The stock price of Lands’ End plummeted after releasing its estimated preliminary financial results for the fourth quarter showing disappointing sales outlook.
The shares of Lands’ End were trading $40.60 per share, down by almost 20% at the time of this writing around 1:19 in the afternoon in New York.
Lands’ End preliminary financial results
Lands’ End is now expecting to report earnings in the range of $1.06 to $1.16 per share for the fourth quarter, lower than the $1.38 in earnings per share consensus estimate of Wall Street analyst.
According to the company, its merchandise sales and services are expected to be in the range of $505 million to $515 million, down by 3% to 5% from $530 million in the same period in 2013. Analysts were expecting Lands’ End to generate $542.21 million in revenue for the fourth quarter.
Lands’ End shops at Sears declined
Lands’ End estimated that the sales of its Retail segment will be around $71 million to $73 million, a decline of 16% to 18% from $87 million the same period in 2013.
The company explained that the expected decline was due to the decrease in the number of Lands’ End shops at Sears, a decrease in same store sales and Shop Your Way redemption credits after its separation with Sears Holdings Corporation.
Lands’ End estimated that its Retail segment’s same store sales will decline by 7% to 9% during the quarter.
The company has 236 Lands End shops at Sears, 14 global Lands’ End inlet stores and five international shop-in-shops as of January 22, 2015. The company previously had 274 shops at Sears and 16 global inlet stores.
The sales of its Direct segment is expected to decline to around $434 million to $442 million, down from $443 million.
Lands’ End expected its gross margin to be around 43.8% to 44%, an improvement of 10-30 basis points from 43.7%.
In a statement, Lands’ End CEO Edgar Huber said, “Although our US Direct businesses generated increases in both sales and gross margin, we were disappointed by the performance of our cold weather assortment, especially during the peak holiday period.”
“The international direct business continued to show improvements in gross margin, but had revenue decreases which were significantly impacted by currency translation. The Retail Segment revenue decrease resulted from the right-sizing of our Lands’ End Shops at Sears, declines in store traffic and a decrease in Shop Your Way Rewards credits,” added Huber.