Last Christmas for Lands End CEO Jerome Griffith sees e-commerce slide

It’s Jerome Griffith’s last Christmas as CEO of retailer Lands End and it’s playing out against a difficult macro-economic backdrop. He notes:

This is my 44th Christmas [in retail]. You've seen shopping patterns really change over the course of the last several years. What we're seeing right now, I think it's going to be a lot more egalitarian and a lot more thoughtful. And you're going to see people buying up to the last shipping days in e-commerce and up to Christmas Eve in stores. So I still think that people are going to be cautious though about how much money they're spending. 

That has an impact on Cyber Week, he argues:

People are not seeing these huge big blockbuster kind of events like what we used to have around, it was Thanksgiving back in the day, but we call it Cyber Week now. People binding up to get into stores to get great deals on TVs and things like that - you don't see it. It’s a lot more of a friendly shopping environment out there and I think that demand gets spread over the course of time as time goes on.

He adds:

The customer’s really looking for promotions. What we've seen is that, she'll buy key items and she'll buy the products that she's used to buying, but she's looking for a deal. I think customers are getting squeezed with food costs and with energy costs and also re-looking at how they're spending their dollars for the Holiday season.

But the other thing that we're seeing is, if you remember last year there was the hue and cry with the supply chain and you better order early and you better get your order in because things are moving slowly and it's going to take a while to get your product. I don't see that this year.

We definitely saw a shift in how the customer was shopping. The end of October and beginning of November with traffic numbers because last year everybody shopped early, before Veteran's Day. But not this year. In fact, we're actually thinking that you're going to get more traffic as you get closer to Christmas and really be back to what the 2019 trends look like because that's really kind of what we're seeing is the traffic pattern looks a bit like 2019, meaning getting back to what people are used to.

Re-invention

One of the legacies of Griffith’s tenure at Lands End has been his ongoing efforts to re-invent the firm as a modern omni-channel retailer, building on 25 years of e-commerce experience. That’s been a bumpy ride over the years as diginomica’s coverage has tracked. The firm’s performance in its most recent quarter has seen another setback, turning in a loss of $4.7 million on revenue of $371 million. Global e-commerce sales decreased 5% from 2021, with the US e-commerce business essentially flat, decreasing one percent year-on-year. 

That’s partly down to the general retail environment, suggests Griffith:

Our consumer is showing resiliency in the face of the uncertain macro environment stemming from the multi-decade high inflation, which is impacting buying decisions for discretionary purchases such as apparel. Despite these challenges, our sales were only one percent below our outlook and our year-ago results.

Like others in our industry, we saw consumer activity fluctuate during the quarter and we experienced particular softness at the end of the quarter. We believe the sales softness at the end of October, which continued into the early days of November, also reflects a return to historical shopping patterns as compared with last year when demand was pulled forward due to consumer concern about inventory shortages.

Customer focus remains a top priority, says Griffith:

We also continue to deepen customer engagement through refining search and proving the effectiveness of our catalog and increasing our social media presence. I'm pleased that our customer engagement continues to generate healthy lifetime value over a long-term duration as our customer has been shopping with us for an average of 18 years. With this tenure, we have very actionable data-driven insights, combined with our commitment to fit and quality, which supports our buy-now-wear-now focus.

Midway into the holiday season, we are capitalizing on the early success of our branded marketing efforts and shifting our focus from brand marketing towards a more targeted approach, leveraging our buyer file of nearly 7 million to drive customer conversion and retention.

Another Griffith legacy can be seen in Lands Ends third party partnerships:

We are pleased with our performance at Kohl's, both in 500+ stores, where we saw strength in our seasonal assortment, and online, where our full assortment is available to the Kohl's shopper. Our business on Amazon also continues to build momentum and continues to introduce new customers to the brand. And while a small part of the business, we are pleased with the exposure we are receiving on QVC and have recently launched on Target.com and Walmart.com.

The intention is to find additional distribution partners going forward as a way to reach more customers in the addressable market, he adds:

When we look at what's happening with our third-party, generally, we still continue to see a build. As you know, we really didn't have a lot of third-party business until 2018, when we started with Amazon, and then a couple years ago when we started up with Kohl’s. And what we see is both of those businesses, plus really our Target business, which we just started recently, and Walmart, both continuing to grow. It takes a few years to really maximize what your potential is there and we see longer term continuing to grow with our third-party.

As he prepares to hand over to his successor,  Andrew McLean, in January, Griffith concludes:

We are focused on making progress against our strategic initiatives. However, the current environment is very uncertain and volatile. We are very pleased with our conversion rates, showing the strength of our product offering and appeal to our customer. In addition, the consumer is responding more to promotions this season and we will be disciplined through our dynamic promotion and marketing initiatives to remain competitive and drive traffic where we can capitalize on those strong conversion rates.

Our brand metrics remain very solid as we continue to see strength in our active buyers, which reflects the long-term resilience of our brands. We have a highly loyal customer base with an average tenure of 18 years, and we are confident that our performance will improve when the macro-environment recovers .

My take

A disappointing quarter for Lands End, but one there are nuggets of good news in the mix as well as the drop in e-commerce sales. The partnership strategy is looking like a good asset for McLean to build on as he takes the helm.