongoing to maximize shareholder value [27] - The company aims to enhance its presence in international markets, particularly Europe, by leveraging local trends and customer preferences [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating tariff impacts through strategic sourcing and operational adjustments [30][31] - The company anticipates continued growth in the licensing business and sees significant opportunities in the European market [22][39] - Management highlighted the importance of customer experience and personalization in driving brand loyalty and new customer acquisition [10][11] Other Important Information - The company repurchased $3 million worth of shares under its $25 million share repurchase authorization, with $11 million remaining [24][25] - The guidance for the full year remains unchanged, with expected net revenue between $1.33 billion and $1.45 billion [25] Q&A Session Summary Question: Upcoming quarter guidance and tariff impacts - Management provided annual guidance based on current tariff rates, emphasizing mitigation efforts against tariff impacts [30][31] Question: Delta agreement and marketplace performance - The Delta agreement is a continuation of a previous contract, and management expressed optimism about marketplace growth, particularly in Nordstrom and Amazon [33][35] Question: Licensing strategy and new categories - Licensing is expected to add incremental revenue through new categories, with strong performance in kids' products and a focus on expanding into new markets [58][62] Question: Back to school and school uniforms - The company anticipates strong performance in the back-to-school season, driven by new customer growth from competitors exiting the market [70][71] Question: Swim product performance and weather impact - Management noted that improved swim product performance is due to product enhancements rather than just weather conditions [72][74]

Financial Performance - Net revenue for the first quarter was $261.2 million, a decrease of $24.3 million or 8.5% year-over-year[3] - U.S. Digital Segment Net revenue was $227.7 million, a decrease of $1.0 million or 0.4% from the previous year[3] - Europe eCommerce Net revenue decreased by $7.1 million or 28.4% to $17.9 million, with a focus on relaunching as a premium brand[6] - Licensing revenue decreased by $16.2 million or 50.9% to $15.6 million, but licensing revenue from existing partners grew over 60%[6] - Net revenue for the 13 weeks ended May 2, 2025, was $261.2 million, a decrease of 8.5% compared to $285.5 million for the same period in 2024[20] Profitability Metrics - Gross profit decreased by $6.3 million or 4.5% to $132.7 million, while gross margin improved by approximately 210 basis points to 50.8%[6] - Gross profit for the same period was $132.7 million, down from $139.0 million, resulting in a gross margin of 50.7%[20] - Adjusted EBITDA for the first quarter was $9.5 million, down from $11.6 million in the same quarter last year[6] - Adjusted EBITDA for the 13 weeks ended May 2, 2025, was $9.5 million, representing 3.6% of net revenue, compared to $11.6 million or 4.1% in the prior year[30] Net Loss and Adjusted Loss - Net loss was $8.3 million, or $0.27 loss per diluted share, compared to a net loss of $6.4 million or $0.20 loss per diluted share in the prior year[6] - The company reported a net loss of $8.3 million for the 13 weeks ended May 2, 2025, compared to a net loss of $6.4 million in the prior year[20] - Adjusted net loss for the same period was $5.4 million, with an adjusted diluted loss per share of $0.18[27] - Net loss for the 13 weeks ended May 2, 2025, was $8,262,000, compared to a net loss of $6,442,000 for the same period in 2024, representing an increase in loss of approximately 28.3%[34] Cash Flow and Assets - Net cash used in operating activities was $22,463,000, a decrease from $25,815,000 in the prior year, indicating improved cash flow management[34] - Cash provided by financing activities totaled $32,420,000, slightly down from $34,959,000 in the previous year, reflecting ongoing financing efforts[34] - The company reported a net increase in cash, cash equivalents, and restricted cash of $1,505,000, compared to an increase of $2,549,000 in the prior year[34] - Total current assets decreased to $365.1 million from $405.0 million year-over-year[18] - Total liabilities decreased to $530.4 million from $565.5 million year-over-year[18] Strategic Initiatives - A strategic alternatives process is ongoing to explore options including a sale or merger to maximize shareholder value[8] - The company plans to focus on corporate restructuring, which incurred costs of $3.3 million in the latest quarter[28] - The company expects full-year net revenue to be between $1.33 billion and $1.45 billion, with adjusted EBITDA projected in the range of $95.0 million to $107.0 million[11] - The company provided fiscal 2025 guidance for adjusted EBITDA of $95 million, down from $107 million in the previous guidance[32] Inventory and Receivables - Accounts receivable increased significantly to $12,283,000 from $553,000, indicating a potential rise in sales or credit terms[34] - Inventories decreased to $4,114,000 from $12,762,000, suggesting improved inventory turnover or reduced production[34] Financing and Liabilities - Proceeds from borrowings under the ABL Facility were $60,000,000, up from $49,000,000, indicating increased reliance on financing[34] - Interest paid decreased to $8,670,000 from $10,983,000, reflecting lower borrowing costs or reduced debt levels[34] - The company had an unpaid liability to acquire property and equipment of $1,691,000, up from $1,480,000, indicating ongoing capital expenditure commitments[34] - Operating lease right-of-use assets obtained in exchange for lease liabilities amounted to $95,000, showing continued investment in operational infrastructure[34]

Core Insights - Lands' End, Inc. reported solid first quarter performance with growth in Gross Merchandise Value (GMV) and Gross margin, reflecting the effectiveness of its customer-centric strategy [3][4] - The company experienced a decrease in net revenue and net loss compared to the previous year, but improved gross margin by approximately 210 basis points [11][12] Financial Performance - Gross Merchandise Value (GMV) increased by low-single digits, but was modestly lower year-over-year when accounting for a $12.7 million impact from transitioning kids and footwear inventory to licensees [4] - Net revenue for the first quarter was $261.2 million, down 8.5% from $285.5 million in the same quarter of fiscal 2024, with a 4.2% decrease when excluding the inventory transition impact [4] - Gross profit decreased to $132.7 million, a 4.5% decline from $139.0 million in the first quarter of 2024, while gross margin improved to 50.8% [11] - The net loss was $8.3 million, or $0.27 loss per diluted share, compared to a net loss of $6.4 million, or $0.20 loss per diluted share in the prior year [11] Segment Performance - U.S. Digital Segment net revenue was $227.7 million, a slight decrease of 0.4% from the previous year, while U.S. eCommerce net revenue increased by 0.1% to $170.7 million [4] - Europe eCommerce net revenue fell by 28.4% to $17.9 million, attributed to a relaunch strategy and macroeconomic challenges [4] - Licensing and Retail net revenue decreased by 50.9% to $15.6 million, primarily due to inventory transitions, although licensing revenue grew over 60% [4] Balance Sheet and Cash Flow - Cash and cash equivalents were $18.1 million as of May 2, 2025, down from $27.4 million a year earlier, while inventories decreased by 9% to $262.4 million [5] - Net cash used in operating activities improved to $22.5 million from $25.8 million year-over-year, driven by changes in working capital [6] Strategic Initiatives - The company is exploring strategic alternatives, including potential sale or merger, to maximize shareholder value [9] - A partnership with Delta Air Lines is set to commence in the second quarter of fiscal 2025 [11] Outlook - For fiscal 2025, the company expects GMV growth in the mid-to-high single digits and net revenue between $1.33 billion and $1.45 billion [17] - The guidance includes an anticipated net income range of $8.0 million to $20.0 million and adjusted EBITDA between $95.0 million and $107.0 million [17]

Core Viewpoint - Lands' End, Inc. will hold a conference call to discuss its first quarter 2025 financial results on June 5, 2025, at 8:30 a.m. Eastern Time [1] Group 1: Conference Call Details - The conference call will be accessible via the Company's investor relations website [1] - A news release with the financial results will be issued prior to the call [1] - An online archive of the broadcast will be available around noon on June 5, 2025 [2] Group 2: Company Overview - Lands' End, Inc. is a leading digital retailer specializing in solution-based apparel, swimwear, outerwear, accessories, footwear, home products, and uniforms [3] - The Company sells products through its website, third-party distribution channels, Company Operated stores, and third-party license agreements [3] - Lands' End also provides products to businesses and schools through the Outfitters distribution channel [3]

Group 1 - The core investment strategy of Quipus Capital focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective rather than market-driven dynamics [1] - Quipus Capital emphasizes understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations from Quipus Capital will be holds, indicating a cautious approach to investment opportunities [1] Group 2 - The articles produced by Quipus Capital aim to provide valuable information for future investors while maintaining a healthy skepticism towards a generally bullish market [1] - The company believes that only a small fraction of companies should be considered a buy at any given time [1]

Financial Performance - Net revenue for Fiscal 2024 was $1,362,935, a decrease of 7.4% compared to $1,472,508 in Fiscal 2023[199]. - Gross profit increased to $653,345, representing a gross margin of 47.9%, up from 42.5% in the previous fiscal year[199]. - Operating income for Fiscal 2024 was $50,957, compared to a loss of $77,515 in Fiscal 2023, indicating a significant turnaround[199]. - Adjusted net income for Fiscal 2024 was $12,572, compared to a loss of $4,783 in Fiscal 2023, with adjusted diluted net earnings per share at $0.40[206]. - Total Net revenue for Fiscal 2024 was $1.36 billion, a decrease of $109.6 million or 7.4% from $1.47 billion in Fiscal 2023[213]. - U.S. Digital Segment Net revenue was $1.15 billion in Fiscal 2024, a decrease of $138.6 million or 10.7% from $1.29 billion in Fiscal 2023[214]. - Adjusted EBITDA was $92.6 million in Fiscal 2024, compared to $84.3 million in Fiscal 2023[233]. - Licensing and Retail Net revenue increased by $38.9 million or 58.5% to $105.4 million in Fiscal 2024[219]. - U.S. eCommerce Net revenue decreased by 9.4%, but increased by 2.3% when excluding the impact of licensing transition and the 53rd week[215]. - Variable profit for U.S. Digital Segment was $265.4 million in Fiscal 2024, a decrease of $0.5 million compared to Fiscal 2023, but increased as a percentage of Net revenue to 23.0%[234]. Cost Management - Restructuring charges incurred were $5.6 million in Fiscal 2024, down from $7.3 million in Fiscal 2023, reflecting ongoing cost optimization efforts[193]. - Interest expense decreased to $40,439 in Fiscal 2024 from $48,291 in Fiscal 2023, reflecting improved financial management[199]. - Interest expense decreased by $7.9 million to $40.4 million in Fiscal 2024, primarily due to lower average outstanding balances[226]. Operational Changes - The company closed its Japan eCommerce operations, incurring approximately $0.3 million in costs during Fiscal 2023, with no closing costs in Fiscal 2024[194]. - The company has restructured its operating segments, now including U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing, and Retail[189]. Cash Flow and Investments - The company generated net cash of $53.1 million from operating activities in Fiscal 2024, a decrease of $77.5 million compared to Fiscal 2023[258]. - Net cash used in investing activities was $35.0 million in Fiscal 2024, primarily for updating digital information technology infrastructure[259]. - The company plans to invest approximately $30.0 million in capital expenditures for strategic investments and infrastructure in Fiscal 2025[259]. Debt and Financial Obligations - The company has a $275.0 million committed revolving ABL Facility, with a $70.0 million sublimit for letters of credit, maturing on July 29, 2026[242]. - As of January 31, 2025, the borrowing availability under the ABL Facility was $129.3 million, with outstanding letters of credit totaling $10.1 million[245]. - The Current Term Loan Facility provides borrowings of $260.0 million, maturing on December 29, 2028, with a quarterly amortization rate of 1.25%[245]. - Total contractual obligations as of January 31, 2025, amounted to $515.5 million, with principal payments on long-term debt at $247.0 million[261]. - The company was in compliance with its financial covenants in the Debt Facilities as of January 31, 2025[256]. Impairments and Valuations - Goodwill impairment of $70.4 million and $36.3 million was recorded for the U.S. eCommerce and Outfitters reporting units[271]. - The fair value of the indefinite-lived intangible asset (Lands' End trade name) exceeded the carrying value by less than 15% in Fiscal 2023 and Fiscal 2022, resulting in no impairment charges[273]. Foreign Currency and Economic Factors - Net revenue from the International distribution channel represented 8% of total net revenue in Fiscal 2024[282]. - A 10% change in foreign currency exchange rates could have resulted in a net revenue change of approximately $10.3 million in Fiscal 2024[282]. - Foreign currency translation losses for Fiscal 2024 totaled approximately $0.4 million related to international subsidiaries[282]. - The company had $8.7 million of cash and cash equivalents denominated in foreign currency as of January 31, 2025[283]. - The company does not utilize financial instruments for trading purposes or hedging to limit foreign currency exchange rate exposures[282]. - Macroeconomic challenges, including inflation and high interest rates, continue to impact consumer discretionary spending and may require increased promotions[192]. Interest Rate Sensitivity - Each one percentage point change in interest rates associated with the Current Term Loan Facility would result in a $2.5 million change in annual cash interest expenses[284]. - Assuming the ABL Facility was fully drawn to $275.0 million, each one percentage point change in interest rates would result in a $2.8 million change in annual cash interest expense[284]. Other Considerations - The excess and obsolete reserve balances were $11.7 million as of January 31, 2025, down from $18.1 million in the previous year[267]. - The company believes that the judgments and estimates regarding deferred tax assets are reasonable, but actual results may differ materially[279].

Financial Data and Key Metrics Changes - The company achieved low single-digit GMV growth on a like-for-like quarterly basis and reported a 3% year-over-year increase in gross profit dollars [6][25] - Adjusted EBITDA for the fourth quarter was $44 million, up 38% year-over-year, while adjusted net income was $18 million, resulting in adjusted EPS of $0.57, a 120% increase year-over-year [6][30] - For the full year, net revenue was $1.36 billion, with gross margin improving by 550 basis points to 48% compared to 43% in fiscal 2023 [7][32] Business Line Data and Key Metrics Changes - The U.S. e-commerce business saw a sales decrease of 19% compared to the fourth quarter of fiscal 2023, but adjusted for the fifty-third week and kids and footwear, sales decreased mid-single digits year-over-year [27][28] - The licensing and retail business combined grew revenue over 50% year-over-year, driven by the expansion of the licensing model [25][29] - The B2B outfitters business met revenue and profit objectives for the quarter, with significant progress in developing the sales pipeline for the Uniforms business [21][23] Market Data and Key Metrics Changes - The European e-commerce business experienced a 22% year-over-year sales decrease, although gross margin improved by approximately 310 basis points [29] - Sales from third-party revenue decreased 2% compared to last year, with declines in existing marketplaces partially offset by new relationships [28] Company Strategy and Development Direction - The company is focusing on high-quality sales and improved cash flows, expecting continued gross profit and margin expansion during the spring and summer selling season [33] - There is a strategic emphasis on increasing the asset-light licensing business to enhance brand reach and customer acquisition [35] - The company is exploring strategic alternatives, including a sale or merger, to maximize shareholder value [36] Management's Comments on Operating Environment and Future Outlook - Management noted that the fourth quarter performance was key in closing out the fiscal year, with a focus on optimizing inventory and enhancing customer engagement through digital marketing [9][10] - The management expressed confidence in the brand's evolution and the potential for growth through licensing and new product offerings [8][16] Other Important Information - The company reported a 12% year-over-year improvement in inventory position, allowing for increased inventory turns and better cost structure [9][30] - SG&A expenses decreased by $15 million compared to the prior year, driven by digital marketing investments and strong cost controls [29] Q&A Session Summary Question: How does the company frame the cadence of the year in terms of sales and the impact of tariffs? - Management highlighted the importance of weatherproofing the assortment and managing product offerings effectively to drive sales, noting that tariffs have a limited impact as less than 8% of purchases are from China [39][48][49] Question: How does the company plan to convert younger customers attracted by pop-up events into other segments? - Management emphasized the strategy of cross-promoting products, particularly in swimwear and outerwear, to engage younger customers and drive brand loyalty [52][58][61] Question: When will licensed products, particularly kids' items, start to appear in the catalog? - Management confirmed that kids' and shoes are already in the market, with additional licensed products expected to launch in the back half of the year [66] Question: How is the response to the evolution of the catalog as a lifestyle resource? - Management indicated that the catalog is being used as a marketing device, focusing on personalization to cater to different customer segments [70][71]