Lands' End writing down Canvas line, impairing its brand
Lands' End, Inc. on Thursday announced an impairment of the Lands' End trade name to the tune of an estimated $170 million to $180 million, which will reduce the value of the asset from $430 million to between $250 million and $260 million.
The struggling apparel retailer also said that it expects to write down some $2.3 million of aged Canvas merchandise — a line revived by former CEO Federica Marchionni last spring in an effort to attract a more youthful demographic — in the fourth quarter of fiscal 2016.
Lands' End expects Q4 net revenue to decrease about 3% compared to $473.5 million in the fourth quarter of fiscal 2016, due to an expected decrease of approximately 2.5% in its direct-to-consumer sales and a decline of approximately 6% in its retail segment. Same-store sales in that segment are expected to fall 3%, due in part to the fact that there are 11 fewer Lands' End shop-within-shops at Sears locations compared to last year.
Lands’ End failed to revive its fortunes during Marchionni’s tenure, which lasted less than two years. She was a veteran of luxury fashion house Dolce & Gabbana, brought in to add style and sophistication to the retailer's casual, sensible brand, as well as boost e-commerce sales and capture younger, more fashionable shoppers. Under her watch, the company introduced slimmer-fitting designs, a new line of athletic wear and a series of pop-up shops in trendsetting locales like New York’s Fifth Avenue and SoHo neighborhood. Marchionni also brought on a new team of executives with experience at brands like Saks, J. Crew, and Bonobos to help with design and supply chain.
But style changes (like Marchionni's revival of the retailer’s dormant Canvas line) were fraught with risk, and her departure after just 19 months at the helm came amidst criticism that she was moving the brand's fashion agenda too quickly, that her New York City-based lifestyle was too far removed from Lands’ End heritage and its staff, and that she was trying too hard to turn Lands’ End into something it’s not.
But Lands’ End’s struggles ultimately date back to its 2002 acquisition by Sears, from which it finally spun off in late 2013. In the meantime, though, Lands' End suffered, trapped inside Sears locations, which have been neglected for years by shoppers (and by Sears itself).
While Lands' End expressed hopes that the relaunched Canvas brand, with its modern fits and styles, would attract new, younger customers and bring back core customers who had moved on, Thursday's write down suggests otherwise. “Millennials continue to present a challenge for all retailers,” Greg Portell, who leads the consumer and retail practice at global strategy and management consulting firm A.T. Kearney, told Retail Dive last year. “The issue is less about the audience and more about the ability of current marketing teams to address those consumers. Rather than blame the consumers for being ‘too fickle’ or ‘too distracted,’ perhaps we should be challenging marketing teams to be ‘more relevant’ and ‘more agile.’”
Lands' End plans to release its full fourth quarter and fiscal 2016 results on March 21. Net loss, including the trade name impairment, is expected to be between $92.8 million and $98.8 million. Net loss in the fourth quarter of 2015, including the impairment, was $39.5 million, or $1.23 per share.
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