November 13, 1998

Flat Sales Hurt Lands' End

Fears that unexpected executive departures at Lands' End portended a poor third quarter were realized this week as the Dodgeville, WI, cataloger reported modest sales gains but severe drops in net income because of foreign currency losses and lower productivity from its core catalog business. Sales grew 1 percent to $322.4 million for the quarter and 6 percent to $830.2 million for the first nine months of the year. Net income fell to $347,000 from $8.2 million in the third quarter a year ago while earnings per share dropped to 1 cent from 26 cents. That figure fell well below analysts' estimates of 22 cents per share. Net income was affected by a $3.4 million foreign currency exchange loss caused by a strengthening of the yen against the dollar. Year-to-date net income was $5.5 million, or 18 cents a share, compared to 1997 figures of $22.9 million, or 71 cents a share. David E. Dyer, who replaced Michael J. Smith as president/CEO on Oct. 28 in a purge that included the departure of vice chairman of sales William E. Ferry, said the company needs to improve its performance in the areas of merchandising, creative and inventory management. Dyer was encouraged by improving sales for the first week-and-a-half of the crucial fourth quarter. Lands' End attributed its sales increases to a higher volume of specialty catalogs and pages mailed. Sales from its monthly and prospecting catalogs were down from a year ago.