Despite brutal competition in the apparel sector, an ill-advised attempt to be hipper and more upscale a few years ago, and Sears Holdings’ (shld) years-long implosion, Lands’ End (le) is on the upswing again in a convincing way.
The Dodgeville, Wisconsin company, known for its low price, high quality outdoor wear and school uniforms, on Thursday reported a sixth straight quarter of sales growth, with net revenue up 4.9% to $341.6 million. Crucially, online sales soared, as did sales at its own stores, a part of the business that will grow as Lands’ End continues to wean its retail business off of its reliance on the now bankrupt Sears.
Since taking the reins in March 2017, Lands’ End CEO Jerome Griffith has made it a priority to overhaul the company’s e-commerce capability, which he admits was wanting, and build out a fleet of Lands’ End stand-alone stores as Sears—whose parent company owned Lands’ End from 2002 until 2014—reduces its retail footprint. Other bold, arguably risky moves have included selling some Lands’ End items on Amazon.com (amzn).
He also had to repair damage caused by the efforts of his predecessor, Federica Marchionni, the former president of Dolce & Gabbana USA, who tried to make Lands’ End something it was wasn’t: a fashion-forward, higher-end brand. (The results were disastrous.) Instead, Griffith decided that Lands’ End would thrive by being the best version of itself.
“If a company begins to lose its way, always go back to what it’s known for,” Griffith told Fortune ahead of its earnings report this week.
The Shadow of Sears
In 2005, Sears started rolling out Lands’ End boutiques within its stores, and four years later, Lands’ End’s store count hit a peak of 310, the bulk of which were the Sears’ shops. By the end of this fiscal year, the tally will be 49 shops at Sears and 16 stand alone locations. Not that long ago, the Sears’ shops were as much as 15% of company revenues. In 2018 that side of the business has largely vaporized.
To make up for that, Griffith has said he would open somewhere between 40 and 60 more stand-alone Lands’ End stores in the next four years or so. While he won’t say how big that fleet could eventually become, it is a central piece of his plan to lift total annual sales to between $1.8 billion and $2 billion by 2022 or so, exceeding the all-time high of $1.73 billion Lands’ End revenue hit in 2011. Other components will include moves like lining up more deals for corporate uniforms, following its big contract with Delta Airlines this year.
That target is ambitious. Even with the current growth, Wall Street analysts expect Lands’ End revenue to come in at $1.45 billion this year, an improvement over the two prior years to be sure. But when you consider Lands’ End revenue was at that level in 2001, a year before Sears bought it, it’s fair to say the brand is recovering from a lost decade and a half. (Sears paid $2 billion in 2002 for Lands’ End, which today has a market capitalization of $600 million.)
While Lands’ End has a long history as a catalog company, something that should have made it a strong e-commerce player earlier, Griffith has sought to beef that up with better use of data analytics to better figure out what customers want. One of his first key hires as a new CEO last year was that of a head data scientist. And now online sales are rising by more than 10% per quarter. Still, Lands’ End started to supplement its own e-commerce in 2016 by selling on Amazon.com (amzn).
Griffith dismisses the notion that such a partnership could harm Lands’ End, saying that about half the people who buy its products on Amazon are new to Lands’ End and that is simply how customers search for things they want to buy. “If you’re not there, you could become irrelevant,” he says.
But Amazon does not signal any broader move to wholesale beyond that partnership. And Lands’ End under Griffith has no intention of replacing the Sears shops closing with spaces at any other stores as rivals have done e.g. J.Crew has been lining up space at Nordstrom. The idea is simple: after years of relying on Sears, and arguably being held back, Lands’ End wants to be the master of its own destiny. And the strong performance of Lands’ End’s own stores bolsters his argument: comparable sales at those locations, though still few in number, rose 15% in the quarter.
“One of the most important things about resurrecting Lands’ End is to be 100% in charge of what our brand image is,” Griffith says. And after the turmoil of the last few years, who can blame him?