Lands End just turned in Q3 numbers that saw a 5% year-on-year rise in revenue, up to $341.6 million. Net income was $3.3 million, up from $200,000 a year ago. There was a double digital increase in the US e-commerce business, balanced out by a 21% decrease in retail outlets business as the firm exits from its long-term presence within Sears, now in Chapter 11 bankruptcy protection.
This is a planned transition, argues Lands End CEO Jermome Griffith:
As Sears has continued to close locations, we have been executing on our own retail strategy and expanding our own store base. While building a retail store network will take time, effort and resources, I believe we have a viable, profitable and expandable store model, which complements our successful online presence with brand-appropriate, single-brand focused, Lands End staffed and operated bricks-and-mortar locations.
We have been extremely pleased with our retail rollout so far. Our new stores are another example of how we have tested different approaches and have used the learnings from our test to improve each new store. We're testing types of locations, finding which center characteristics our customers are attracted to as well as merchandize offerings among our women's, men's, kid's, school and home offerings.
As the new stores roll out, they will built around omni-channel principles, he adds:
The legacy stores that have been around for several years, they have always performed in a certain way and they were source-stocked in a certain way. I think as we continue to open up new stores and think of new ways to run retail businesses here and tie that in with more of an omnichannel presence, we’re shipping differently, we’re setting the stores up differently, we’re carrying different assortments in the stores and it's kind of resonating with the consumer. How many pieces we have per square foot? What our key items strategy looks like? Number of skews we put in the store continues to evolve and customers actually reacting pretty well to it.
On the digital front, Black Friday and Cyber Monday performed well, says Griffith:
We continue to focus our initiatives on new customer acquisition and an improved customer experience. To drive these initiatives forward, we are increasing our marketing investment for the remainder of the year and all of 2019. We remain pleased with the continued strong growth in the customer file..We have also ramped up our efforts to deliver segmented and personalized emails by leveraging our data.
Our digital investments in landsend.com are also yielding benefits. During the third quarter, we devoted substantial attention to improving the customers' experience and time for holiday peak. We improved our internal search engine and implemented price clarity across all platforms to better capture customers during their discovery phase. We enhanced our site with best-in-class external search engine optimization practices, including updated product description that align with the language and habits that our customers use when searching for product.
We also enhanced our smartphone experience as this is the device our customer increasingly prefers…customer experience with compelling merchandized and increased price clarity in a way that's quick and easy to shop. We drove significant improvement in traffic and realized double-digit conversion increases year-over-year in the third quarter, in terms of our business year-over-year in the third quarter.
In terms of our distribution strategy, we remain focused on developing a uni-channel approach, ensuring that customers have the same great experience wherever, whenever, and however they choose to purchase our products whether through our own website, our own retail stores, third-party e-commerce platforms like Amazon or through our own call center.
On the question of third parties, despite the fall out from its Sears links and in common with an increasing number of other retailers, Lands End is opening itself up to partnering with Amazon as an additional online sales channel. Griffith explains:
While we are making it easier than ever to shop through our own website, landsend.com, we see tremendous potential to increase brand awareness and expand our customer-reach by selling Land's End products on third-party marketplaces in the US and internationally. For example, we've recognized that half of apparel searches now start on Amazon, and as you know, we began selling key items on Amazon in February. Approximately half of our Amazon customers are completely new to our brand. In general, the Amazon customer looks similar to the Land’s End customer, and the key items that are selling well on Amazon are the same key items that are selling well through our own website and retail channel. Clearly, customers are reacting positively to our key item product strategy across our channels.
While it's not taking the Amazon alliance as far as the likes of Kohl's, tapping into its established online route to market is pragmatic. The Sears departure may well have been planned for, but Lands End has a big challenge ahead in establishing the store aspect of an omni-channel retail strategy. As I said at the start, no cliff edge quips this time around, but I won't be assuming they won't be needed in the future just yet...