Trends come and trends go. Remember those sweet “Members Only” jackets. That’s right, I’m talking to you. How about a more recent, very forgettable trend? Trucker hats anyone? If I see Von Dutch again I may just vomit. Unfortunately it’s very hard to stay relevant as a retailer. Sometimes a bigger fish comes in and eats your lunch. Other times, the market just turns away. Even soccer moms switch their style up. Which is probably what’s slapping down this retailer and today’s Bear of the Day, Lands’ End (LE).
Founded in the great city of Chicago originally as a sailboat equipment partner, Lands’ End branched off into a clothing retailer that specializes in casual clothing, luggage and home furnishings. The majority of their business is conducted through mail order and online sales. Once a part of Sears Holdings (SHLD), Lands’ End was spun off in April 2014.
The recent news surrounding Lands’ End was the resignation of Edgar Huber from the Board and from his roles as President and CEO of the company. Mr. Huber’s resignation from the Board was effective as of February 1, 2015. As part of the severance, Mr. Huber is getting his $850,000 per year base salary for 24 months, a lump sum payment equal to accrued vacation pay, continued health insurance coverage for 24 months and accelerated vesting and payment of $247,976.67 under the company’s Annual Incentive Plan. In the age of “golden parachutes” it’s a very mild and palettable package.
Former President of Dolce & Gabbana Ms. Federica Marchionni took over the reins and is looking to right the ship after a third quarter that saw lower sales but better margins which helped surprise earnings to the upside. Q3 came in at 56 cents versus estimates for 40 cents.
Analysts, however, remain bearish despite a change at the helm. Analysts slashed estimates for the current quarter, next quarter, the current year and next year as well. These downside estimate revisions have dropped the Zacks Consensus Estimates from $2.65 for the current year all the way down to $2.38. What’s more troubling though is the change to next year’s estimate. Analysts are looking for $2.15 per share versus previous consensus of $2.75. That 60 cent drop isn’t as worrisome as the fact that analysts are looking for next year’s numbers to shrink 23 cents per share compared to this year’s numbers. That’s the opposite of the story that you’d like to hear.
The stock price was doing very well shortly after the spin-off. LE more than doubled from the mid-$25 range shortly after going public to nearly $56 by late December 2014. But news of Huber’s resignation helped send shares tumbling, dropping all the way down to $33.16. Shares have traded sideways since the dramatic drop and now are hovering just above $35.
But the technical picture shows a stock that is following through on a stochastic sell signal from overbought territory. The commodity channel index is becoming increasingly bearish as well, dipping from over 100 through the zero line and now sits down at -169.63. Yesterday, with the market in the green across the board LE was off 3%.
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