Lands’ End Announces New Term Loan
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Insights
The refinancing of Lands' End's existing term loan with a new maturity date in 2028 is a strategic financial maneuver that merits close examination. By securing a new term loan of $260 million to replace the existing one, the company has effectively negotiated a more favorable interest rate environment, with the potential for further rate reductions tied to debt and EBITDA levels. This proactive approach to debt management is indicative of a robust financial strategy aimed at capitalizing on current market conditions to reduce interest expenses over time.
From a liquidity standpoint, the move also suggests that Lands' End is optimizing its capital structure. By refinancing well ahead of the original loan's maturity, the company is demonstrating confidence in its financial health and operational stability. The reduction in inventory levels by 25% and the expansion of gross margin by approximately 700 basis points in the third quarter of 2023 provide tangible evidence of operational efficiency and improved cost management.
The implications for stakeholders are multifaceted. In the short term, there may be an increase in financial flexibility, which can support ongoing investments and operational initiatives. In the long term, the company's ability to secure more favorable loan terms may lead to enhanced shareholder value through improved net income attributable to reduced interest expenses.
Lands' End's refinancing initiative is a clear signal to the market of its strategic focus on sustainable growth and operational efficiency. The emphasis on a 'solutions-based strategy' and the drive for 'more profitable sales' underscore a commitment to not only maintain but also enhance market competitiveness. The company's ability to adjust its inventory position and expand gross margins is commendable and reflects well on its supply chain and inventory management capabilities.
Furthermore, the engagement with a diversified lending group, including Blue Torch Capital and Sculptor Capital Management, indicates a level of confidence from the lending community in Lands' End's financial prospects. This could potentially have a positive influence on investor sentiment and the company's stock market performance, as it reflects a vote of confidence from institutional investors with rigorous due diligence processes.
The retail sector, in which Lands' End operates, is highly competitive and subject to rapid shifts in consumer behavior. The company's focus on reaching new customers and enhancing efficiency is crucial for maintaining its position in the market. The ability to navigate these challenges and emerge with a strong financial and operational footing is likely to be viewed favorably by analysts and investors alike.
The interest rate on the new term loan, initially set at 8.25% per annum, reflects broader economic conditions, including prevailing interest rates influenced by monetary policy and market liquidity. The rate, which is adjustable based on the Secured Overnight Financing Rate (SOFR) or a minimum of 2.0%, indicates a sensitivity to the fluctuating cost of borrowing. This sensitivity is particularly relevant given the current economic climate of rising interest rates as central banks globally seek to curb inflationary pressures.
The company's ability to negotiate a reduction in interest rates based on debt and EBITDA levels serves as a hedge against potential economic downturns. It also incentivizes Lands' End to maintain a strong EBITDA, which is a measure of a company's operating performance. A robust EBITDA can indicate good financial health and the potential for future growth, which are critical factors in the eyes of investors and creditors.
In the context of the retail industry, which is often cyclical and sensitive to economic downturns, the refinancing of debt with more favorable terms provides a cushion against market volatility. It enhances Lands' End's financial resilience, potentially enabling the company to weather economic headwinds more effectively than competitors with less favorable debt structures.
Company Refinances Existing Term Loan
New Loan Maturity In 2028
DODGEVILLE, Wis., Jan. 02, 2024 (GLOBE NEWSWIRE) -- Lands' End, Inc. (NASDAQ: LE) today announced that it has entered into a new term loan of
“The completion of this refinancing initiative is an important step in Lands’ End’s trajectory and provides us with more favorable terms under which we can continue to invest in the growth and evolution of the Company,” said Bernard McCracken, Chief Financial Officer. “Our performance in 2023 has been characterized by steady improvements throughout the year –including expanding gross margin by approximately 700 basis points and reducing our inventory position year-over-year by
Andrew McLean, Chief Executive Officer, added, “On the heels of our strong third quarter, it’s clear that Lands’ End’s solutions-based strategy is delivering compelling results. Through our focus on injecting newness across our assortment and reaching new and prospective customers in the most impactful ways, which collectively are helping us drive more profitable sales, we have significantly improved our operating and financial position and paved the way for sustainable growth. As we look to 2024 and beyond, we plan to build on our progress by further enhancing efficiency, reducing our costs and ensuring we are best positioned to create value for our stakeholders over the long term.”
The Company was advised on the refinancing transaction by Perella Weinberg Partners. The lending group includes Blue Torch Capital, Sculptor Capital Management, JPMorgan and Arbour Lane Capital Management.
About Lands' End, Inc.
Lands’ End, Inc. (NASDAQ:LE) is a leading digital retailer of casual clothing, swimwear, outerwear, accessories, footwear, home products and uniform solutions. We offer products online at www.landsend.com, through our own Company Operated stores and through third-party distribution channels. We are a classic American lifestyle brand with a passion for quality, legendary service and real value. We seek to deliver timeless style for women, men, kids and the home. We also offer products to businesses and schools, for their employees and students, through the Outfitters distribution channel.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the impact of the financing terms on the Company’s ability to invest in growth and further evolution of the Company; the Company’s confidence in its ability to drive long-term profitable growth; expectations of sustainable growth; and plans and expectations for enhancing efficiency, reducing costs and positioning to create value for stakeholders over the long term. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: global supply chain challenges in the recent past have resulted in a significant increase in inbound transportation costs and delays in receiving product; disruption in the Company’s supply chain, including with respect to its distribution centers, third-party manufacturing partners and logistics partners, caused by limits in freight capacity, increases in transportation costs, port congestion, other logistics constraints, and closure of certain manufacturing facilities and production lines due to public health crises and other global economic conditions; the impact of global economic conditions, including inflation, on consumer discretionary spending; the impact of public health crises on operations, customer demand and the Company’s supply chain, as well as its consolidated results of operation, financial position and cash flows; the Company may be unsuccessful in implementing its strategic initiatives, or its initiatives may not have their desired impact on its business; the Company’s ability to offer merchandise and services that customers want to purchase; changes in customer preference from the Company’s branded merchandise; the Company’s results may be materially impacted if tariffs on imports to the United States increase and it is unable to offset the increased costs from current or future tariffs through pricing negotiations with its vendor base, moving production out of countries impacted by the tariffs, passing through a portion of the cost increases to the customer, or other savings opportunities; customers’ use of the Company’s digital platform, including customer acceptance of its efforts to enhance its eCommerce websites, including the Outfitters website; customer response to the Company’s marketing efforts across all types of media; the Company’s maintenance of a robust customer list; the Company’s retail store strategy may be unsuccessful; the Company’s Third Party channel may not develop as planned or have its desired impact; the Company’s dependence on information technology and a failure of information technology systems, including with respect to its eCommerce operations, or an inability to upgrade or adapt its systems; fluctuations and increases in costs of raw materials as well as fluctuations in other production and distribution-related costs; impairment of the Company’s relationships with its vendors; the Company’s failure to maintain the security of customer, employee or company information; the risk of cybersecurity events and their impact on the Company; the Company’s failure to compete effectively in the apparel industry; legal, regulatory, economic and political risks associated with international trade and those markets in which the Company conducts business and sources its merchandise; the Company’s failure to protect or preserve the image of its brands and its intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide the Company with services in connection with certain aspects of its business to perform their obligations; the Company’s failure to timely and effectively obtain shipments of products from its vendors and deliver merchandise to its customers; reliance on promotions and markdowns to encourage customer purchases; the Company’s failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the adverse effect on the Company’s reputation if its independent vendors or licensees do not use ethical business practices or comply with applicable laws and regulations; assessments for additional state taxes; incurrence of charges due to impairment of goodwill, other intangible assets and long-lived assets; the impact on the Company’s business of adverse worldwide economic and market conditions, including inflation and other economic factors that negatively impact consumer spending on discretionary items; the stock repurchase program may not be executed to the full extent within its duration, due to business or market conditions; the ability of the Company’s principal stockholders to exert substantial influence over the Company; and other risks, uncertainties and factors discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended January 27, 2023. The Company intends the forward-looking statements to speak only as of the time made and does not undertake to update or revise them as more information becomes available, except as required by law.
CONTACTS
Lands’ End, Inc.
Bernard McCracken
Chief Financial Officer
(608) 935-9341
Investor Relations:
ICR, Inc.
Tom Filandro
(646) 277-1235
Tom.Filandro@icrinc.com
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