Lands' End Earnings: New CEO, Old Problems
(Bloomberg Gadfly) -- A little more than a year ago, Federica Marchionni was pushed out as CEO of Lands' End Inc. after less than two years on the job.
A veteran of Dolce & Gabbana, Marchionni had tried to use her high-fashion background to enliven the stale American brand, ordering up slimmer silhouettes and glamorous marketing campaigns and hiring a leadership team with experience at the likes of Saks Fifth Avenue.
Sales results show Marchionni's plan didn't work -- or, at least, her execution of it didn't work. (She reportedly wasn't a popular figure around the company's Wisconsin headquarters.)
To succeed her, the board of directors chose former Tumi CEO Jerome Griffith. He has essentially promised a flight to safety, aiming to restore Lands' End to the classic, outdoorsy vibe of its heritage.
The company's latest quarterly results suggest the decision is paying off in the short term. Lands' End reported Tuesday that revenue increased 4.5 percent from a year earlier, fueled by stronger sales in the business segment that includes e-commerce. Gross margin improved as the company changed its promotions strategy.
But the long-term outlook for Lands' End is still as uncertain as when Marchionni arrived.
The vast majority of Lands' End's sales are made online or from catalogues. But it is still problematic that the brand's brick-and-mortar business depends heavily on Sears Holdings Corp., a deeply troubled retailer that is regularly closing stores and gasping for survival.
In the latest quarter, Lands' End said sales fell nearly 11 percent from a year earlier in the division that includes its business at Sears stores.
Griffith wants Lands' End to open more of its own brick-and-mortar locations. This will give it more control over presentation and attract customers in shopping environments beyond the dying malls where Sears is often located.
Other items on Griffith's agenda also don't inspire confidence this brand can mount a comeback.
For one, he talked Tuesday morning about focusing more on the home category. But this retailing space is getting awfully crowded: At Home Group Inc. is adding more stores. TJX Cos. is expanding its popular HomeGoods chain and building a new one called HomeSense. Apparel chains such as Anthropologie are adding more home items. And Amazon.com Inc. and Wayfair Inc. are pulling more of these dollars online.
What makes Land's End think it can cut through all that competitive noise? It would be better off focusing on getting apparel right first.
And that brings me to its plans for the clothes. Griffith has said his team is focused on appealing to customers' desire for "timeless pieces and classic stylings." If he can pull that off, great. With so many apparel giants chasing trends, there is certainly an open lane for a brand that excels at making such goods.
But, too often lately, apparel retailers aiming for a timeless look end up with a dowdy one. That's surely been a problem at the Ann Taylor chain, which on Monday reported a 6 percent decline in quarterly comparable sales from a year earlier.
If Lands' End can't avoid that pitfall, then it will be right back where it was when Marchionni arrived: trying to figure out how to broaden the appeal of a tired-looking brand.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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