Despite a Slow Start, Lands End Has Good Prospects

Lands End, in its first quarterly report after its spin-off from Sears Holdings, showed investors impressive sales growth. The good trends should continue at Lands End for a few key reasons.

Jun 18, 2014 at 7:33AM

Le

(Photo Credit)

Dodgeville, Wisconsin-based Lands End (NASDAQ:LE) was spun off from Hoffman Estates-based Sears Holdings (NASDAQ:SHLD) in April. Since then, the stock price of Lands End has slowly moved downward. But in its first quarterly report since the spin-off, Lands End delivered remarkably strong top-notch results. But can Lands End keep up the strong growth? And what do Sears' draw-down operations mean for shareholders?

The strong performance of Lands End
Even though Lands End had a slow start in the public market, its first-quarter results indicate that the company is effectively increasing shareholder value. Earnings increased 48% to $10.9 million, or $0.34 per share, compared with $7.3 million, or $0.23 per share, one year ago. Sales also rose to $330.5 million from $319 million in the same three-month period one year ago.

Despite the aftermath of huge winter storms and a rough market for retailers, Lands End posted better results because it effectively targeted consumers in its marketing campaigns, kept costs under control, and offered more special promotions for customers. 

Lands End has a very strong presence on the Internet. In fact, the company said its Internet and catalog sales accounted for a whopping 84% of its total sales. The rest came from traditional retail operations. Lands End has 251 shops inside Sears locations and only 14 stand-alone stores.

Moving forward, Lands End is a classy brand that many consumers enjoy purchasing, which bodes well for the company's future. As the months progress, however, the company needs to break away from its over-dependence on Sears and branch out by building more stores to attract more business.

What about Sears?
Sears itself is a fascinating stock. The CEO of Sears, Eddie Lampert, seems to be taking the company on a quixotic strategy by extracting Sears' intangible assets and spinning off profitable parts of the company.

Late last year, I wrote a more in-depth explanation of Lampert's interesting financial engineering experiment entitled "There's More Than Meets the Eye With Sears." At that time, it appeared that Sears' stock had started to leave the company's poor image as a reviled retailer behind as hedge fund managers bet that the stock could bring returns. It seems that Sears has not yet moved past its retail woes.

SHLD Chart

SHLD data by YCharts

Even though the stock has languished since the date of my article's publication, I still believe Sears' stock may indeed turn into a grand financial experiment. Whether the results of that experiment will bear fruit for investors willing to bite is anyone's guess.

Despite the potential for massive gains with Sears, there is still an equally large chance that the stock will continue to decrease in price due to Sears' poor image as a retailer. Thus Lands End appears to be a much stronger and more stable investment for the long term.

You can't afford to miss this...
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!

Evan Buck has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers