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Lands’ End Stock Soars on BTB News

Lands’ End began to look more like an Internet company in March, as the company’s stock soared despite reporting profits that fell short of expectations for the fourth quarter.

The casual-apparel retailer, based in Dodegville, WI, was one of the top gainers in the DM News Portfolio for the four-week period ended March 28, with a 65 percent gain in stock value.

Analysts attributed the gain to the company’s strong showing in the business-to-business market, but at least one analyst said the performance of the company’s spring catalog mailings will be the true test of the company’s recovery.

Berne Sosnick, director of research at Fahnestock & Co., New York, said spring will be the first time the company’s new management team, which took over in November 1998, will get a chance to roll out a complete apparel assortment. The preceding management team selected the merchandise that the company offered in its most recent catalogs, he said.

“The assortment is more focused,” Sosnick said of the upcoming catalog offerings. “It’s still basic styling primarily – but much more in terms of a flair for what’s contemporary, similar to what Banana Republic and Gap do.”

The stock’s March recovery followed a dismal year-end performance. It lost more than half its value when the company in December said its sales during the critical fall season were down compared with the preceding year. The stock had hit a 52-week high of $83.50 a share when the company announced the sales shortfall, which it attributed to a cost-saving cutback on its catalog mailings. The price dropped as low as $27.25 before several announcements last month seemed to buoy investor confidence in the cataloger.

Sosnick said the firm’s appealing announcements during March about the BTB side of its operations and about its Internet plans helped boost the stock, which closed just under $55 a share on March 28.

“Not only is there the buzz around BTB, but in this instance, it actually does around $140 million,” Sosnick said. “They built a distribution facility for it in 1997, and they are already outgrowing that. So it is not simply the hype of something on the come, but it is using the Internet as a means of staying in touch with businesses.”

The company on March 9 reported that its BTB division had a sales increase of 9 percent in the fiscal year ended in January, compared with the preceding year, while sales for the company’s core operations were down 9 percent, compared with the preceding year. Overall sales for the year of $1.32 billion were down about 3.8 percent from the preceding year. Its fourth-quarter sales were down about 17 percent, to $449.6 million, from $541.2 million.

The DM News Portfolio for March includes two new companies: Metris Cos. Inc., a St. Louis Park, MN, direct marketer of consumer credit products and fee-based services, and Outlook Group, a Neenah, WI, printing, packaging and direct mail company. They replace USWeb/CKS and Micro Warehouse, which were acquired.

Portfolio Value: If $1,000 had been invested in each of these companies at the beginning of the year – for newly public companies when the stock first closed – the value would be $103,494, an increase of about 3.5 percent.

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