13 Weeks Ended

July 28, 2017

July 29, 2016

August 3, 2018

July 28, 2017

(in thousands)

$’s

% of
Net revenue

$’s

% of
Net revenue

Table of Contents

26 Weeks Ended
July 28, 2017 July 29, 2016
(in thousands) $’s % of
Net revenue $’s % of Net revenue
Net revenue $ 570,555
100.0 % $ 565,443
100.0 %
Cost of sales (excluding depreciation and amortization) 313,748
55.0 % 299,621
53.0 %
Gross profit 256,807
45.0 % 265,822
47.0 %
Selling and administrative 248,682
43.6 % 257,926
45.6 %
Depreciation and amortization 12,683
2.2 % 8,624
1.5 %
Other operating expense, net 1,988
0.3 % 46
— %
Operating loss (6,546 ) (1.1 )% (774 ) (0.1 )%
Interest expense 12,292
2.2 % 12,344
2.2 %
Other income, net (1,236 ) (0.2 )% (981 ) (0.2 )%
Loss before income taxes (17,602 ) (3.1 )% (12,137 ) (2.1 )%
Income tax benefit (5,883 ) (1.0 )% (4,398 ) (0.8 )%
NET LOSS $ (11,719 ) (2.1 )% $ (7,739 ) (1.4 )%



	26 Weeks Ended
	August 3, 2018					July 28, 2017
(in thousands)	$’s			% of Net revenue		$’s			% of Net revenue
Net revenue	$	607,770		100.0	%	$	570,555		100.0	%
Cost of sales (excluding depreciation and amortization)	337,979			55.6	%	313,748			55.0	%
Gross profit	269,791			44.4	%	256,807			45.0	%
Selling and administrative	253,041			41.6	%	248,682			43.6	%
Depreciation and amortization	13,058			2.1	%	12,683			2.2	%
Other operating (income) expense, net	290			—	%	1,988			0.3	%
Operating income (loss)	3,402			0.6	%	(6,546		)	(1.1	)%
Interest expense	13,913			2.3	%	12,292			2.2	%
Other (income) expense, net	3,452			0.6	%	(1,236		)	(0.2	)%
Loss before income taxes	(13,963		)	(2.3	)%	(17,602		)	(3.1	)%
Income tax benefit	(6,048		)	(1.0	)%	(5,883		)	(1.0	)%
NET LOSS	$	(7,915	)	(1.3	)%	$	(11,719	)	(2.1	)%

Depreciation and amortization is not included in our cost of sales because we are a reseller of inventory and do not believe that including depreciation and amortization is meaningful. As a result, our gross margins may not be comparable to other entities that include depreciation and amortization related to the sale of their product in their gross margin measure.

Net Loss and Adjusted EBITDA

We recorded a Net ~~loss~~losses of $5.3 million and $7.9 million in the Second Quarter 2018 and Year-to-Date 2018, respectively compared to $3.9 million and $11.7 million in the Second Quarter 2017 ~~compared to a Net loss of $2.0 million in Second Quarter 2016.~~and Year-to-Date 2017, respectively. In addition to our Net loss determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted EBITDA measurement. Adjusted EBITDA is computed as Net loss appearing on the Condensed Consolidated Statements of Operations net of Income tax benefit, Other income, net, Interest expense, Depreciation and amortization, and certain significant items set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our businesses for comparable periods, and as ~~well as~~an executive compensation ~~metrics, for comparable periods.~~metric. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and useful to investors, because:

EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax costs or benefits.

Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations.


◦	Transfer of corporate functions - severance and contract losses associated with a transition of certain corporate activities from our New York office to our Dodgeville headquarters.


◦	Gain or loss on ~~the sale of~~ property and equipment - management considers the gains or losses on ~~disposal of assets~~asset valuation to result from investing decisions rather than ongoing operations.

13 Weeks Ended

July 28, 2017
July 29, 2016
(in thousands)
$’s
% of
Net revenue
$’s
% of
Net revenue
Net loss
$ (3,880 )
(1.3 )%
$ (1,980 )
(0.7 )%
Income tax benefit
(1,619 )
(0.5 )%
(954 )
(0.3 )%
Other income, net
(494 )
(0.2 )%
(528 )
(0.2 )%
Interest expense
6,167

2.0 %
6,174

2.1 %
Operating income
174

0.1 %
2,712

0.9 %
Depreciation and amortization
6,175

2.0 %
4,488

1.5 %
Transfer of corporate functions
480

0.2 %
—

— %
Loss on disposal of property and equipment
—

— %
60

— %
Adjusted EBITDA
$ 6,829

2.3 %
$ 7,260

2.5 %

1922

Table of Contents


	26 Weeks Ended										13 Weeks Ended
	July 28, 2017					July 29, 2016					August 3, 2018					July 28, 2017
(in thousands)	$’s			% of Net revenue		$’s			% of Net revenue		$’s			% of Net revenue		$’s			% of Net revenue
Net loss	$	(11,719	)	(2.1	)%	$	(7,739	)	(1.4	)%	$	(5,285	)	(1.7	)%	$	(3,880	)	(1.3	)%
Income tax benefit	(5,883		)	(1.0	)%	(4,398		)	(0.8	)%	(429		)	(0.1	)%	(1,619		)	(0.5	)%
Other income, net	(1,236		)	(0.2	)%	(981		)	(0.2	)%
Other (income) expense, net											(412		)	(0.1	)%	(494		)	(0.2	)%
Interest expense	12,292			2.2	%	12,344			2.2	%	7,001			2.3	%	6,167			2.0	%
Operating loss	(6,546		)	(1.1	)%	(774		)	(0.1	)%
Operating income (loss)											875			0.3	%	174			0.1	%
Depreciation and amortization	12,683			2.2	%	8,624			1.5	%	6,897			2.2	%	6,175			2.0	%
Transfer of corporate functions	1,926			0.3	%	—			—	%	5			—	%	480			0.2	%
Loss on disposal of property and equipment	62			—	%	46			—	%
(Gain) on property and equipment											(52		)	—	%	—			—	%
Adjusted EBITDA	$	8,125		1.4	%	$	7,896		1.4	%	$	7,725		2.5	%	$	6,829		2.3	%



	26 Weeks Ended
	August 3, 2018					July 28, 2017
(in thousands)	$’s			% of Net revenue		$’s			% of Net revenue
Net loss	$	(7,915	)	(1.3	)%	$	(11,719	)	(2.1	)%
Income tax benefit	(6,048		)	(1.0	)%	(5,883		)	(1.0	)%
Other (income) expense, net	3,452			0.6	%	(1,236		)	(0.2	)%
Interest expense	13,913			2.3	%	12,292			2.2	%
Operating income (loss)	3,402			0.6	%	(6,546		)	(1.1	)%
Depreciation and amortization	13,058			2.1	%	12,683			2.2	%
Transfer of corporate functions	6			—	%	1,926			0.3	%
Loss on property and equipment	284			—	%	62			—	%
Adjusted EBITDA	$	16,750		2.8	%	$	8,125		1.4	%

In assessing the operational performance of our business, we consider a variety of financial measures. We operate in two reportable ~~segments,~~segments: Direct (sold through e-commerce websites and direct mail catalogs) and Retail (sold through stores). A key measure in the evaluation of our business is revenue performance by segment. We also consider gross margin and Selling and administrative expenses in evaluating the performance of our business.

To evaluate revenue performance for the Direct segment we use Net revenue. For our Retail segment, we use Same Store Sales as a key measure in evaluating performance. A store is included in Same Store Sales calculations on the first day it has comparable prior year sales. Stores in which the selling square footage has changed by 15% or more as a result of a remodel, expansion, reduction or relocation are excluded from Same Store Sales calculations until the first day they have comparable prior year sales. Online sales and sales generated through our in-store computer kiosks are considered revenue in our Direct segment and are excluded from Same Store Sales.

Discussion and Analysis

Second Quarter ~~2017~~2018 compared with Second Quarter ~~2016~~2017

Net Revenue

Net revenue for Second Quarter ~~2017~~2018 was ~~$302.2~~$307.9 million, compared with ~~$292.0~~$302.2 million in the comparable period of the prior year, an increase of ~~$10.2~~$5.8 million, or ~~3.5%~~1.9%. The increase was comprised of an increase in our Direct segment of ~~$13.5~~$16.7 million and a decrease in our Retail segment of ~~$3.4~~$10.9 million.

Direct segment Net revenue ~~in our Direct segment~~ was ~~$259.9~~$276.6 million for Second Quarter ~~2017,~~2018, an increase of ~~$13.5~~$16.7 million, or ~~5.5%~~6.4%, from the comparable period of the prior year. The increase in the Direct segment was primarily attributable to ~~an increase~~the remainder of the launch of our Delta Airlines business as well as the continued growth in our U.S. consumer business. We ~~increased circulation~~continued to increase our buyer file and ~~customer contacts~~our conversion rate in our U.S. consumer business ~~which resulted in an~~helping to drive the increase, ~~in revenue,~~ particularly in key items in our ~~Women's~~assortment such as swimwear, ~~product categories.~~shorts, cover ups, and dresses.

Table of Contents

Retail segment Net revenue ~~in our Retail segment~~ was ~~$42.2~~$31.3 million for Second Quarter ~~2017,~~2018, a decrease of ~~$3.4~~$10.9 million, or ~~7.4%~~25.8%, from the comparable period of the prior year. Same Store Sales declined 5.8% as compared to the same period of the prior year. The decrease was primarily attributable to a ~~decrease in the number~~reduction of 57 of our Lands’ End Shops at Sears ~~partially offset by an increase~~locations and a 6.7% decrease in Lands' End Shops at Sears Same Store Sales. Company Operated stores experienced a decrease of 0.6% in Same Store ~~Sales of 3.8%.~~Sales. On ~~July 28, 2017,~~August 3, 2018, the Company ~~operated~~had 147 Lands’ End Shops at Sears and 15 Company Operated stores compared with 204 Lands’ End Shops at Sears and 14 ~~global Lands’ End~~Company Operated stores ~~and no international shop-in-shops compared with 224 Lands’ End Shops at Sears, 13 global Lands’ End stores and four international shop-in-shops~~ on July ~~29, 2016.~~28, 2017.

Gross Profit

~~Total gross~~Gross profit ~~decreased $2.0~~increased $2.6 million to ~~$134.2~~$136.8 million and gross margin ~~decreased approximately 220 basis points~~increased slightly to 44.4% of total Net revenue, in Second Quarter ~~2017,~~2018, compared with ~~$136.2~~$134.2 million, or ~~46.6%~~44.4% of total Net revenue, in Second Quarter ~~2016.~~2017. The ~~gross~~Gross profit ~~decrease~~increase was comprised of ~~a decrease~~an increase in our Direct segment of ~~$1.0~~$7.5 million and a decrease in our Retail segment of ~~$1.0~~$4.9 million.

Direct segment Gross profit increased $7.5 million to $122.4 million in ~~the~~Second Quarter 2018 from $115.0 million in Second Quarter 2017. Direct segment ~~was $115.0 million compared with $116.0 million for Second Quarter 2017 and Second Quarter 2016, respectively. Gross~~gross margin ~~in the Direct segment decreased~~increased approximately ~~290~~10 basis points to ~~44.2%~~

44.3% of total Net revenue in Second Quarter ~~2017 versus 47.1%~~2018, compared with 44.2% of total Net revenue in Second Quarter 2017. The gross margin increase was driven by stronger merchandise margins and tighter inventory management of our seasonal assortment offset by the ~~comparable prior year period. The decrease in Gross~~lower margin ~~during second quarter was primarily attributable to increased shipping and net duty expenses, unfavorable changes in currency exchange rates as well as increased promotional activity.~~

Delta Airlines business. Retail segment ~~gross~~Gross profit decreased ~~$1.0~~$4.9 million to $14.3 million in Second Quarter 2018 from $19.1 million in Second Quarter ~~2017 from $20.1 million in Second Quarter 2016.~~2017. Retail segment gross margin increased approximately 40 basis points to 45.7% of Net revenue, in Second Quarter 2018, compared to 45.3% ~~for~~of Net revenue, in Second Quarter 2017 ~~compared~~through effective inventory management of our seasonal assortment, which led to ~~44.2% for Second Quarter 2016 driven by certain liquidation activities that occurred~~a reduction in ~~Second Quarter 2016 which did not occur in Second Quarter 2017.~~clearance sales and stronger merchandise margins.

Selling and Administrative Expenses

Selling and administrative expenses ~~were $127.3~~increased $1.7 million ~~or 42.1%~~to $129.0 million, a decrease of ~~total Net revenue compared with $128.9 million or 44.1%~~approximately 20 basis points to 41.9% of total Net revenue, in Second Quarter ~~2017 and~~2018, compared with $127.3 million, or 42.1% of Net revenue, in Second Quarter ~~2016, respectively.~~2017. The ~~decrease~~increase in Selling and administrative expenses was ~~primarily~~ due to an increase of $4.8 million in the Direct Segment and $0.3 million in Corporate expenses, offset by a decrease of ~~$2.3~~$3.4 million in the Retail ~~segment partially offset by an increase of $0.7 million in the Direct~~ segment.

~~The~~ Direct segment Selling and administrative expenses were $106.7 million, a decrease of approximately 60 basis points to 38.6% of Net revenue, in Second Quarter 2018, compared with $101.9 million, or 39.2% of Net revenue, in Second Quarter 2017. The basis point decrease was largely attributable to the leveraging of existing marketing expenses to drive higher sales volume, partially offset by increased incentive compensation.

Retail segment Selling and administrative expenses were $13.9 million, an increase of approximately 340 basis points to 44.4% of Net revenue, in Second Quarter 2018, compared with $17.3 million, or 41.0% of Net revenue, in Second Quarter 2017. The basis point increase was largely attributable to the reduction in the number of Lands' End Shops at Sears and negative same store sales.

Corporate / other Selling and administrative expenses were $8.4 million compared with ~~$101.2~~$8.1 million for Second Quarter ~~2017~~2018 and Second Quarter ~~2016,~~2017, respectively. The ~~$0.7~~$0.3 million, or ~~0.7%~~3.7%, increase was ~~primarily~~largely attributable to an increase in incentive compensation ~~expenses and a property tax refund received in Second Quarter 2016 which did not repeat in Second Quarter 2017, largely offset by lower marketing~~ expenses.

The Retail segment Selling and administrative expenses were $17.3 million compared with $19.6 million for Second Quarter 2017 and Second Quarter 2016, respectively. The $2.3 million or 11.8% decrease was largely attributable to a decrease in marketing expenses and occupancy costs.

Depreciation and Amortization

Depreciation and amortization expense was $6.9 million in Second Quarter 2018, an increase of $0.7 million or 11.7%, compared with $6.2 million in Second Quarter 2017, ~~an increase of $1.7 million or 37.6%, compared with $4.5 million in Second Quarter 2016,~~ primarily attributable to an increase in depreciation associated with our ongoing multi-year ERP system implementation. ~~During Second Quarter 2017, the Company placed $11.4 million of ERP assets in service. The useful lives of the assets are 3 to 7 years.~~

Other Operating (Income) Expense, Net

Other operating expense, net was insignificant in Second Quarter 2018 compared to $0.5 million in Second Quarter 2017, ~~compared~~primarily due to ~~$0.1~~severance charges associated with the transition of certain corporate activities from the New York office to the Company's Dodgeville headquarters in Second Quarter 2017.

Table of Contents

Operating Income (Loss)

Operating income was $0.9 million in Second Quarter ~~2016~~2018 compared to $0.2 million in Second Quarter 2017 primarily due to increased revenue driven by the Direct Segment and the leveraging of the existing cost structure.

Interest Expense

Interest expense was $7.0 million in Second Quarter 2018 compared to $6.2 million in Second Quarter 2017, reflective of a rising interest rate environment.

Other (Income) Expense, Net

Other income, net was $0.4 million in Second Quarter 2018 compared to $0.5 million in Second Quarter 2017.

Income Tax Benefit

The Income tax benefit was $0.4 million for Second Quarter 2018 compared to $1.6 million in Second Quarter 2017. The effective tax rate was 7.5% in Second Quarter 2018 compared with 29.4% in Second Quarter 2017. The lower benefit is primarily due to the Tax Act.

Net Loss

As a result of the above factors, Net loss was $5.3 million and diluted loss per share was $0.16 in Second Quarter 2018 compared with a Net loss of $3.9 million and diluted loss per share of $0.12 in Second Quarter 2017.

Adjusted EBITDA

As a result of the above factors, Adjusted EBITDA increased to $7.7 million in Second Quarter 2018 from $6.8 million in Second Quarter 2017.

Year-to-Date 2018 compared with Year-to-Date 2017

Net Revenue

Net revenue for Year-to-Date 2018 was $607.8 million, compared with $570.6 million in the comparable period of the prior year, an increase of $37.2 million or 6.5%. The increase was comprised of an increase in our Direct segment of $61.7 million and a decrease in our Retail segment of $24.5 million.

Direct segment Net revenue was $550.0 million for Year-to-Date 2018, an increase of $61.7 million, or 12.6%, from the comparable period of the prior year. The increase in the Direct segment was largely attributable to the launch of Delta Airlines business and an increase in our U.S. consumer business. In our U.S. consumer business, we increased our buyer file and conversion rate helping to drive increased revenue across our assortment.

Retail segment Net revenue was $57.8 million for Year-to-Date 2018, a decrease of $24.4 million, or 29.7%, from the comparable period of the prior year primarily due to the reduction of Lands' End Shops at Sears. Same Store Sales declined 12.4% compared to the same period of the prior year. The decrease was primarily attributable to a reduction of 57 of our Lands' End Shops at Sears locations and a 13.6% decrease in Lands' End Shops at Sears Same Store Sales. Company Operated stores experienced a decrease of 5.1% in Same Store Sales. On August 3, 2018, the Company operated 147 Lands’ End Shops at Sears and 15 global Lands’ End stores compared with 204 Lands’ End Shops at Sears and 14 Company Operated stores on July 28, 2017.

Gross Profit

Gross profit increased $13.0 million to $269.8 million and gross margin decreased approximately 60 basis points to 44.4% of Net revenue in Year-to-Date 2018, compared with $256.8 million, or 45.0% of Net revenue, in Year-to-Date 2017. The Gross profit increase was comprised of an increase in our Direct segment of $22.9 million offset by a decrease in our Retail segment of $9.9 million.

Direct segment Gross profit increased 10.3% to $245.5 million in Year-to-Date 2018 from $222.6 million in Year-to-Date 2017. Direct segment gross margin decreased approximately 100 basis points to 44.6% of Net revenue for Year-to-Date 2018, compared with 45.6% of Net revenue for Year-to-Date 2017. The gross margin decrease was

primarily attributable to increased promotional activity in the highly competitive retail environment as well as the ~~result~~launch of the lower margin Delta Airlines business.

Retail segment Gross profit decreased 28.7% to $24.3 million in Year-to-Date 2018 from $34.1 million in Year-to-Date 2017. Retail segment gross margin increased approximately 50 basis points to 42.0% of Net revenue, for Year-to-Date 2018, compared to 41.5% of Net revenue for Year-to-Date 2017 primarily attributable to tighter inventory management requiring lower markdowns of our assortment.

Selling and Administrative Expenses

Selling and administrative expenses increased 1.7% to $253.0 million, a decrease of approximately 200 basis points to 41.6% of Net revenue, in Year-to-Date 2018, compared with $248.7 million, or 43.6% of Net revenue, in Year-to-Date 2017. The increase in Selling and administrative expenses was primarily due to an increase of $9.7 million in the Direct segment and $1.7 million in Corporate expenses, partially offset by a decrease of $7.0 million in the Retail segment.

Direct segment Selling and administrative expenses were $207.4 million, a decrease of approximately 280 basis points to 37.7% of Net revenue, in Year-to-Date 2018, compared with $197.7 million, or 40.5% of Net revenue, for Year-to-Date 2017. The basis point decrease was largely attributable to improved cost leverage, partially offset by increased incentive compensation expense.

Retail segment Selling and administrative expenses were $28.5 million, an increase of approximately 620 basis points to 49.3% of Net revenue, in Year-to-Date 2018, compared with $35.5 million, or 43.2% of Net revenue, in Year-to-Date 2017. The basis point increase was largely attributable to the reduction in the number of Lands' End Shops at Sears and negative same store sales.

Corporate / other Selling and administrative expenses were $17.2 million compared with $15.5 million in Year-to-Date 2018 and Year-to-Date 2017, respectively. The $1.7 million, or 11.0%, increase was primarily due to an increase in incentive compensation expenses.

Depreciation and Amortization

Depreciation and amortization expense was $13.1 million in Year-to-Date 2018, an increase of $0.4 million, or 3.0%, compared with $12.7 million in Year-to-Date 2017, primarily attributable to an increase in depreciation associated with our ongoing multi-year ERP system implementation.

Other Operating (Income) Expense, Net

Other operating expense (income), net was expense of $0.3 million in Year-to-Date 2018 compared to $2.0 million in the Year-to-Date 2017, due to severance ~~charge~~charges in the Year-to-Date 2017 associated with the transition of certain corporate activities from the New York office to the Company's Dodgeville headquarters.

Operating Income (Loss)

Operating income ~~decreased to $0.2~~was $3.4 million in ~~Second Quarter 2017 from $2.7~~Year-to-Date 2018 compared to Operating loss of $6.5 million in ~~Second Quarter 2016~~Year-to-Date 2017. The increase was primarily due to ~~lower gross margin discussed above.~~improved growth in our Direct business, partially offset by closures of Lands' End Shops at Sears.

Interest Expense

Interest expense was ~~unchanged at $6.2~~$13.9 million in ~~Second Quarter 2017~~Year-to-Date 2018 compared to ~~$6.2~~$12.3 million in ~~Second Quarter 2016.~~Year-to-Date 2017, reflective of a rising interest rate environment.

Other (Income) Expense, Net

Other expense, net was $3.5 million in Year-to-Date 2018 compared to Other income, net of $1.2 million in Year-to-Date 2017. Other expense in Year-to-Date 2018 was primarily attributable to the reversal of indemnification assets from Sears Holdings Corporation for UTBs and accrued interest due to favorable state tax audit settlements for periods prior to the Separation.

Income Tax Benefit

Income tax benefit was ~~$1.6~~$6.0 million for ~~Second Quarter 2017~~Year-to-Date 2018 compared to ~~$1.0~~$5.9 million in ~~Second Quarter 2016.~~Year-to-Date 2017. The effective tax rate was ~~29.4%~~43.3% in ~~Second Quarter 2017~~Year-to-Date 2018 compared with ~~32.5%~~33.4% in ~~Second Quarter 2016.~~Year-to-Date 2017. The higher benefit resulted from the reversal of UTBs as a consequence of the favorable state tax audit settlements for periods prior to the Separation, partially offset by impacts of the Tax Act.

Net Loss

As a result of the above factors, Net loss was ~~$3.9~~$7.9 million and diluted loss per share was ~~$0.12~~$0.25 in ~~Second Quarter 2017~~Year-to-Date 2018 compared with Net loss of ~~$2.0~~$11.7 million and diluted loss per share of ~~$0.06 in Second Quarter 2016.~~

~~Adjusted EBITDA~~

~~As a result of the above factors, Adjusted EBITDA decreased to $6.8 million in Second Quarter 2017 from $7.3 million in Second Quarter 2016.~~

~~Year to Date 2017 compared with Year to Date 2016~~

~~Net Revenue~~

Net revenue for Year to Date 2017 was $570.6 million, compared with $565.4 million in the comparable period of the prior year, an increase of $5.1 million or 0.9%. The increase was comprised of an increase in our Direct segment of $9.6 million and a decrease in our Retail segment of $4.5 million.

Net revenue in our Direct segment was $488.2 million for Year to Date 2017, an increase of $9.6 million, or 2.0% from the comparable period of the prior year. The increase in the Direct segment was largely attributable to an increase in our U.S. consumer business. In our U.S. consumer business, we increased circulation and customer contacts which resulted in an increase in revenue, particularly in Women's swimwear.

Net revenue in our Retail segment was $82.2 million for Year to Date 2017, a decrease of $4.5 million, or 5.2% from the comparable period of the prior year. The decrease was driven by a decrease in the number of Lands’ End Shops at Sears, partially offset by an increase in Same Store Sales of 3.0%. On July 28, 2017, the Company operated 204 Lands’ End Shops at Sears, 14 global Lands’ End stores and no international shop-in-shops compared with 224 Lands’ End Shops at Sears, 13 global Lands’ End stores and four international shop-in-shops on July 29, 2016.

~~Gross Profit~~

Total gross profit decreased $9.0 million to $256.8 million and gross margin decreased approximately 200 basis points to 45.0% of total Net revenue in Year to Date 2017, compared with $265.8 million, or 47.0% of total Net revenue, in Year to Date 2016. The gross profit decrease was comprised of a decrease in our Direct segment of $6.7 million and a decrease in our Retail segment of $2.3 million.

Gross profit in the Direct segment was $222.6 million compared with $229.3 million for Year to Date 2017 and Year to Date 2016, respectively. Gross margin in the Direct segment decreased approximately 230 basis points to 45.6% in Year to Date 2017 versus 47.9% in the comparable prior year period. The decrease in Gross margin during second quarter was primarily attributable to increased promotional activity in the highly competitive retail environment, as well as increased shipping expenses and unfavorable changes in currency exchange rates.

Retail segment gross profit decreased $2.3 million to $34.1 million in Year to Date 2017 from $36.4 million in Year to Date 2016. Retail segment gross margin decreased to 41.4% for Year to Date 2017 compared to 42.0% for Year to Date 2016 driven by increased promotional activity in the highly competitive retail environment, partially offset by certain liquidation activities that occurred in Second Quarter 2016 which did not occur in Second Quarter 2017.

~~Selling and Administrative Expenses~~

Selling and administrative expenses were $248.7 million, or 43.6% of total Net revenue compared with $257.9 million or 45.6% of total Net revenue in Year to Date 2017 and Year to Date 2016, respectively. The decrease in Selling and administrative expenses was primarily due to a decrease of $4.0 million in the Direct segment, a decrease of $4.4 million in the Retail segment and a decrease of $0.8 million in the Corporate segment.

The Direct segment Selling and administrative expenses were $197.7 million compared with $201.7 million for Year to Date 2017 and Year to Date 2016, respectively. The $4.0 million or 2.0% decrease, was primarily attributable to a reduction in marketing expenses, partially offset by increased incentive compensation expense.

The Retail segment Selling and administrative expenses were $35.5 million compared with $39.9 million for Year to Date 2017 and Year to Date 2016, respectively. The $4.4 million or 11.0% decrease was primarily attributable to a decrease in marketing expenses as well as occupancy and other operating expenses associated with closed stores.

~~Corporate / other Selling and administrative expenses decreased to $15.5 million in Year to Date 2017 compared to $16.3 million in Year to Date 2016 due to personnel costs.~~

~~Depreciation and Amortization~~

Depreciation and amortization expense was $12.7 million in Year to Date 2017, an increase of $4.1 million or 47.1%, compared with $8.6 million in Year to Date 2016, primarily attributable to an increase in depreciation associated with our ongoing multi-year ERP system implementation. Year to Date 2017 we have placed $30.7 million of ERP related assets in service. The useful lives of the assets are 3 to 10 years.

~~Other Operating Expense, Net~~

Other operating expense, net was $2.0 million in Year to Date 2017 as the result of severance charges associated with the transition of certain corporate activities from the New York office to the Company's Dodgeville headquarters.

~~Operating Loss~~

~~Operating loss increased to a $6.5 million loss in Year to Date 2017 from $0.8 million in Year to Date 2016 primarily due to lower gross margin discussed above.~~

~~Interest Expense~~

~~Interest expense was unchanged at $12.3 million in Year to Date 2017 compared to $12.3 million in Year to Date 2016.~~

~~Income Tax Benefit~~

~~Income tax benefit was $5.9 million for Year to Date 2017 compared to $4.4 million in Year to Date 2016. The effective tax rate was 33.4% in Year to Date 2017 compared with 36.2% in Year to Date 2016.~~

~~Net Loss~~

~~As a result of the above factors, Net loss was $11.7 million and diluted loss per share was~~ $0.37 in ~~Year to Date 2017 compared with Net loss of $7.7 million and diluted loss per share of $0.24 in the Year to Date 2016.~~Year-to-Date 2017.

Adjusted EBITDA

As a result of the above factors, Adjusted EBITDA increased to $16.8 million in Year-to-Date 2018 from $8.1 million in ~~Year to Date 2017 from $7.9 million in Year to Date 2016.~~Year-to-Date 2017.

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Liquidity and Capital Resources

Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, debt service and for general corporate purposes. Our cash and cash equivalents and the Current ABL Facility serve as sources of liquidity for short-term working capital needs and general corporate purposes. We expect that our cash on hand and cash flows from operations, along with our Current ABL Facility, will be adequate to meet our capital requirements and operational needs for at least the next 12 months. Cash generated from our net sales and profitability, and somewhat to a lesser extent our changes in working capital, are driven by the seasonality of our business, with a disproportionate amount of ~~net~~Net revenue and operating cash flows generally occurring in the fourth fiscal quarter of each year.

Description of Material Indebtedness

Debt Arrangements

~~Lands’ End~~On November 16, 2017, the Company entered into the Current ABL Facility, which provides for maximum borrowings of $175.0 million for ~~Lands’~~the Company, subject to a borrowing base. The Current ABL Facility has a letter of credit sub-limit of $70.0 million. The Current ABL Facility is available for working capital and other general corporate purposes and was undrawn other than for $14.9 million in outstanding letters of credit.

Also on November 16, 2017, the Company terminated all loan related documents of the Prior ABL Facility and repaid all outstanding amounts thereunder.

The Prior ABL Facility provided for maximum borrowings of $175.0 million for Lands' End, subject to a borrowing base, with a $30.0 million sub facility for the UK Borrower. The Prior ABL Facility ~~has~~had a sub-limit of $70.0 million for domestic letters of credit and a sub-limit of $15.0 million for letters of credit for the UK Borrower. The Prior ABL Facility iswas available for working capital and other general corporate purposes and was undrawn ~~at July 28, 2017 and July 29, 2016,~~ other than for letters of credit. ~~The Company had borrowing availability under the ABL Facility of $164.6 million as of July 28, 2017, net of outstanding letters of credit of $10.4 million.~~

~~Also on~~On April 4, 2014, Lands’ End entered into the $515.0 million Term Loan Facility of which proceeds were used to pay a dividend of $500.0 million to a subsidiary of Sears Holdings Corporation immediately prior to the

Separation and to pay fees and expenses associated with the Debt Facilities of approximately $11.4 million, with the remaining proceeds used for general corporate purposes.

Maturity; Amortization and Prepayments

The ~~ABL Facility will mature on April 4, 2019. The~~ Term Loan Facility ~~will mature on April 4, 2021 and will amortize~~amortizes at a rate equal to 1% per annum, and is subject to mandatory prepayment in an amount equal to a percentage of the borrower’s excess cash flows (as defined in the Term Loan Facility) in each fiscal year, ranging from 0% to 50% depending on Lands’ End’s secured leverage ratio, and the proceeds from certain asset sales and casualty events.

The Term Loan Facility matures on April 4, 2021 while the Current ABL Facility will mature no later than November 16, 2022.

Guarantees; Security

All domestic obligations under the Debt Facilities are unconditionally guaranteed by ~~Lands’ End~~the Company and, subject to certain exceptions, each of its existing and future direct and indirect wholly-owned domestic subsidiaries. ~~In addition, the obligations of the UK Borrower under the~~The Current ABL Facility ~~are guaranteed by its existing and future direct and indirect subsidiaries organized~~ in ~~the United Kingdom. The ABL Facility is~~ secured by a first priority security interest in certain working capital of the borrowers and guarantors consisting primarily of accounts receivable and inventory. The Term Loan Facility is secured by a second priority security interest in the same collateral, with certain exceptions.

The Term Loan Facility also is secured by a first priority security interest in certain property and assets of the borrowers and guarantors, including certain fixed assets and stock of subsidiaries. The Current ABL Facility is secured by a second priority security interest in the same collateral.

The Prior ABL Facility had the same terms to those stated above. In addition, the obligations of the UK Borrower under the Prior ABL Facility were guaranteed by its existing and future direct and indirect subsidiaries organized in the United Kingdom.

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Interest; Fees

The interest rates per annum applicable to the loans under the Debt Facilities are based on a fluctuating rate of interest measured by reference to, at the borrowers’ election, either (i) an adjusted LIBOR rate plus a borrowing margin, or (ii) an alternative base rate plus a borrowing margin. The borrowing margin is fixed for the Term Loan Facility at 3.25% in the case of LIBOR loans and 2.25% in the case of base rate loans. For the Term Loan Facility, LIBOR is subject to a 1% interest rate floor. The borrowing margin for the ABL ~~Facility~~Facilities is subject to adjustment based on the average excess availability under the ABL ~~Facility~~Facilities for the preceding fiscal ~~quarter, and will range from 1.50% to 2.00% in~~quarter. In the case of LIBOR borrowings this adjustment will range from 1.25% to 1.75% and 1.50% to 2.00% for the Current ABL Facility and Prior ABL Facility, respectively. Base rate borrowings will range from 0.50% to 1.00% infor the ~~case of base rate borrowings.~~ABL Facilities.

Customary agency fees are payable pursuant to the terms of the Debt Facilities. The ABL ~~Facility~~Facilities fees also include (i) commitment fees ~~based on a percentage ranging from approximately~~in an amount equal to 0.25% and 0.25% to 0.375% of the daily unused portions of the ~~facility,~~Current ABL Facility and Prior ABL Facility, respectively, and (ii) customary letter of credit fees.

Representations and Warranties; ~~Covenant~~sCovenants

Subject to specified exceptions, the Debt Facilities contain various representations and warranties and restrictive covenants that, among other things, restrict the ability of Lands’ End and its subsidiaries to incur indebtedness (including guarantees), grant liens, make investments, make dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers or change the nature of their business. In addition, if excess availability under the Current ABL Facility falls below the greater of 10% of the loan cap amount or ~~$15~~$15.0 million, Lands’ End will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0. The Debt Facilities do not otherwise contain financial maintenance covenants. The Company was in compliance with all financial covenants related to the Debt Facilities as of ~~July 28, 2017.~~August 3, 2018.

The Debt Facilities contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance, and providing additional guarantees and collateral in certain circumstances.

Events of Default

The Debt Facilities include customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross defaults related to certain other material

indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, and material judgments and change of control.

Cash Flows from Operating Activities

~~Operating~~Net cash provided by operating activities ~~used~~increased to $24.8 million in the Year-to-Date 2018 from a net cash use of $13.2 million in the Year-to-Date 2017, primarily driven by improved working capital management through:

Improved inventory management reducing both overall and ~~provided net cash of $2.1 million for Year to Date 2017 and Year to Date 2016, respectively, primarily~~aged inventory,

Lower Accounts payable payments in Fiscal 2018 due to ~~the combination of:~~timing of inventory receipts and payments,

~~Increased use of cash to pay down accounts payable~~Higher receipts from Accounts receivable, net in Fiscal 2018 due to ~~higher payables entering~~high customer receivables outstanding at the ~~current~~beginning of the year ~~and~~

~~Increased inventory build due~~related to ~~more timely receipts in~~ the ~~current year.~~Delta Airlines launch.

Cash Flows from Investing Activities

Net cash used in investing activities was $22.2 million and $20.2 million for Year-to-Date 2018 and ~~$18.0 million for Year to Date~~Year-to-Date 2017, ~~and Year to Date 2016,~~ respectively. Cash used in investing activities for both periods was primarily used for investments to update our information technology infrastructure and property and equipment.

For Fiscal ~~2017,~~2018, we plan to invest a total of approximately $35.0 million to $45.0 million in capital expenditures for strategic investments and infrastructure, primarily associated with our ERP investment, other technology investments and general corporate needs.

Cash Flows from Financing Activities

Net cash used by financing activities was $3.1 million and $3.2 million for Year-to-Date 2018 and ~~$3.0 million for Year to Date~~Year-to-Date 2017, ~~and Year to Date 2016,~~ respectively, consisting primarily of our quarterly payments ~~for the~~on our Term ~~Loan.~~Loan Facility.

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Contractual Obligations and Off-Balance-Sheet Arrangements

There have been no material changes to our contractual obligations and off-balance-sheet arrangements as discussed in our Annual Report on Form 10-K for the fiscal year ended ~~January 27, 2017.~~February 2, 2018.

Financial Instruments with Off-Balance-Sheet Risk

~~Lands’ End~~On November 16, 2017, the Company entered into ~~the ABL Facility,~~an asset-based lending credit agreement with Wells Fargo Bank, National Association, which provides for maximum borrowings of $175.0 million for ~~Lands’ End,~~the Company, subject to a borrowing ~~base, with a $30.0 million sub facility for the UK Borrower.~~base. The Current ABL Facility has a letter of credit sub-limit of $70.0 ~~million~~million. The Current ABL Facility is available for ~~domestic letters of credit~~working capital and ~~a sub-limit of $15.0 million~~other general corporate purposes. The Current ABL Facility will mature no later than November 16, 2022, subject to customary extension provisions provided for ~~letters of credit for the UK Borrower.~~therein. The Current ABL Facility is available for working capital and other general corporate purposes and was undrawn at ~~July 28, 2017 and July 29, 2016,~~May 4, 2018, other than for ~~letters of credit. The Company had borrowing availability under the ABL Facility of $164.6~~$14.9 million ~~as of July 28, 2017, net of~~in outstanding letters of ~~credit~~credit.

Also on November 16, 2017, the Company terminated all loan related documents of ~~$10.4 million.~~the Prior ABL Facility and repaid all outstanding amounts thereunder.

Application of Critical Accounting Policies and Estimates

We believe that the assumptions and estimates associated with revenue, inventory valuation, goodwill and intangible asset impairment assessments and income taxes have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

~~There have been no material changes to the~~For a complete discussion of our critical accounting policies, ~~and estimates described in~~please refer to our Annual Report on Form 10-K for the ~~fiscal~~ year ended ~~January 27, 2017.~~February 2, 2018, and Note 2, Recent Accounting Pronouncements. There have been no significant changes in our critical accounting policies or their application since February 2, 2018, except as described below.

~~As previously discussed, Lands' End reviews~~Effective First Quarter 2018, we adopted authoritative guidance related to revenue recognition from contracts with customers using the ~~Company's indefinite-lived intangible asset,~~modified retrospective method. The comparative information presented in the ~~Lands’ End trade name,~~Condensed Consolidated Financial Statements was not restated and is reported under the accounting standards in effect for ~~impairment by comparing~~ the ~~carrying amount~~periods presented. The adoption of ~~the asset to the fair value on an annual basis, or more frequently if events occur or changes in circumstances indicate that the carrying value~~this guidance did not have, and is not ~~recoverable. At the date of its most recent annual impairment assessment, Lands' End determined that the~~expected to have, a significant impact on our reported revenue, gross margins or income ~~approach, specifically the relief~~ from ~~royalty method, was most appropriate~~operations. However, we have implemented a change in our balance sheet presentation for ~~analyzing the Company's indefinite-lived asset. This method is based on the assumption that, in lieu of ownership,~~expected product returns and are now reporting a ~~firm would be willing to pay a royalty in order to exploit the related benefits of this~~product return asset ~~class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates~~ for the ~~assets~~right to receive returned products and ~~(2) the application of these royalty rates~~a returns liability for amounts expected to ~~a revenue stream and discounting the resulting cash flows~~be refunded to determine a value. The Company multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the asset. The cash flows were then discounted to present value by the selected discount rate and compared to the carrying value of the asset.

Ascustomers as a result of product returns, where these were previously netted in Other current liabilities. The product return asset is reported within Prepaid expenses and other current assets. The returns liability and payments received from customers for future delivery of products are reported within Other current liabilities in the Fiscal 2016 annual impairment assessment, the Company recorded a non-cash pretax intangible asset impairment charge of $173.0 million during Fiscal 2016 to reduce the carrying value of the trade name to the fair value. During Year to Date 2017, there were no events or changes in circumstances that indicated that the carrying value of Lands' End trade name is not recoverable. As such, an impairment assessment was not performed and there was no impairment charge related to the trade name in Year to Date 2017. If actual results are not consistent with our estimates and assumptions used in estimating revenue growth, future cash flows and asset fair values, we could incur further impairment charges for the intangible asset or goodwill, which could have an adverse effect on our results of operations. The annual test for impairment will be conducted as of the end of Fiscal November 2017.Condensed Consolidated Balance Sheets.

Recent Accounting Pronouncements

See Part I, Item 1, Note ~~13 –~~ 2, Recent Accounting Pronouncements, of the Condensed Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q for information regarding recent accounting ~~pronouncements~~pronouncements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

~~Certain~~This document contains forward-looking statements. Forward-looking statements ~~made in this Quarterly Report on Form 10-Q contain~~reflect our current views with respect to, among other things, future events and performance. These statements may discuss, among other things, our net sales, gross margin, operating expenses, operating income, net income, cash flow, financial condition, impairments, expenditures, growth, strategies, plans, achievements, dividends, capital structure, organizational structure, future store openings, market opportunities and general market and industry conditions. We generally identify forward-looking statements ~~including~~by words such as "anticipate," "estimate," "expect," "intend," "project," "plan," "predict," "believe," "seek," "continue," "outlook," "may," "might," "will," "should," "can have," "likely" or the negative version of these words or comparable words. Forward-looking statements ~~about our strategies~~are based on beliefs and ~~our opportunities for growth.~~assumptions made by management using currently available information. These statements are only predictions and are not guarantees of future performance, actions or events. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or

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uncertainties ~~that may cause our actual results, performance~~materialize, or ~~achievements~~if management’s underlying beliefs and assumptions prove to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include without limitation information concerning our future financial performance, business strategy, plans, goals and objectives.

Statements preceded or followed by, or that otherwise include, the words “believes,” “expects,” “anticipates,” “intends,” “project,” “estimates,” “plans,” “forecast,” “is likely to” and similar expressions or future or conditional verbs such as “will,” “may,” “would,” “should” and “could” are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actualincorrect, actual results may differ materially from those ~~set forth in the~~contemplated by a forward-looking ~~statements.~~

~~The following important factors~~statement. These risks and uncertainties ~~among others, could cause actual results to differ materially from~~include those ~~described in these forward-looking statements: our ability to offer merchandise and services that customers~~

want to purchase; changes in customer preference from our branded merchandise; customers' use of our digital platform, including customer acceptance of our efforts to enhance our e-commerce websites; customer response to our marketing efforts across all types of media; our maintenance of a robust customer list; our dependence on information technology and a failure of information technology systems, including with respect to our e-commerce operations, or an inability to upgrade or adapt our systems; the success of our ERP implementation; fluctuations and increases in costs of raw materials; impairment of our relationships with our vendors; our failure to maintain the security of customer, employee or company information; our failure to compete effectively in the apparel industry; the performance of our “store within a store” business; if Sears Holdings Corporation sells or disposes of its retail stores, including pursuant to the recapture rights granted to Seritage Growth Properties, and other parties or if its retail business does not attract customers or does not adequately provide services to the Lands’ End Shops at Sears; legal, regulatory, economic and political risks associated with international trade and those markets in which we conduct business and source our merchandise; our failure to protect or preserve the image of our brands and our intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide us with services in connection with certain aspects of our business to perform their obligations; our failure to timely and effectively obtain shipments of products from our vendors and deliver merchandise to our customers; reliance on promotions and markdowns to encourage customer purchases; our failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the seasonal nature of our business; the adverse effect on our reputation if our independent vendors do not use ethical business practices or comply with applicable laws and regulations; assessments for additional state taxes; incurrence of charges due to impairment of goodwill, other intangible assets and long-lived assets; the impact on our business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; the impact of increased costs due to a decrease in our purchasing power following our separation from Sears Holdings (“Separation”) and other losses of benefits associated with being a subsidiary of Sears Holdings; the failure of Sears Holdings or its subsidiaries to perform under various transaction agreements or our failure to have necessary systems and services in place when certain of the transaction agreements expire; our agreements related to the Separation and certain agreements related to our continuing relationship with Sears Holdings were negotiated while we were a subsidiary of Sears Holdings and we may have received better terms from an unaffiliated third party; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement; the ability of our principal shareholders to exert substantial influence over us; adverse effects of the Separation on our business; potential liabilities under fraudulent conveyance and transfer laws and legal capital requirements; and other risks, uncertainties and factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended ~~January 27, 2017. We intend the forward-looking~~February 2, 2018. Forward-looking statements to speak only as of the ~~time made and do not undertake~~date on which they are made. We expressly disclaim any obligation to update or revise ~~them~~any forward-looking statement, whether as ~~more~~a result of new information, ~~becomes available,~~future events or otherwise, except as required by ~~law.~~applicable securities laws and regulations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in currency rates. A significant portion of our business is transacted in U.S. dollars, and is expected to continue to be transacted in U.S. dollars or U.S. dollar-based currencies. As of ~~July 28, 2017,~~August 3, 2018, we had ~~$40.2~~$25.3 million of cash denominated in foreign currencies, principally in British Pound Sterling, Euros and Yen. We do not enter into financial instruments for trading purposes or hedging and have not used any derivative financial instruments. We do not consider our foreign earnings to be permanently reinvested.

We are subject to interest rate risk with ~~our~~the Term Loan Facility and ~~our~~the Current ABL Facility, as both require usthe Company to pay interest on outstanding borrowings at variable rates. Each one percentage point change in interest rates associated with the Term Loan Facility would result in a ~~$5.1~~$4.9 million change in our annual cash interest expenses. Assuming our Current ABL Facility was fully drawn to a principal amount equal to $175.0 million, each one percentage point change in interest rates would result in a $1.8 million change in our annual cash interest expense.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Based on their evaluation for the period covered by this Quarterly Report on Form 10-Q, Lands’ End’s Chief Executive Officer and President and Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer have concluded that, as of ~~July 28, 2017,~~August 3, 2018, the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) are effective.

Changes in Internal Control over Financial Reporting

During the Second Quarter ~~2017,~~2018, the Company implemented ~~the~~ additional ~~phases of~~capabilities to upgrade our inventory purchase order and matching systems related to a multi-year implementation of a global enterprise resource planning ("ERP") ~~system. The new ERP~~ system was designed to better support our business needs in response to the changing operating environment. The implementation of a worldwide ERP system will likely affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness as the implementation progresses.. The Company expects that the new ERP system will enhance the overall system of internal controls over financial reporting through further automation and integration of business processes, although it is not being implemented in response to any identified deficiency in the Company’s internal controls over financial reporting.

Other than the ERP implementation, there have been no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15 under the Exchange Act during the second fiscal quarter ended ~~July 28, 2017~~August 3, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various claims, legal proceedings and investigations arising in the ordinary course of business. Some of these actions involve complex factual and legal issues and are subject to uncertainties. At this time, the Company is not able to either predict the outcome of these legal proceedings or reasonably estimate a potential range of loss with respect to the proceedings. While it is not feasible to predict the outcome of pending claims, proceedings and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on our results of operations, cash flows or financial position.

See Part I, Item 1 "Financial Statements - Notes to Condensed Consolidated Financial Statements," Note 9 Commitments and Contingencies - Legal Proceedings for additional information regarding legal proceedings (incorporated herein by reference).

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended ~~January 27, 2017,~~February 2, 2018, which was filed with the SEC on March ~~31, 2017.~~29, 2018.

ITEM 6. EXHIBITS



3.1		Amended and Restated Certificate of Incorporation of ~~Lands’~~Lands' End, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Lands’ End, Inc. on March 20, 2014 (File No. 001-09769)).

3.2		Amended and Restated Bylaws of ~~Lands’~~Lands' End, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on April 8, 2014 (File No. 001-09769)).

10.1		~~Form~~Letter Agreement with respect to RRC/CRC Charges, dated as of ~~Restricted Stock Unit~~July 9, 2018, by and between Sears, Roebuck and Co. and Lands' End, Inc., amending Lands' End Shops at Sears Retail Operations Agreement, ~~(Time-Based Vesting) (for use under Company stock plans)~~dated as of April 4, 2014.*

10.2		~~Form~~Letter Agreement with respect to Assistant Store Manager - Apparel Charges, dated as of ~~Stock Option~~July 9, 2018, by and between Sears, Roebuck and Co. and Lands' End, Inc., amending Lands' End Shops at Sears Retail Operations Agreement, ~~(for use under Company stock plans)~~dated as of April 4, 2014.*

31.1		Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.*

31.2		Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.*

32.1		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

*	Filed herewith.

**	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Lands’ End, Inc.

(Registrant)

Dated: ~~August 31, 2017~~September 6, 2018



By:	/s/ James F. Gooch
	James F. Gooch
	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer (Principal Financial Officer)

2936

% of
Net revenue

$’s

% of
Net revenue

Net revenue

302,190

100.0

292,010

100.0

307,945

100.0

302,190

100.0

Cost of sales (excluding depreciation and amortization)

168,025

55.6

155,858

53.4

171,179

55.6

168,025

55.6

Gross profit

134,165

44.4

136,152

46.6

136,766

44.4

134,165

44.4

Selling and administrative

127,336

42.1

128,892

44.1

129,041

41.9

127,336

42.1

Depreciation and amortization

6,175

2.0

4,488

1.5

6,897

2.2

6,175

2.0

Other operating expense, net

480

0.2

—

Operating income

174

0.1

2,712

0.9

Other operating (income) expense, net

(47

)

—

480

0.2

Operating income (loss)

875

0.3

174

0.1

Interest expense

6,167

2.0

6,174

2.1

7,001

2.3

6,167

2.0

Other income, net

(494

)

(0.2

(528

)

(0.2

Other (income) expense, net

(412

)

(0.1

(494

)

(0.2

Loss before income taxes

(5,499

)

(1.8

(2,934

)

(1.0

(5,714

)

(1.9

(5,499

)

(1.8

Income tax benefit

(1,619

)

(0.5

(954

)

(0.3

(429

)

(0.1

(1,619

)

(0.5

NET LOSS

(3,880

)

(1.3

(1,980

)

(0.7

(5,285

)

(1.7

(3,880

)

(1.3



Delaware		36-2512786
(State or Other Jurisdiction of Incorporation of Organization)		(I.R.S. Employer Identification No.)

1 Lands’ End Lane Dodgeville, Wisconsin		53595
(Address of Principal Executive Offices)		(Zip Code)



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

Emerging growth company	¨



		Page

	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Statements of Operations	1

	Condensed Consolidated Statements of Comprehensive Operations	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1619

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2632

Item 4.	Controls and Procedures	2733

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	2734

Item 1A.	Risk Factors	2734

Item 6.	Exhibits	2835

	Signatures	2936


(in thousands, except share data)	July 28, 2017			July 29, 2016			January 27, 2017			August 3, 2018			July 28, 2017			February 2, 2018
ASSETS
Current assets
Cash and cash equivalents	$	176,955		$	210,736		$	213,108		$	194,391		$	176,955		$	195,581
Restricted cash	3,300			3,300			3,300			1,953			3,300			2,356
Accounts receivable, net	24,632			29,287			39,284			25,925			24,632			49,860
Inventories, net	370,470			354,739			325,314			349,597			370,470			332,297
Prepaid expenses and other current assets	36,216			31,781			26,394			40,967			36,216			26,659
Total current assets	611,573			629,843			607,400			612,833			611,573			606,753
Property and equipment, net	126,825			112,682			122,836			142,261			126,825			136,501
Goodwill	110,000			110,000			110,000			110,000			110,000			110,000
Intangible asset, net	257,000			430,000			257,000			257,000			257,000			257,000
Other assets	17,007			15,913			17,155			8,349			17,007			13,881
TOTAL ASSETS	$	1,122,405		$	1,298,438		$	1,114,391		$	1,130,443		$	1,122,405		$	1,124,135
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	181,685		$	174,940		$	162,408		$	186,207		$	181,685		$	155,874
Other current liabilities	85,415			82,212			86,446			91,747			85,415			100,257
Total current liabilities	267,100			257,152			248,854			277,954			267,100			256,131
Long-term debt, net	488,146			491,941			490,043			484,350			488,146			486,248
Long-term deferred tax liabilities	91,015			155,451			90,467			58,420			91,015			59,137
Other liabilities	14,144			16,539			13,615			10,494			14,144			15,526
TOTAL LIABILITIES	860,405			921,083			842,979			831,218			860,405			817,042
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01- authorized: 480,000,000 shares; issued and outstanding: 32,087,532, 32,029,359 and 32,029,359, respectively	320			320			320
Common stock, par value $0.01 authorized: 480,000,000 shares; issued and outstanding: 32,212,290, 32,087,532 and 32,101,793, respectively										320			320			320
Additional paid-in capital	345,139			345,598			343,971			349,338			345,139			347,175
Retained (deficit) earnings	(72,172		)	41,590			(60,453		)
Accumulated deficit										(36,665		)	(72,172		)	(29,810		)
Accumulated other comprehensive loss	(11,287		)	(10,153		)	(12,426		)	(13,768		)	(11,287		)	(10,592		)
Total stockholders’ equity	262,000			377,355			271,412			299,225			262,000			307,093
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,122,405		$	1,298,438		$	1,114,391		$	1,130,443		$	1,122,405		$	1,124,135


	26 Weeks Ended						26 Weeks Ended
(in thousands)	July 28, 2017			July 29, 2016			August 3, 2018			July 28, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(11,719	)	$	(7,739	)	$	(7,915	)	$	(11,719	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	12,683			8,624			13,058			12,683
Amortization of debt issuance costs	856			856			965			856
Loss on disposal of property and equipment	62			46
Loss on property and equipment							284			62
Stock-based compensation	1,800			1,752			2,696			1,800
Deferred income taxes	(88		)	(1,387		)	128			(88		)
Change in operating assets and liabilities:
Inventories	(43,493		)	(25,983		)	(20,223		)	(43,493		)
Accounts payable	22,434			34,472			33,678			22,434
Other operating assets	5,603			(4,015		)	18,545			5,603
Other operating liabilities	(1,333		)	(4,552		)	(16,384		)	(1,333		)
Net cash (used in) provided by operating activities	(13,195		)	2,074
Net cash provided by (used in) operating activities							24,832			(13,195		)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment	—			44
Purchases of property and equipment	(20,223		)	(18,017		)	(22,203		)	(20,223		)
Net cash used in investing activities	(20,223		)	(17,973		)	(22,203		)	(20,223		)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loan facility	(2,575		)	(2,575		)	(2,575		)	(2,575		)
Payments of employee withholding taxes on share-based compensation	(629		)	(396		)	(533		)	(629		)
Net cash used in financing activities	(3,204		)	(2,971		)	(3,108		)	(3,204		)
Effects of exchange rate changes on cash	469			1,238
NET DECREASE IN CASH AND CASH EQUIVALENTS	(36,153		)	(17,632		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	213,108			228,368
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	176,955		$	210,736
Effects of exchange rate changes on cash, cash equivalents and restricted cash							(1,114		)	469
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH							(1,593		)	(36,153		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD							197,937			216,408
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD							$	196,344		$	180,255
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment	$	4,438		$	2,297		$	4,990		$	4,438
Income taxes paid, net of refunds	$	3,082		$	3,067		$	1,349		$	3,802
Interest paid	$	11,257		$	11,291		$	12,938		$	11,257



x	Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934



¨	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934



(in thousands)	February 2, 2018(As reported)			Impact of Adoption		February 3, 2018
Assets:
Prepaid expenses and other current assets	$	26,659		$	10,425	$	37,084

Liabilities:
Other current liabilities	100,257			9,365		109,622

Stockholders' Equity:
Accumulated deficit	(29,810		)	1,060		(28,750		)



	August 3, 2018
(in thousands)	Balances Without Adoption			Impact of Adoption		As Reported
Assets:
Prepaid expenses and other current assets	$	31,757		$	9,210	$	40,967

Liabilities:
Other current liabilities	83,657			8,090		91,747

Stockholders' Equity:
Accumulated deficit	(37,785		)	1,120		(36,665		)



	13 Weeks Ended						26 Weeks Ended
(in thousands, except per share amounts)	July 28, 2017			July 29, 2016			July 28, 2017			July 29, 2016
Net loss	$	(3,880	)	$	(1,980	)	$	(11,719	)	$	(7,739	)

Basic weighted average shares outstanding	32,079			32,024			32,054			32,013
Dilutive effect of stock awards	—			—			—			—
Diluted weighted average shares outstanding	32,079			32,024			32,054			32,013

Basic loss per share	$	(0.12	)	$	(0.06	)	$	(0.37	)	$	(0.24	)
Diluted loss per share	$	(0.12	)	$	(0.06	)	$	(0.37	)	$	(0.24	)


~~ii.~~	Stock option awards ("Option Awards") which provide the recipient with the option to purchase a set number of shares at a stated exercise price over the term of the contract, which is 10 years for all Option Awards granted.



	Deferred Awards				Option Awards			Performance Awards
(in thousands, except per share amounts)	Number of Shares		Weighted Average Grant Date Fair Value per Share		Number of Shares	Weighted Average Grant Date Fair Value per Share		Number of Shares		Weighted Average Grant Date Fair Value per Share
Outstanding as of January 27, 2017	252		$	24.42	—	$	—	69		$	26.38
Granted	395		21.99		343	8.73		—		—
Vested	(47	)	25.20		—	—		(41	)	28.33
Exercised	—		—		—	—		—		—
Forfeited or expired	(55	)	25.04		—	—		(28	)	23.47
Outstanding as of July 28, 2017	545		22.47		343	8.73		—		—



Risk-free interest rate	1.82%	-	1.90%
Expected dividend yield	—%	-	—%
Volatility	45.59%	-	46.12%
Expected life (in years)	6.25	-	6.25
Weighted average exercise price per share	$18.10	-	$22.00


ii.	Stock option awards ("Option Awards") provide the recipient with the option to purchase a set number of shares at a stated exercise price over the term of the contract, which is ten years for all Option Awards currently outstanding. Options are granted with a strike price equal to the stock price on the date of grant.