Lands' End Inc (LE) 2015 Q4 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the Lands' End fourth-quarter and FY15 conference call.

(Operator Instructions)

I would now like to turn the call over to your host for today's conference, Mr. Bernie McCracken, Chief Accounting Officer. Sir, you may begin.

Good morning and thank you for attending the Lands' End earnings call for our fourth-quarter and FY15 results. On the call today you will hear from Federica Marchionni, our President and Chief Executive Officer: and Jim Gooch, our Chief Operating Officer and Chief Financial Officer.

To begin our prepared remarks, Federica will discuss our progress on key initiatives and then Jim will provide details on our fourth-quarter and full-year performance. After the Company's prepared remarks we will conduct a question-and-answer session with our covering analysts. Please note that this morning we released our fourth-quarter and FY2015 earnings results which are now available on landsend.com.

I would like to remind you that today's discussion will contain forward-looking statements related to future events and expectations. These statements are based on current expectations and the current economic environment or are based on potential opportunities. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause the Company's actual results to differ materially from those discussed are posted in the investor relations section of landsend.com and our most recent SEC filings.

Our discussion will also include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures also can be found in the investor relations section of landsend.com. Any reference in our discussion today to EBITDA means adjusted EBITDA as defined in the earnings release.

Lastly, we assume no obligation to update the information presented on this call except as required by law. I will now turn the call over to our Chief Executive Officer, Federica Marchionni.

Thank you, Bernie. Good morning, everyone, and thank you for joining us today. 2015 was a year of transition for Lands' End as we work to create a solid foundation from which to execute our long-term vision for the brand. This began with assembling a highly talented and experienced management team in the areas of merchandising, design, supply chain and most recently, operation and finance with the addition of Jim Gooch who joined us as EVP, COO and CFO about a month ago.

I want to take a moment to welcome Jim to the Lands' End family. He has hit the ground running and I look forward to leveraging his knowledge as we move our business forward. I am pleased with how quickly Jim and the other new members of the senior management team have integrated with our extraordinarily talented and passionate team as we continue to work towards our unified mission to deliver a timeless style, high quality, honest value and world-class quality service to our customers.

With the senior management team now in place, we are working together to reinvigorate and elevate Lands' End. We are focused on continuing our strong engagement with our core customers while taking steps to grow our customer appeal and to expand global awareness for the Lands' End brand.

While I believe that we made meaningful progress in 2015, it is not reflected in our financial performance for the year. Adverse weather and foreign exchange headwinds, combined with a difficult highly promotional retail environment, continue to negatively impact our business.

Adjusted EPS was $1.26 as compared to the $2.39 in FY14. Jim will provide a detailed review of our financials. While we were disappointed with the financial results, we believe that the steps that we took throughout 2015 were important building blocks for our future, positioning us to deliver sequential improvement beginning in the second quarter.

I have said from the start everything begins with the product. And this was and is my number-one priority. Over the last year we spent time evaluating the product line, analyzing customer data and developing and assortment that embodies timeless yet updated styling, improving fit and higher quality and maintains the strong value proposition that is true to Lands' End. In order to accomplish this, we needed to make arrangement throughout our operation to ensure that we have the partners and the process in place that will enable us to execute on our strategies.

We tested some items that reflect new styles over the holiday season and we were pleased with the response. A great example of this is our sweater category where we had product ranging from our opening price point under $50 for our classic sweaters to higher-end products, including our new customer offering at over $300.

We were pleased to see strong sell-throughs across the price spectrum which was far better than our Company average. This illustrates to us that our customer has an appetite for a broader product assortment that is relevant to their lifestyle. Importantly, this highlights our ability to deliver quality value to the customer at a wide range of price points.

As part of this, we worked during 2015 to develop a strategic marketing plan to communicate the Lands' End message and build brand awareness. This included engaging campaigns centered on great imagery and storytelling that reflects the Lands' End value of timeless, high quality and honest value.

We launched two pop-up stores, one on Fifth Avenue in New York City and another in Boston. We were pleasantly surprised by the significant media exposure from these pop-ups, especially in New York City, and delighted with the positive customer reception on our product offering and service in both locations.

In addition, we received excellent feedback from our multimedia holiday campaign. Unfortunately, these initiatives were muted by the difficult retail environment and the record warm temperatures. We have supported this marketing investment with slightly lower marketing spend.

During the year we also took steps to improve our catalog productivity by focusing mailing on active, productive customers and limited mailing to non-active customers. As I have spoken to the past, we have been making arrangement to the overall look and quality of our catalogs in an effort to drive higher productivity through increased conversions and sales per book, increasing circulation only when we can drive incremental profitability. Overall, we look at the catalogs as our store base and consistent with any brick-and-mortar retailers, we constantly analyze the productivity of the store base, making necessary adjustments to maximize our return on investment.

We have also been testing value spending strategies and balancing this against level of promotion we offer, making adjustments in an effort to increase the productivity of our marketing investment. While our long-term goal is to drive greater full-price sell-through. As you are aware, we're operating in a highly competitive environment and consumers have become increasingly value-conscious. Therefore, we need to remain flexible and adaptable in our promotional strategies.

Before I turn the call over to Jim, I would like to outline our priorities for 2016. We will continue to focus on increasing product relevance and reinvigorating the assortment. Our loyal customer has always been our first priority, and we believe that our announced spring collection will greatly appeal to this customer. Bold florals, vibrant hues and nautical stripes are featured throughout the collection.

The spring assortment is built around strong colors and pattern story that have historically resonated with our customers. Our timeless appeal and effortless line convey a greater sense of ease and comfort to our customers than ever before. We're also excited to introduce a new swim separate collection with the season's best color, design and innovation to complement our already strong offering in beach leading.

Overall, we struck a balance between offering new products that excite the consumers and silhouettes and fabrication that we knew they love from the past to create a compelling and cohesive collection. It is important to note that we are on a journey to constantly deliver strong collection, and we still have much to accomplish. Our dedicated design team has been put in place to develop the fall-winter collection, and I am confident that they will bring even more significant enhancement than we offer in our spring summer collection to delight our customers.

In order to strengthen our resilience to future weather fluctuations, we seek to broaden our offering of non-seasonal products to balance our seasonal offerings of outerwear and swimwear. We believe that there is a big opportunity with non-seasonal categories such as dresses and sweaters, and we have an opportunity to become a go-to destination to asset customers year around.

That said, outerwear and swimwear remain important categories to our brand and we will continue to offer a well-designed, high quality selection of products and great value. Ultimately, we are looking to offer a well-balanced assortment of timeless design for our core customers in a way that is updated for the times and relevant to their current lifestyle, while maintaining a strong value proposition.

In addition to the product offerings in our core collection, in just a few weeks we will be unveiling a brand-new collection as part of our spring offering, which is not only a modern interpretation of the vastly rich heritage of Lands' End, but also marks an important foray into our acquisition of new consumers. With freshly updated styles and fits, the collection features knit tops, dresses and lightweight outerwear with an elevated aesthetic that we believe will be compelling to both loyal and new customers.

On top of improving the relevance of our core collection, this is a great example on how Lands' End can simultaneously delight its loyal customers with a complementary offering while attracting a new customer and still remain true to its core DNA and storied history. We believe that the heightened tailoring, modern sensibility and polished presentation will have a halo effect and draw more customers into the brand. Once here, they will be able to experience all that Lands' End has to offer. And this spring collection reflects just a portion of the progress that we are making with our product assortment.

On the marketing front, while marketing spend in 2016 will be relatively flat to last year, we will be more efficient in our overall spend, enabling us to invest in initiatives that we believe will yield benefits over the long term. The majority of our marketing spend will be allocated to our catalog and digital marketing where we can generate near-term ROI.

We're also investing in branding initiatives designed to communicate the enhancements we are making to our product offering and to elevate the Lands' End image while not stepping away from our core DNA. We will also continue to communicate the Lands' End value proposition with strategically planned promotions throughout the year.

We will also further enhance our distributions channel in 2016. Our catalog is a key area of focus for us. As you know, we have worked to reduce circulation to maximize catalog productivity and during the first quarter this reduction will continue.

As we move into the second and third quarter, when our new more compelling product is featured, we will begin to slowly and strategically rebuild our catalog distribution. This will enable us not only to target our core active catalog consumers, but also win back left customers and create connections with new consumers.

On the e-commerce front, in an effort to drive higher conversion rates, UPTs, and grow our Lands' End customer base, we are focused on multiple improvements. These include new and adapted storytelling content and enhanced product page for a better overall selling experience, including stronger cross-category functionality. Some of this you will experience in conjunction with the launch of the new collection.

These enhancements are in addition to the upgrades that we made to the site earlier in the year to improve our merchandise assortment, streamline checkout and simplify the online shopping experience. Overall, we have gotten great feedback thus far on upgrades that we have made to our digital experience and are encouraged by the progress that we are making on this front.

We'll also continue to build our international business. While foreign-exchange rate had a negative impact on the business in 2015, we are generally seeing favorable response to our product offering from the international consumers and are happy with the progress that we have made outside the United States.

We are also pleased with the work we have done with our corporate accounts, as well as the steps we have taken on developing new partnerships. We expect the corporate uniform business to see a halo effect from the improvements we are making as part of our strategic initiative.

Finally, we have spoken in the past about investing in our infrastructure and that will be a top priority in 2016. We are making significant improvements in technology to upgrade our system across business functions that will enable us to operate effectively and efficiently in the future. Jim will provide the details on the timing and cost of these investments.

In summary, we have worked hard to build a strong foundation from which to execute our strategic plan, but we still have a lot to do. We look forward to continue driving improvement in this initiative in 2016 and are excited to keep you updated on our progress as we move throughout the year. Now I will turn the call over to Jim.

Thank you, Federica, and good morning, everyone. First before I get started I would like to say a few words about how excited I am to have joined the Company. This is truly a great Company. It's an iconic brand with a strong and passionate team. And certainly I am looking forward to working with all of them, to partner with all of them, as we look to capitalize on the many opportunities that we have in front of us.

With that, I would like to get started by walking you through our financial results for the quarter. Revenue for the fourth quarter was $473.5 million, that's down 6.1% compared to $504.6 million last year and down 5.3% on a constant-currency basis.

This sales decline was comprised of a 5.2% decrease in the direct segment with sales of $409.1 million and an 11.5% decrease in the retail segment with sales of $64.4 million. The decrease in the direct segment was due to the decline in both the US region and the negative impact of foreign currency on the international business.

The US business continued to realize negative comparable sales in many product categories. As Federica noted, the decrease is attributable to a combination of both internal and external factors.

During the quarter we saw the continuation of a highly promotional retail environment with record warm weather, both of which negatively impacted our business, especially in some of our seasonal categories. In addition, the decline in US revenue reflected a planned reduction in our catalog circulation as we continue to optimize all of our marketing spending.

Looking at our international business, our revenue was negatively impacted by approximately $5 million from foreign exchange fluctuation, primarily in Europe. On a constant-currency basis, our international revenue was essentially flat.

The decline in the retail segment reflected an 8.7% decrease in same-store sales combined with nine fewer locations at the end of the quarter, compared to the same period last year. The decline in same-store sales was primarily driven by many of the same factors which impacted our direct business, in addition to an overall drop in traffic at our Sears locations. We ended the quarter with 227 shops at Sears and that compared to 236 at the end of the fourth quarter last year.

Moving onto gross profit. Gross profit was $199.1 million, a decrease of 10.4% which compared to $222.2 million for the quarter last year. Gross margin for the quarter decreased 200 basis points to 42%. If you exclude the impact of foreign currency exchange rates, gross margin was down approximately 150 basis points year over year.

The direct segment gross profit decreased 9.9% and gross margin in the direct segment decreased 220 basis points to 43.1%. The retail segment gross profit decreased 14.1% and gross margin in the retail segment decreased by 110 basis points to 35.3%. The decrease in both segments was attributable to a highly competitive retail environment resulting in increased promotional activity, deeper product discounts and an unfavorable sales mix during the quarter.

Looking at total selling and administrative, or S&A expenses for the quarter decreased 1.6% to $151 million. That compared to $153.5 million in the fourth quarter of last year. Total S&A expenses as a percentage of revenue increased by 150 basis points to 31.9%. The S&A expense deleverage was primarily due to the decreased sales volume partially offset by lower costs.

The drivers of year-over-year decrease in expense include lower personnel costs, a reduction in professional fees, as well as a decrease in catalog costs as we continue to optimize our circulation. All of these savings were combined with favorability from currency exchange rates.

Other operating expense was $39,000 in the fourth quarter of 2015 compared to $3.2 million in the same period last year. Other expense for the fourth quarter of 2014 included $3 million of expense that related to product recall reserve which was recorded in the fourth quarter of last year.

Operating loss was $54.8 million. That compares to operating income of $60.5 million in the fourth quarter of 2014. The decrease was primarily due to $98.3 million of a non-cash impairment charge related to the write-down of intangible assets. That combined with lower volume, all partially offset by expense savings.

The income tax benefit for the fourth quarter of 2015 was $21.1 million and that compares in income tax expense of $21.7 million for the same period last year.

Net loss in the fourth quarter was $39.5 million or $1.23 per share as compared to net income of $33.1 million or $1.03 per share in the fourth quarter last year. Again, excluding the $98.3 million or $62 million after-tax non-cash impairment charge, net income for the fourth quarter of 2015 was $22.6 million or $0.71 per share. Excluding the impact of the product recall, net income in the fourth quarter of 2014 was $35.9 million or $1.12 per share.

In addition to the GAAP measures outlined above, adjusted EBITDA is important profitability measure that we use to manage our business internally. For the fourth quarter of 2015 adjusted EBITDA was $48.1 million or 10.2% of revenue. This adjusted EBITDA excludes the $98.3 million of the non-cash impairment charge. This compares to adjusted EBITDA of $70.4 million in the fourth quarter of 2014 which excludes the impact of the product recall in last year's fourth quarter of $4.7 million.

For the year, net revenue was $1.42 billion and that compares to $1.56 billion in 2014. FY15 net loss was $19.5 million or $0.61 per share compared to net income of $73.8 million or $2.31 per share for FY14.

Excluding the after-tax $62 million non-cash impairment charge and the impact of the reversal of the product recall accrual, net income was $40.4 million or $1.26 per share in FY15. Excluding the impact of the product recall, net income in FY14 was $76.6 million or $2.39 per share.

Now let's take a look at the balance sheet. Total cash and cash equivalents at the end of the quarter were $228.4 million and that compares to $221.5 million at the end of 2014. Inventory for the quarter increased to $329.2 million which compares to $301.4 million, mainly due to the softer sales and increased receipts during the quarter. We're taking the necessary steps to move through the excess product and we are adjusting future receipts and our plan would be to normalize our inventory levels throughout 2016.

Long-term debt decreased to $500.8 million as compared to $506 million at the end of last year with the reduction due to the quarterly principal payments. Looking at operating cash flow for the year, it was $35.9 million compared to $211.1 million in FY14. The decrease in operating cash was mainly the result of lower operating earnings and increase in inventory receipts and the one-time favorable impact of approximately $25 million that related to the separation from our former parent that was in prior years' cash flow.

Before I open up the call for questions, I want to make a couple comments on our cash flow and investments. First, we will continue to remain prudent in our cash management in 2016 while making strategic investments where we believe we can yield a positive return.

As we look at our marketing spend for 2016, we expect to see catalog circulation decline in the first quarter and build sequentially year over year in the remaining quarters. As we continue to optimize our circulation spend, we will focus on our active customer base. We recognize that it will take some time to build back our relapsed customers and to capture new ones. However, we remain confident that we can do both over time and believe that we are well positioned to see sequential improvement in performance beginning in the second quarter.

And finally for 2016, we plan to invest a total of approximately $40 million to $45 million in capital expenditures. The entire year-over-year increase in CapEx is attributable to our investment in our ERP system implementation. We feel this investment is critical to ensure that we have a sufficient infrastructure in place to deliver our initiatives and to drive improvement in our business.

Our investment during 2016 will focus on our finance functions, merchandising operations and our inventory planning systems. After our 2016 investment, we will be approximately 75% complete with our multi-year ERP plan, with our largest remaining investments coming in our order management systems and our warehouse management systems.

And now with that, we will open up the call for questions.

(Operator Instructions)

Mark Rosenkranz, Craig-Hallum Capital.

Great. Thanks for taking my questions, and congrats on a good fourth quarter. I was just wondering if you could maybe expand a little more. You talk about delivering sequential improvement in the second quarter. Could you give us a little bit more on what areas you expect to see that improvement and what catalysts you think will happen in the second quarter that will drive that to the rest of the year?

Good morning. I guess I will start with that and maybe Federica can chime in. We're probably not going to give any specific guidance as to the drivers, but as I said, and as I think Federica walked through with all the initiatives, many of the initiatives that we have in place, you'll start to see them take hold later in the year. We're going to continue to optimize that marketing and advertising spend and I think as we go through the quarters we're going to get more efficient there and I think you'll see us drive our productivity.

And also, from a product perspective, we have limited amounts of new product in the first quarter. You're going to see that build a little bit in the second quarter and then you will see that be more impactful in the back half.

Okay, great. That makes a lot of sense. Could you talk a little bit more about the improved marketing, what areas you can see some room for improvement there and how you're going to make that even more efficient as you go through the year?

On the marketing -- first of all, good morning, everyone -- we already had improvements last year on the efficiency and the focus is to continuously improve on the productivity of our catalogs. We can say that we increased the average response rate. And because of that, we can also adjust today the circulation in the next quarter to make sure that we really target the active customer and get things and higher profitability from each catalog. Because, as you know, on the marketing spend, the catalogs are the biggest spend.

Of course, as we said, we also are trying to improve efficiency also in our digital spend. This year, in particular, we want to make sure that every dollar that goes into the digital market will be targeted to the right consumer on the core. Core, as I said before, is the number-one priority for us. And we will do that while also acquiring new customers. And this new customer definitely, even more, responding to digital marketing. So part of that spend will also be targeting the new customer.

As we said, we are improving the brand awareness, not just nationally but also internationally. So it is important to note how our advertising campaign today is much more relevant and focused. Again, there are moments where we focus more on the core, and that is, for example in Q4, was the holiday campaign. We spoke to the family, to the multi-generational family.

And through the 2016 we will have a balance between the initiative for the core customers and the initiative for the new customer. As I said, in a few weeks we will launch a new collection dedicated to the new generation, which we consider an extension of our current customer.

I think, Mark, as what Federica noted is absolutely true. We're obviously trying to drive productivity across all of our different marketing vehicles. You see us talking more, certainly, about the catalog just because that's the biggest piece.

The goal is there to continue to refine our model there, continue to drive productivity. We made some changes last year. We gave you a little bit of insight as to how we see the spending flowing this year. The first quarter this year will be our first pass at making some changes there. I think as we get into the second and third and fourth quarter, we will be making changes over prior-year changes and I think we will get smarter as we go.

Okay. Thank you, that's very helpful. Last question for me, you talked a little bit about how on the non-seasonal items you could see some opportunities there. Can you talk about how you're going to handle the balance between the seasonal and the non-seasonal items in the store? What kind of prominence is needed to make the right touch to emphasize those products as available but not to overshadow the strong seasonal trends in a given time in the quarter?

Of course. What we saw last year was very bad weather, both for the spring and for the fall. We had no summer and we have a very warm winter. And for a company like us that is not exposed on trends, fashion, but is exposed on seasonality, this is our two biggest categories are the swim and the outerwear. I wanted to make sure that we have always something that is considered core also for different categories.

So the first thing, and this is one of the reasons why, even in this spring/summer, you see more products on the offering on the clothing for -- in year-around usage. That is very key to succeed in the clothing business. This part should grow, and to do that, what we did was, I consider, streamline the merchandising offer. That means that we eliminated the SKUs that were unproductive. Again, efficiency is for me the key element, the criteria to define the strategies of both in the marketing and also in the merchandising offer.

By eliminating that, I could include newness both on the core and, as you will see, in the new collection. There are various ways of introducing non-seasonality products. And one of these -- and you will see through the year that my focus will be also the activewear. Because the at-leisure is also an area where we can grow.

This is a non-seasonality product and will help us to stay strong in moments where outerwear is in transition between the spring and the summer -- summer and the fall/winter. And, in fact, this is the moment where we think to put our focus this year. And also to grow the business in this area where the weather will not influence the buying.

Steve Marotta, C.L. King and Associates.

Good morning, everybody. Federica, just following up on that question, as it pertains to the split between seasonal and non-seasonal in FY15, roughly what was that split? And, roughly, what would you expect that split to be in FY16?

We don't give exact number on the split, but what I can say to you is that, of course as I mentioned, the seasonal products are the pillars of our business. But we saw a great response to also products that can be year-around.

And because of that, and because of the fact that we didn't develop the collection thinking about that in the past, that will be, of course, a journey, as everything. So will not change dramatically, but will be introduced. And you can have a sense of that by just walking through our current spring/summer collection that is on the website or is in the catalog. So you see that there are more products that can be used, again, for year-around.

I am always also thinking about how US, which is the biggest market for us, how the weather is there. 50% of the country is exposed to the warm weather year-around, so we need to consider that when we create a collection.

But, again, that will be made by always reducing the product SKUs that are non-productive and introducing more productive and opportunities. So will be, again, a journey. So this percentage, don't expect a dramatic change, but an increase season after season. Of course, we will be flexible in understanding the data and see the customer acceptance.

Okay, thank you. Jim, as it pertains to the inventory, can you delve a little deeper into the composition, what the percent of, say, aged inventory is within the particular pool of inventory currently? How you would expect the promotional cadence to look over the course of the next 6 to 12 months?

Would you -- the concern, of course, is that considering that inventory is up and some of it appears aged, that margins will remain under pressure due to high promotions in order to jettison the older inventory for what is now filing through some of the newer stuff. If you could delineate it a little clearer, that would be great.

Absolutely. As I mentioned in my prepared remarks, we are certainly sitting on a little bit more inventory than where we planned to be, where we wanted to be. And I also said that I think, from adjusting future receipts, we are going to be able to move back to a normalized level of inventory.

What I would tell you, though, is I am pretty happy actually with the quality of inventory. If you look at it both from an age perspective, we're in a better position today than what we were a year ago. And also, Federica talked a little bit about the seasonal and basic mix. We have a greater percentage of basic product than where we were a year ago. So as you think about how we're going to move through, I don't anticipate us needing a significant amount of mark-downs in order to move through this inventory. It will be more a matter of time and being able to adjust future receipts. And, based on our inventory commitments that we have out there, it's certainly going to take us a quarter or two to move through this.

But I wouldn't anticipate significant margin pressure as a result of the inventory. I think from a margin pressure, if anything, you're still talking a very competitive retail environment. You are still talking a very promotional retail environment. And if there is any margin pressure, I see it coming more from that than I do from our current inventory position.

Okay, that's great. Can you disclose what the plan was? You said was slightly above what you would have liked to have ended the year with on an increase. Can you talk a little bit about what the range may have been?

We are not going to get into specifics on the plan, but the year-over-year inventory is slightly higher. Now I would say that the prior-year inventory, if you go back and look at that, was probably also a little bit artificially lower than what a normalized inventory level would be. But, really, because of -- if you look at our performance in our top-line sales, that's really what drove a little bit of the excess inventory at the end of the year.

Okay. I have two other questions. As it pertains to the promotional cadence through 2016, can you comment? Federica, you have mentioned in the past that you endeavor to make the brand messaging less promotional to the customer and to dial back heightened promotions as what has occurred over 2014 and some of 2015. Are the 2016 promotional plans -- right now just the plans -- are they fewer or similar or more than 2015?

First of all, Steven, the most important thing is always to be in line with market, and that's our lesson, let's say, last year. So, every time we were not in line with the what was out there in the market, we actually needed to change because dialing back when everyone else is doing a very strong promotion, then you seem to just lose the top line.

But we did some tests to verify what is the way -- what's the best way to drive more high margin within the promotions. And so, this is the first thing. We have more data and more knowledge on how to drive higher margin in the promotion and how to do it, when to do it. I think that it was really the year where every one of us was sitting daily, especially in Q4, to define the best promotion to drive top line and margin.

This year we wish not to be that promotional. No one likes that. I think no company would like to be in that situation. And, definitely, it's not in the strategy to become more and more a brand with higher value, and we would like that the consumer shop to -- at Lands' End, not because of the promotion but because they like what we give to them. But, as we said, the consumers are becoming more and more price conscious. So, again, we want to be very flexible.

What I am doing with the launch of the new collection is also to see and to test product that can not be and will not be promoted as we used to for -- so far with the product offering that we have. So that will be another learning for us you will witness this year. So the intention is definitely to improve the margins, not to be as promotional. But, again, as I said, stay flexible and very diligent in driving top line, too.

That's helpful. And I just have one other question. You mentioned that there were some sweaters that were tested in the holiday season and you felt that you got some pretty good reads on them and can make better inventory decisions regarding those successful tests in, I would assume, the following season, in the fall/winter. Is it possible that the test-and-react model can represent a larger portion of Lands' End sales in future years than it has? Is this a tactic that you think you can use more aggressively and across categories?

For sure. As I am always saying, one of my pillars, on the three pillars, that is growth profitability, the third is the adaptability. The more you can adapt to the market needs, the faster you can do it, the bigger are the results. It is important to read the data and to react immediately on the data.

Of course, as you know, our product lead time is long. So we have to be able to read the data way before, but I think this is one of my skills. I am working with the team to make sure that we understand more the trends and the insight we can get from a first read. I am a very big fan, as my team also is, on the test for, not just the product, but on all the activities that we do.

Steve, I would add to that, too, in my comments on our incremental CapEx that we're spending this year, that's a big reason why we're investing there, too. We have data available at this Company but it's significant amount of homegrown systems. I think our investment in that infrastructure is not only going to allow us to get data -- more accurate data, but I think data that comes quicker and it's more actionable. So we can do more of these read-and-react tests and be more timely to market.

That's helpful. All the best.

Thank you.

I am not showing any further questions. This concludes the Q&A portion of today's call. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.