(Registrant’s Telephone Number Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		LE		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES~~ x NO ¨

Yes☒No☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files) ~~YES~~ x NO ¨

. Yes☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of ~~“large~~"large accelerated ~~filer”, “accelerated filer”,~~filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	¨	Accelerated filer	x ☒

Non-accelerated filer	☐	¨	Smaller reporting company	¨ ☐

Emerging growth company	☐	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ~~YES~~ ¨ NO x

Yes☐No☒

As of ~~December 5, 2017,~~August 27, 2021, the registrant had ~~32,097,483~~32,981,027 shares of common stock, $0.01 par value, outstanding.

LANDS’ END, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED ~~OCTOBER 27, 2017~~

JULY 30, 2021

TABLE OF CONTENTS

			Page

				~~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

	Condensed Consolidated Statements of Changes in Stockholders' Equity		5

	Notes to Condensed Consolidated Financial Statements		5 6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		19 17

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		31 30

Item 4.		Controls and Procedures		31

		PART II OTHER INFORMATION		32

Item 1.	Legal Proceedings	~~LegalProceedings~~		32

Item 1A.		Risk Factors		32

Item 6.	Exhibits	~~Exhibits~~		32 33

	Signatures	~~Signatures~~		32 34

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LANDS’ END, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	13 Weeks Ended					26 Weeks Ended
(in thousands, except per share data)	July 30, 2021			July 31, 2020		July 30, 2021			July 31, 2020
Net revenue	$	384,109		$	312,083	$	705,406		$	529,091
Cost of sales (excluding depreciation and amortization)		206,320			176,661		379,880			299,514
Gross profit		177,789			135,422		325,526			229,577

Selling and administrative		136,649			111,478		262,171			217,276
Depreciation and amortization		9,791			9,378		19,695			18,164
Other operating expense, net		—			3,373		443			7,656
Operating income (loss)		31,349			11,193		43,217			(13,519	)
Interest expense		8,837			4,916		17,897			10,227
Other (income) expense, net		(123	)		1,333		(290	)		1,160
Income (loss) before income taxes		22,635			4,944		25,610			(24,906	)
Income tax expense (benefit)		6,414			568		6,750			(8,639	)
NET INCOME (LOSS)	$	16,221		$	4,376	$	18,860		$	(16,267	)
NET INCOME (LOSS) PER COMMON SHARE
Basic:	$	0.49		$	0.13	$	0.57		$	(0.50	)
Diluted:	$	0.48		$	0.13	$	0.56		$	(0.50	)

Basic weighted average common shares outstanding		32,979			32,600		32,875			32,524
Diluted weighted average common shares outstanding		33,713			32,838		33,710			32,524

~~(Unaudited)~~

13 Weeks Ended 39 Weeks Ended
(in thousands, except per share data) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Net revenue $ 325,489

$ 311,476
$ 896,044
$ 876,919
Cost of sales (excluding depreciation and amortization) 183,515
177,825
497,262
477,446
Gross profit 141,974
133,651
398,782
399,473

Selling and administrative 129,122
132,365
377,804
390,291
Depreciation and amortization 6,347

4,795
19,031
13,419
Other operating expense (income), net 564
(86 ) 2,552
(40 )
Operating income (loss) 5,941
(3,423 ) (605 ) (4,197 )
Interest expense 6,350
6,149
18,642
18,493
Other income, net (576 ) (432 ) (1,812 ) (1,413 )
Income (loss) before income taxes 167
(9,140 ) (17,435 ) (21,277 )
Income tax expense (benefit) 5
(1,918 ) (5,878 ) (6,316 )
NET INCOME (LOSS) $ 162

$ (7,222 ) $ (11,557 ) $ (14,961 )
NET INCOME (LOSS) PER COMMON SHARE (Note 2)
Basic: $ 0.01

$ (0.23 ) $ (0.36 ) $ (0.47 )
Diluted: $ 0.01
$ (0.23 ) $ (0.36 ) $ (0.47 )

Basic weighted average common shares outstanding 32,095

32,029
32,068
32,018
Diluted weighted average common shares outstanding 32,117

32,029
32,068
32,018

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Comprehensive Operations

(Unaudited)

	13 Weeks Ended					26 Weeks Ended
(in thousands)	July 30, 2021			July 31, 2020		July 30, 2021		July 31, 2020
NET INCOME (LOSS)	$	16,221		$	4,376	$	18,860	$	(16,267	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		(36	)		1,382		275		123
COMPREHENSIVE INCOME (LOSS)	$	16,185		$	5,758	$	19,135	$	(16,144	)

~~(Unaudited)~~

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
NET INCOME (LOSS) $ 162
$ (7,222 ) $ (11,557 ) $ (14,961 )
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments (79 )
(2,183 ) 1,060
(2,952 )
COMPREHENSIVE INCOME (LOSS) $ 83
$ (9,405 ) $ (10,497 ) $ (17,913 )

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share data)	July 30, 2021			July 31, 2020			January 29, 2021
ASSETS
Current assets
Cash and cash equivalents	$	39,223		$	62,624		$	33,933
Restricted cash		2,102			1,843			1,861
Accounts receivable, net		30,203			24,367			37,574
Inventories, net		464,291			441,510			382,106
Prepaid expenses and other current assets		31,127			48,095			40,356
Total current assets		566,946			578,439			495,830
Property and equipment, net		136,714			153,003			145,288
Operating lease right-of-use asset		33,989			37,882			35,475
Goodwill		106,700			106,700			106,700
Intangible asset, net		257,000			257,000			257,000
Other assets		4,347			4,300			5,215
TOTAL ASSETS	$	1,105,696		$	1,137,324		$	1,045,508
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	13,750		$	—			13,750
Accounts payable		211,916			202,629			134,007
Lease liability - current		5,437			5,676			5,183
Other current liabilities		130,285			99,016			161,982
Total current liabilities		361,388			307,321			314,922
Long-term borrowings on ABL Facility		25,000			—			25,000
Long-term debt, net		240,020			381,909			245,632
Lease liability - long-term		35,912			40,588			37,811
Deferred tax liabilities		47,469			65,619			47,346
Other liabilities		6,084			5,530			5,094
TOTAL LIABILITIES		715,873			800,967			675,805
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000 shares; issued and outstanding: 32,981, 32,604 and 32,614, respectively		330			326			326
Additional paid-in capital		370,353			364,773			369,372
Retained earnings (accumulated deficit)		30,086			(15,877	)		11,226
Accumulated other comprehensive loss		(10,946	)		(12,865	)		(11,221	)
TOTAL STOCKHOLDERS' EQUITY		389,823			336,357			369,703
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,105,696		$	1,137,324		$	1,045,508

~~(Unaudited)~~

(in thousands, except share data) October 27, 2017 October 28, 2016 January 27, 2017
ASSETS
Current assets
Cash and cash equivalents $ 92,913

$ 131,532
$ 213,108
Restricted cash 1,640

3,300

3,300
Accounts receivable, net 39,044
40,101
39,284
Inventories, net 423,540
425,290
325,314
Prepaid expenses and other current assets 48,934
40,942
26,394
Total current assets 606,071
641,165
607,400
Property and equipment, net 129,955
115,871
122,836
Goodwill 110,000

110,000

110,000
Intangible asset, net 257,000

430,000

257,000
Other assets 17,454
16,142
17,155
TOTAL ASSETS $ 1,120,480

$ 1,313,178

$ 1,114,391
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 160,340
$ 180,608
$ 162,408
Other current liabilities 103,886
101,093
86,446
Total current liabilities 264,226
281,701
248,854
Long-term debt, net 487,197

490,992

490,043
Long-term deferred tax liabilities 91,392
158,048
90,467
Other liabilities 14,568
16,766
13,615
TOTAL LIABILITIES 857,383
947,507
842,979
Commitments and contingencies

STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000,000 shares; issued and outstanding: 32,095,021, 32,029,359 and 32,029,359, respectively 320
320
320
Additional paid-in capital 346,153
343,319
343,971
Retained (deficit) earnings (72,010 ) 34,368
(60,453 )
Accumulated other comprehensive loss (11,366 )
(12,336 )
(12,426 )
Total stockholders’ equity 263,097
365,671
271,412
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,120,480
$ 1,313,178
$ 1,114,391

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	26 Weeks Ended
(in thousands)	July 30, 2021			July 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	18,860		$	(16,267	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		19,695			18,164
Amortization of debt issuance costs		1,597			858
Loss on property and equipment		443			887
Stock-based compensation		6,069			4,542
Deferred income taxes		46			7,936
Goodwill impairment		—			3,300
Other		194			1,115
Change in operating assets and liabilities:
Accounts receivable		7,071			26,966
Inventories		(81,971	)		(65,553	)
Accounts payable		78,376			48,858
Other operating assets		10,615			(11,361	)
Other operating liabilities		(30,470	)		(11,461	)
Net cash provided by operating activities		30,525			7,984
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(11,961	)		(19,758	)
Net cash used in investing activities		(11,961	)		(19,758	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under ABL Facility		75,000			75,000
Payments of borrowings under ABL Facility		(75,000	)		(75,000	)
Principal payments on long-term debt, net		(6,875	)		(2,575	)
Payments of employee withholding taxes on share-based compensation		(5,084	)		(423	)
Payment of debt-issuance costs		(932	)		—
Net cash used in financing activities		(12,891	)		(2,998	)
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(142	)		(58	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		5,531			(14,830	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		35,794			79,297
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	41,325		$	64,467
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment	$	2,726		$	2,303
Income taxes paid, net of refunds	$	18,338		$	(47	)
Interest paid	$	16,306		$	9,087
Lease liabilities arising from obtaining operating lease right-of-use assets	$	1,161		$	3,525

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS' END, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

~~(Unaudited)~~

	Common Stock Issued					Additional Paid-in			Retained		Accumulated Other Comprehensive			Total Stockholders'
(in thousands)	Shares			Amount		Capital			Earnings		Loss			Equity
Balance at January 29, 2021		32,614		$	326	$	369,372		$	11,226	$	(11,221	)	$	369,703
Net income		—			—		—			2,639		—			2,639
Cumulative translation adjustment, net of tax		—			—		—			—		311			311
Stock-based compensation expense		—			—		2,513			—		—			2,513
Vesting of restricted shares		553			4		(4	)		—		—			—
Restricted stock shares surrendered for taxes		(190	)		—		(5,013	)		—		—			(5,013	)
Balance at April 30, 2021		32,977		$	330	$	366,868		$	13,865	$	(10,910	)	$	370,153
Net income		—			—		—			16,221		—			16,221
Cumulative translation adjustment, net of tax		—			—		—			—		(36	)		(36	)
Stock-based compensation expense		—			—		3,556			—		—			3,556
Vesting of restricted shares		7			—		—			—		—			—
Restricted stock shares surrendered for taxes		(3	)		—		(71	)		—		—			(71	)
Balance at July 30, 2021		32,981		$	330	$	370,353		$	30,086	$	(10,946	)	$	389,823

	Common Stock Issued					Additional Paid-in			Retained Earnings/ (Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(in thousands)	Shares			Amount		Capital			Deficit)			Loss			Equity
Balance at January 31, 2020		32,382		$	324	$	360,656		$	390		$	(12,988	)	$	348,382
Net loss		—			—		—			(20,643	)		—			(20,643	)
Cumulative translation adjustment, net of tax		—			—		—			—			(1,259	)		(1,259	)
Stock-based compensation expense		—			—		1,828			—			—			1,828
Vesting of restricted shares		275			2		(2	)		—			—			—
Restricted stock shares surrendered for taxes		(61	)		—		(410	)		—			—			(410	)
Balance at May 1, 2020		32,596		$	326	$	362,072		$	(20,253	)	$	(14,247	)	$	327,898
Net income		—			—		—			4,376			—			4,376
Cumulative translation adjustment, net of tax		—			—		—			—			1,382			1,382
Stock-based compensation expense		—			—		2,714			—			—			2,714
Vesting of restricted shares		10			—		—			—			—			—
Restricted stock shares surrendered for taxes		(2	)		—		(13	)		—			—			(13	)
Balance at July 31, 2020		32,604		$	326	$	364,773		$	(15,877	)	$	(12,865	)	$	336,357

39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (11,557 ) $ (14,961 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 19,031
13,419
Product recall —
(212 )
Amortization of debt issuance costs 1,284
1,284
Loss on disposal of property and equipment 151
172
Stock-based compensation 2,855
1,578
Deferred income taxes 355
839
Change in operating assets and liabilities:
Inventories (96,522 ) (99,997 )
Accounts payable 944
40,186
Other operating assets (21,890 ) (25,100 )
Other operating liabilities 17,542
15,933
Net cash used in operating activities (87,807 ) (66,859 )
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment —
44
Change in restricted cash 1,660
—
Purchases of property and equipment (29,143 ) (26,083 )
Net cash used in investing activities (27,483 )
(26,039 )
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loan facility (3,863 ) (3,863 )
Payments of employee withholding taxes on share-based compensation (674 ) (396 )
Net cash used in financing activities (4,537 ) (4,259 )
Effects of exchange rate changes on cash (368 ) 321
NET DECREASE IN CASH AND CASH EQUIVALENTS (120,195 ) (96,836 )
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 213,108
228,368
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 92,913
$ 131,532
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment $ 4,796
$ 3,101
Income taxes paid, net of refunds $ 3,220
$ 3,220
Interest paid $ 17,106
$ 16,892

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BACKGROUND AND BASIS OF PRESENTATION

Description of Business ~~and Separation~~

Lands' End, Inc. (“("Lands' ~~End”~~End" or the ~~“Company”~~"Company") is a leading ~~multi-channel~~uni-channel retailer of casual clothing, accessories, footwear and ~~footwear,~~home products. Lands’ End offers products online at www.landsend.com, on third-party online marketplaces and through its own Company Operated stores, as well as ~~home products. Lands' End offers products through catalogs, online at~~ ~~www.landsend.com~~ ~~and affiliated specialty and international websites, and through~~third-party retail ~~locations, primarily at~~locations. Lands’ End ~~Shops at Sears~~is a classic American lifestyle brand with a passion for quality, legendary service and ~~Lands’ End stores.~~

real value and seeks to deliver timeless style for women, men, kids and home.

Terms that are commonly used in the Company's ~~notes~~Notes to ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements are defined as follows:

•

ABL Facility - Asset-based senior secured credit agreements, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders, as amended to date

•

Adjusted EBITDA - Net income (loss) appearing on the Condensed Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items

•

ASC – Financial Accounting Standards Board Accounting Standards Codification, which serves as the source for authoritative GAAP, as supplemented by rules and interpretive releases by the SEC which are also sources of authoritative GAAP for SEC registrants

•

ASU – Financial Accounting Standards Board Accounting Standards Update

•

CARES Act – The Coronavirus Aid, Relief and Economic Security Act signed into law on March 27, 2020

•

Company Operated stores – Lands’ End retail stores in the Retail channel

•

Current Term Loan Facility – Term loan credit agreement, dated as of September 9, 2020, among the Company, Fortress Credit Corp., as Administrative Agent and Collateral Agent, and the lenders party thereto

•

Debt Facilities - Collectively, the Current Term Loan Facility and ABL Facility

•

Deferred Awards - Time vesting stock awards

•

EPS - Earnings per share

•

FASB - Financial Accounting Standards Board

•

First Quarter 2021 – The 13 weeks ended April 30, 2021

•

First Quarter 2020 - The 13 weeks ended May 1, 2020

•

Fiscal 2022 – The 52 weeks ending January 27, 2023

•

Fiscal 2021 - The 52 weeks ending January 28, 2022

•

Fiscal 2020 - The 52 weeks ended January 29, 2021

•

Former Term Loan Facility - Term loan credit agreements, dated as of April 4, 2014, with Bank of America, N.A. and certain other lenders, and replaced by the Current Term Loan Facility on September 9, 2020

•

GAAP - Accounting principles generally accepted in the United States

•

LIBOR - London inter-bank offered rate

Table of ~~April 4, 2014, with Bank of America, N.A. and certain other lenders~~Contents

•

Option Awards - Stock option awards

• ASC - Financial Accounting Standards Board Accounting Standards Codification, which serves as the source for authoritative GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative GAAP for Securities and Exchange Commission registrants

•

Performance Awards - Performance-based stock awards

~~• ASU - FASB Accounting Standards Update~~

•

SEC – United States Securities and Exchange Commission

~~• CAM - Common area maintenance for leased properties~~

•

Second Quarter 2021 – The 13 weeks ended July 30, 2021

~~• Debt Facilities - Collectively, the ABL Facility and the Term Loan Facility and excluding the New ABL Facility~~

•

Second Quarter 2020 – The 13 weeks ended July 31, 2020

~~• EPS - Earnings (loss) per share~~

•

Third Quarter 2021 – The 13 weeks ending October 29, 2021

~~• ERP - Enterprise resource planning software solutions~~

•

Third Quarter 2020 – The 13 weeks ended October 30, 2020

~~• ESL - ESL Investments, Inc. and its investment affiliates, including Edward S. Lampert~~

•

Year-to-Date 2021 - The 26 weeks ended July 30, 2021

~~• FASB - Financial Accounting Standards Board~~

•

Year-to-Date 2020 - The 26 weeks ended July 31, 2020

~~• First Quarter 2017 - The thirteen weeks ended April 28, 2017~~

•

Year-to-Date 2019 – The 26 weeks ended August 2, 2019

~~• Fiscal 2017 - The fifty-three weeks ending February 2, 2018~~

~~• Fiscal 2016 - The fifty-two weeks ended January 27, 2017~~

~~• Fiscal 2014 - The fifty-two weeks ended January 30, 2015~~

~~• Fiscal November 2017 - the four week fiscal month ending November 24, 2017~~

~~• GAAP - Accounting principles generally accepted in the United States~~

~~• LIBOR - London inter-bank offered rate~~

~~• New ABL Facility - Asset-based senior secured credit agreement, dated as of November 16, 2017, with Wells Fargo Bank, National Association~~

~~• Sears Holdings or Sears Holdings Corporation - Sears Holdings Corporation, a Delaware Corporation, and its consolidated subsidiaries~~

~~• SEC - United States Securities and Exchange Commission~~

~~• Second Quarter 2016 - The thirteen weeks ended July 29, 2016~~

~~• Separation - On April 4, 2014 Sears Holdings distributed 100% of the outstanding common stock of Lands' End to its shareholders~~

~~• SHMC - Sears Holdings Management Corporation, a subsidiary of Sears Holdings Corporation~~

~~• SYW or Shop Your Way - Shop Your Way member loyalty program~~

~~• Tax Sharing Agreement - A tax sharing agreement entered into by Sears Holdings Corporation and Lands' End in connection with the Separation~~

~~• Term Loan Facility - Term loan credit agreement, dated as of April 4, 2014, with Bank of America, N.A. and certain other lenders~~

~~• Third Quarter 2017 - The thirteen weeks ended October 27, 2017~~

~~• Third Quarter 2016 - The thirteen weeks ended October 28, 2016~~

~~• UTBs - Gross unrecognized tax benefits related to uncertain tax positions~~

~~• Year to Date 2017 - the thirty-nine weeks ended October 27, 2017~~

~~• Year to Date 2016 - the thirty-nine weeks ended October 28, 2016~~

Basis of Presentation

The Condensed Consolidated Financial Statements include the accounts of Lands' End, Inc., and its subsidiaries. All intercompany transactions and balances have been eliminated.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Dollar amounts are reported in thousands, except per share data, unless otherwise noted. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Lands' End Annual Report on Form 10-K filed with the SEC on March ~~31, 2017.~~

~~Reclassifications~~

~~In First~~25, 2021.

Impact of the COVID-19 Pandemic

COVID-19 surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic. The onset of the COVID-19 pandemic had a disruptive impact on the Company’s business operations and an unfavorable impact on the Company’s results of operations during the first half of Fiscal 2020. During the Second Quarter ~~2017,~~2020, the Company began a significant recovery that continued to build on the momentum experienced before the COVID-19 pandemic. The Company’s strong foundation and ongoing enhancements across the four strategic pillars of product, digital, uni-channel distribution and business processes supported the Company ~~adopted ASU 2016-09,~~ ~~Compensation - Stock Compensation, which changed~~during this COVID-19 pandemic and continues to support the ~~required presentation~~strength of ~~payments~~the Company’s financial performance and encouraging customer metrics. The ultimate timing and impact of ~~employee withholding taxes on share-based compensation~~customer demand levels across all distribution channels will depend on the ~~Condensed consolidated statements~~duration and scope of ~~cash flows~~the COVID-19 pandemic, overall economic conditions and consumer preferences. The COVID-19 pandemic continues to adversely impact the Company in its supply chain and remains a threat to the Company’s workforce.

Health and Safety of Employees and Consumers

From the beginning of the COVID-19 pandemic, the Company’s priority has been the safety of employees and customers. On March 16, 2020, the Company temporarily closed its Company Operated stores. These stores reopened during Second Quarter 2020. Additionally, the Company opened 4 new U.S. Company Operated stores in Second Quarter 2020. These new stores were already planned, and construction was underway prior to the start of the COVID-19 pandemic. Since the onset of the COVID-19 pandemic, the Company has taken extra precautions in its offices and distribution centers which have varied from ~~an operating activity~~time to ~~a financing activity.~~time based on the then current guidance from global, federal and state health authorities. These measures have included COVID-19 retail guidelines, work-from-home policies, social distancing, masking, thermal scanning and partitions in all facilities. With the emergence of the delta variant of COVID-19, the Company has been required to keep these measures in place longer than anticipated.

Table of Contents

Supply Chain

The COVID-19 pandemic continues to cause supply chain disruptions across all industries, and the Company continually monitors its supply chain for manufacturing and transportation delays caused or exacerbated by the COVID-19 pandemic. In the first half of Fiscal 2021, the COVID-19 pandemic impacted the Company’s distribution centers, third-party manufacturing partners and logistics partners, including freight capacity, port congestion, other logistics constraints, and closure of certain third-party manufacturing facilities and production lines. These disruptions and constraints resulted in later timing of Spring 2021 inventory receipts and deliveries, as well as higher freight, distribution and other supply chain costs. These disruptions have led, at times, to lower inventory positions and higher than normal back orders, as manufacturing, transport, receipt and stocking of inbound product is delayed. In addition, increased demand for parcel delivery has led to carrier limitations, as well as rate surcharges, throughout the industry, generally, and for the Company, in particular.

The Company expects these supply chain disruptions and constraints and increases in costs to continue through the balance of Fiscal 2021 and into Fiscal 2022. As a result of ~~the adoption,~~these impacts, the Company ~~reclassified payments of employee withholding taxes on share-based compensation from Other operating liabilities~~anticipates later than expected fall and holiday season inventory receipts and deliveries to the Company’s wholesale customers and inventory availability for the ~~Year~~Company’s distribution channels. These additional costs and shipping delays may impact the Company’s future net sales and gross margin results, depending upon the ultimate timing of delivery and availability of product to ~~Date 2016~~sell.

Expense Reduction

Beginning in First Quarter 2020, the Company took aggressive actions to ~~Payments~~reduce overall expenses as a response to decreased customer demand due to the COVID-19 pandemic. The Company reduced operating expenses and structural costs by enacting employee furloughs and temporary tiered salary reductions for the executive team and corporate staff. In addition, other discretionary operating expenses and planned capital expenditures for Fiscal 2020 were significantly reduced. As the COVID-19 pandemic continues and new variants emerge, the Company will continue to monitor the impact of ~~employee withholding~~the COVID-19 pandemic to manage overall expenses.

Goodwill and Indefinite-Lived Intangible Asset

The Company considered the COVID-19 pandemic to be a triggering event in First Quarter 2020 for the Company’s Outfitters and Japan eCommerce reporting units and therefore completed an interim test for impairment of goodwill for these reporting units as of May 1, 2020. The testing resulted in 0 impairment of the Company’s Outfitters reporting unit and full impairment of the $3.3 million of goodwill allocated to the Company’s Japan eCommerce reporting unit. There was 0t a triggering event or impairment charge Year-to-Date 2021.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes”, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Certain amendments within this ASU are required to be applied on ~~share-based compensation. Other requirements of~~a retrospective basis, certain other amendments are required to be applied on a modified retrospective basis and all other amendments on a prospective basis. The Company adopted this ~~guidance~~standard in First Quarter 2021 and the adoption did not have a material impact on the Company’s Condensed Consolidated Financial ~~Statements.~~

Statements and related disclosures.

NOTE 2.3. EARNINGS (LOSS) PER SHARE

The numerator for both basic and diluted EPS is net income (loss). The denominator for basic EPS is based upon the number of weighted average shares of Lands’ End common stock outstanding during the reporting periods. The denominator for diluted EPS is based upon the number of weighted average shares of Lands' End common stock and common stock equivalents outstanding during the reporting periods using the treasury stock method in accordance with ~~the ASC.~~GAAP. Potentially dilutive securities for the diluted EPS calculations consist of ~~nonvested~~non-vested equity shares of common stock and in-the-money outstanding options where the current stock ~~options, if any, to purchase~~price exceeds the ~~Company’s common stock.~~

option strike price.

Table of Contents

The following table summarizes the components of basic and diluted EPS:

	13 Weeks Ended				26 Weeks Ended
(in thousands, except per share amounts)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Net income (loss)	$	16,221	$	4,376	$	18,860	$	(16,267	)

Basic weighted average common shares outstanding		32,979		32,600		32,875		32,524
Dilutive effect of stock awards		734		238		835		—
Diluted weighted average common shares outstanding		33,713		32,838		33,710		32,524

Basic earnings (loss) per share	$	0.49	$	0.13	$	0.57	$	(0.50	)
Diluted earnings (loss) per share	$	0.48	$	0.13	$	0.56	$	(0.50	)

13 Weeks Ended 39 Weeks Ended
(in thousands, except per share amounts) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Net income (loss) $ 162
$ (7,222 ) $ (11,557 ) $ (14,961 )

Basic weighted average shares outstanding 32,095
32,029
32,068
32,018
Dilutive effect of stock awards 22
—
—
—
Diluted weighted average shares outstanding 32,117
32,029
32,068
32,018

Basic earnings (loss) per share $ 0.01
$ (0.23 ) $ (0.36 ) $ (0.47 )
Diluted earnings (loss) per share $ 0.01
$ (0.23 ) $ (0.36 ) $ (0.47 )

Stock awards are considered anti-dilutive based on the application of the treasury stock method or in the event of a net loss. ~~There were 827,057, 376,347, 692,175 and 314,664~~Anti-dilutive shares excluded from the diluted weighted average shares outstanding ~~for Third Quarter 2017, Third Quarter 2016, Year to Date 2017~~were 89 anti-dilutive shares in the 13 weeks ended July 30, 2021, 978,983 anti-dilutive shares in the 13 weeks ended July 31, 2020, 44 anti-dilutive shares in the 26 weeks ended July 30, 2021 and ~~Year to Date 2016, respectively.~~

1,216,830 anti-dilutive shares in the 26 weeks ended July 31, 2020.

NOTE 3.4. OTHER COMPREHENSIVE ~~(LOSS) INCOME~~

LOSS

Other comprehensive ~~(loss) income~~loss encompasses all changes in equity other than those arising from transactions with stockholders and is comprised solely of foreign currency translation adjustments.

	13 Weeks Ended						26 Weeks Ended
(in thousands)	July 30, 2021			July 31, 2020			July 30, 2021			July 31, 2020
Beginning balance: Accumulated other comprehensive loss (net of tax of $2,900, $3,790, $2,987, and $3,453, respectively)	$	(10,910	)	$	(14,247	)	$	(11,221	)	$	(12,988	)
Other comprehensive loss:
Foreign currency translation adjustments (net of tax of $10, $(370), $(77) and $(33), respectively)		(36	)		1,382			275			123
Ending balance: Accumulated other comprehensive loss (net of tax of $2,910, $3,420, $2,910 and $3,420, respectively)	$	(10,946	)	$	(12,865	)	$	(10,946	)	$	(12,865	)

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Beginning balance: Accumulated other comprehensive loss (net of tax of $6,054, $5,467, $6,691 and $5,053, respectively) $ (11,287 ) $ (10,153 ) $ (12,426 ) $ (9,384 )
Other comprehensive (loss) income:
Foreign currency translation adjustments (net of tax (benefit) expense of $66, $1,176, $(571) and $1,590, respectively) (79 ) (2,183 ) 1,060
(2,952 )
Ending balance: Accumulated other comprehensive loss (net of tax of $6,120, $6,643, $6,120 and $6,643, respectively) $ (11,366 ) $ (12,336 ) $ (11,366 ) $ (12,336 )

NaN amounts were reclassified out of Accumulated other comprehensive loss during any of the periods presented.

NOTE 4.5. DEBT

ABL Facility

The Company’s $275.0 million revolving ABL Facility includes a $70.0 million sublimit for letters of credit and is available for working capital and other general corporate liquidity needs. The balance outstanding was $25.0 million and 0 on July 30, 2021 and July 31, 2020, respectively. The balance of outstanding letters of credit was $16.7 million and $12.0 million on July 30, 2021 and July 31, 2020, respectively.

During Fiscal 2020, the Company exercised the “accordion” feature under the ABL Facility increasing the maximum borrowings available under the facility from $175.0 million to $275.0 million, subject to a borrowing base (the “Loan Cap”). This was completed in two separate transactions. The first was a $25.0 million increase effective March 19, 2020 and the second was a $75.0 million increase effective September 9, 2020. The latter was completed through the Second Amendment to the ABL Facility executed on August 12, 2020.

On July 29, 2021, the Company executed the Third Amendment to the ABL Facility resulting in favorable financial terms compared to the Second Amendment to the ABL Facility and extension of the maturity date of the ABL Facility, as discussed below.

Table of Contents

Long-Term Debt

On September 9, 2020, the Company entered into the Current Term Loan Facility which provides a term loan facility of $275.0 million, the proceeds of which were used, along with borrowings of $125.0 million under the ABL Facility, to repay all of the indebtedness under the Former Term Loan Facility and to pay fees and expenses in connection with the financing. Origination costs, including an Original Issue Discount (“OID”) of 3% and $5.1 million in debt origination fees, were paid upon entering into the Current Term Loan Facility. The OID and the debt origination fees are presented as a direct deduction from the carrying value of the Current Term Loan Facility and are amortized over the term of the loan to Interest expense in the Condensed Consolidated Statements of Operations.

The Company's long-term debt consisted of the following:

	July 30, 2021					July 31, 2020					January 29, 2021
(in thousands)	Amount		Interest Rate			Amount		Interest Rate			Amount		Interest Rate
Former Term Loan Facility	$	—		—	%	$	382,812		4.25	%	$	—		—	%
Current Term Loan Facility, maturing September 9, 2025		264,688		10.75	%		—		—	%		271,563		10.75	%
		264,688					382,812					271,563
Less: Current portion of long-term debt		13,750					—					13,750
Less: Unamortized debt issuance costs		10,918					903					12,181
Long-term debt, net	$	240,020				$	381,909				$	245,632

October 27, 2017 October 28, 2016 January 27, 2017
Amount Rate Amount Rate Amount Rate
Term Loan Facility, maturing April 4, 2021 $ 496,975
4.49 % $ 502,125
4.25 % $ 500,838
4.25 %
ABL Facility, maturing April 4, 2019¹
—
— % —
— % —
— %
496,975
502,125
500,838

Less: Current maturities in Other current liabilities 5,150
5,150
5,150

Less: Unamortized debt issuance costs - Term Loan Facility 4,628
5,983
5,645

Long-term debt, net $ 487,197
$ 490,992
$ 490,043

¹~~Debt arrangement terminated on November 16, 2017.~~

The following table summarizes the Company's borrowing availability under the ABL Facility:

	July 30, 2021			July 31, 2020			January 29, 2021
(in thousands)	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
ABL Facility maximum borrowing	$	275,000		$	200,000		$	275,000
Less: Outstanding borrowings		25,000	2.75%		—	—%		25,000	3.00%
Less: Outstanding letters of credit		16,693			12,020			27,131
Borrowing availability under ABL Facility	$	233,307		$	187,980		$	222,869

October 27, 2017 October 28, 2016 January 27, 2017
ABL maximum borrowing $ 175,000
$ 175,000
$ 175,000
Outstanding Letters of Credit 17,788
13,845
19,705
Borrowing availability under ABL $ 157,212
$ 161,155
$ 155,295

Interest; Fees

Between September 9, 2020 and July 30, 2021, the ABL Facility provided that for LIBOR loans, the interest rate is LIBOR (subject to an interest rate floor of 0.75%) plus a borrowing margin which was, where the average daily total loans outstanding for the previous quarter were (i) less than $50.0 million, 1.75%, (ii) equal to or greater than $50.0 million but less than $100.0 million, 2.00%, (iii) equal to or greater than $100.0 million but less than $200.0 million, 2.25%, and (iv) greater than $200.0 million, 3.50%. For Base Rate loans, the borrowing margin was, where the average daily total loans outstanding for the previous quarter were (i) less than $50.0 million for the previous quarter, 1.00%, (ii) equal to or greater than $50.0 million but less than $100.0 million, 1.25%, (iii) equal to or greater than $100.0 million but less than $200.0 million, 1.50%, and (iv) greater than $200.0 million, 2.75%.

Pursuant to the Third Amendment of the ABL Facility for LIBOR loans, commencing July 31, 2021 the borrowing margin will be, where the average daily total loans outstanding for the previous quarter are (i) less than $95.0 million, 1.25%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 1.50%, and (iii) greater than or equal to $180.0 million, 1.75%. For Base Rate loans, the borrowing margin will be, where the average daily total loans outstanding for the previous quarter are (i) less than $95.0 million for the previous quarter, 0.50%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 0.75%, and (iii) greater than or equal to $180.0 million, 1.00%. The Third Amendment to the ABL Facility replaced the 0.75% LIBOR floor with a 0.00% LIBOR floor.

The interest rates per annum applicable to the loans under the ~~Debt Facilities~~Current Term Loan Facility are based on a fluctuating rate of interest measured by reference to, at the borrowers’ election, either ~~(i)~~(1) an adjusted LIBOR rate (with a minimum rate of 1.00%) plus ~~a borrowing margin,~~9.75%, or ~~(ii)~~(2) an alternative base rate ~~plus a borrowing margin. The borrowing margin~~(which is ~~fixed for~~ the ~~Term Loan Facility at 3.25%~~greater of (i) the prime rate published in the ~~case~~Wall Street Journal, (ii) the federal funds rate, which shall be no lower than 0.00% plus ½ of 1.00%, and (iii) the one month LIBOR ~~loans and 2.25% in~~rate plus 1.00% per annum) plus 8.75%.

Table of Contents

Pursuant to the ~~case of base rate loans. For the Term Loan Facility, LIBOR is subject~~Second Amendment to ~~a 1% interest rate floor. The borrowing margin for~~ the ABL Facility, ~~is subject~~the ABL Facility fees also included (i) commitment fees which range from 0.25% to ~~adjustment~~0.375% based onupon the average ~~excess availability~~daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter and ~~may range from 1.50% to 2.00% in~~(ii) customary letter of credit fees.

Effective with the ~~case of LIBOR borrowings and may range from 0.50% to 1.00% in the case of base rate borrowings.~~

~~Customary agency fees are payable pursuant~~Third Amendment to the ~~terms of~~ABL Facility, the ~~Debt Facilities. The~~ ABL Facility fees ~~also~~ include (i) commitment fees of 0.25% based ~~on a percentage ranging from approximately 0.25% to 0.375% of~~upon the average daily unused ~~portions~~commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter and (ii) customary letter of credit fees.

As of the end of Second Quarter 2021, the Company had borrowings of $25.0 million on the ABL Facility.

Customary agency fees are payable in respect of the Debt Facilities.

Maturity; Amortization and Prepayments

The Third Amendment to the ABL Facility extended the maturity from November 16, 2022 to the earlier of (a) July 29, 2026 and (b) June 9, 2025 if, on or prior to such date, the Current Term Loan Facility has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness.

The Current Term Loan Facility matures on September 9, 2025 and amortizes at a rate equal to 1.25% per quarter. It is subject to mandatory prepayments in an amount equal to a percentage of the borrower’s excess cash flows in each fiscal year, ranging from 0% to 75% depending on the Company’s total leverage ratio, and with the proceeds of certain asset sales, casualty events and extraordinary receipts. The loan may not be voluntarily prepaid during the first two years of its term, without significant penalties. A prepayment premium is applicable to voluntary prepayments and certain mandatory prepayments made prior to the fourth anniversary of the closing date of the Current Term Loan Facility.

Guarantees; Security

All obligations under the Debt Facilities are unconditionally guaranteed by Lands’ End, Inc. and, subject to certain exceptions, each of its existing and future direct and indirect subsidiaries. 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 Current Term Loan Facility is secured by a second priority security interest in the same collateral with certain exceptions.

The Current Term Loan Facility is secured by a first priority security interest in certain property and assets of the borrowers and guarantors, including certain fixed assets such as real estate, stock of the subsidiaries and intellectual property, in each case, subject to certain exceptions. The ABL Facility is secured by a second priority interest in the same collateral, with certain exceptions.

The Former Term Loan Facility, which was replaced by the Current Term Loan Facility on September 9, 2020, had the same priority security interest in the same collateral, with certain exceptions.

Representations and Warranties; Covenants

Subject to specified exceptions, the Debt Facilities contain various representations and warranties, and restrictive covenants that, among other things and subject to specified exceptions, restrict ~~the ability of~~ Lands’ End, Inc.’s and its ~~subsidiaries~~subsidiaries’ ability 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,~~

The Current Term Loan Facility is subject to certain financial covenants, including a quarterly maximum total leverage ratio test, a weekly minimum liquidity test and an annual maximum capital expenditure amount.

Under the ABL Facility, if excess availability ~~under the ABL Facility~~ falls below the greater of 10% of the ~~loan cap~~Loan Cap amount or $15.0 million, ~~Lands’ End~~the Company 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~~

Effective with ~~all financial covenants related~~the Second Amendment to the ~~Debt Facilities as~~ABL Facility, the ABL Facility had a cash maintenance provision which applied a limit of ~~October 27, 2017.~~

$75.0 million on the amount of cash and cash equivalents (subject to certain exceptions) that the Company could hold when outstanding loans under the ABL Facility equaled or exceeded $125.0 million. The Third Amendment to the ABL Facility eliminated this cash maintenance provision.

Table of Contents

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.

~~New ABL Facility~~

~~Subsequent to the balance sheet date, on November 16, 2017,~~

As of July 30, 2021, the Company ~~entered into an asset-based lending credit agreement~~was in compliance with ~~Wells Fargo Bank, National Association, which provides for maximum borrowings~~all of ~~$175.0 million for~~its covenants in the ~~Company, subject to a borrowing base.~~ Debt Facilities.

Events of Default

The ~~New ABL Facility has a letter~~Debt Facilities include customary events of ~~credit sub-limit~~default including non-payment of $70.0 million. The New ABL Facility is available for working capital and other general corporate purposes. The New ABL Facility will mature no later than November 16, 2022, subject to customary extension provisions provided for therein.

~~Also on November 16, 2017, in connection with the effectiveness~~principal, interest or fees, violation of ~~the New ABL Facility, the company terminated its existing ABL Facility, dated as~~covenants, inaccuracy of April 4, 2014, among the Company, Lands’ End Europe Limited, the financial institutions party thereto as lenders and Bank of America, N.A., as administrative agent and collateral agent, terminated all loanrepresentations or warranties, cross defaults related ~~documents and repaid all outstanding amounts thereunder.~~

~~Guarantees; Security for the New ABL Facility~~

~~All obligations under the New ABL Facility are unconditionally guaranteed by the Company and, subject~~ to certain ~~exceptions, each~~other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of ~~its existing~~guarantees or security interests, and ~~future direct~~material judgments and ~~indirect wholly-owned domestic subsidiaries.~~

~~The New ABL Facility is secured by (1) a first priority security interest in certain working capital~~change of the Company and guarantors consisting primarily of accounts receivable and inventory and (2) a second priority security interest in certain property and assets of the Company and guarantors, including certain fixed assets and stock of subsidiaries.

~~Interest; Fees for New ABL Facility~~

The interest rates per annum applicable to the loans under the New ABL Facility are based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (1) an adjusted LIBOR plus a borrowing margin, or (2) an alternative base rate plus a borrowing margin. The borrowing margin for the New ABL Facility is subject to adjustment based on the average daily availability under the ABL Facility for the preceding fiscal quarter, and may range from 1.25% to 1.75% in the case of LIBOR borrowings and may range from 0.50% to 1.00% in the case of base rate borrowings.

Customary agency fees are payable in respect of the New ABL Facility and include (1) commitment fees in an amount equal to 0.25% of the daily unused portions of the ABL Facility, and (2) customary letter of credit fees.

~~NOTE 5. STOCK-BASED COMPENSATION~~

The Company expenses the fair value of all stock awards over their respective vesting periods, ensuring that, the amount of cumulative compensation cost recognized at any date is at least equal to the portion of the grant-date value of the award that is vested at that date. The Company has elected to adjust compensation expense for an estimated forfeiture rate for those shares not expected to vest and to recognize compensation cost on a straight-line basis for awards that only have a service requirement with multiple vest dates.

~~The Company has granted the following types of stock awards to employees at management levels and above:~~

Time vesting stock awards ("Deferred Awards") which are in the form of restricted stock units which only require each recipient to complete a service period; Deferred Awards generally vest over three years or in full after a three year period. The fair value of Deferred Awards is based on the closing price of the Company's common stock on the grant date and is reduced for estimated forfeitures of those awards not expected to vest due to employee turnover.


~~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 currently outstanding.

~~iii.~~

Performance-based stock awards ("Performance Awards") are in the form of restricted stock units and have, in addition to a service requirement, performance criteria that must be achieved for the awards to be earned. Performance Awards have annual vesting, but due to the performance criteria, are not eligible for straight-line expensing. Therefore, Performance Awards are amortized using a graded expense process. Similar to the Deferred Awards, Performance Awards fair value is based on the closing price of the Company’s common stock on the grant date and the compensation expense is reduced for estimated forfeitures of those awards not expected to vest due to employee turnover.

The following table provides a summary of the Company's stock-based compensation expense, which is included in Selling and administrative expense in the Condensed Consolidated Statements of Operations:

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Deferred Awards $ 879
$ (301 ) $ 2,315
$ 1,067
Option Awards 176
—
452
—
Performance Awards —
127
88
511
Total stock-based compensation expense
$ 1,055
$ (174 ) $ 2,855
$ 1,578

~~In the Third Quarter 2016 there was a reversal of prior period expense due to the resignation of the former Chief Executive Officer.~~

~~The following table provides a summary of the activities for stock awards for Year to Date 2017:~~

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 403
21.79
343
8.73
—
—
Vested (59 ) 23.00
—
—
(41 ) 28.33
Exercised —
—
—
—
—
—
Forfeited or expired (80 ) 24.77
—
—
(28 ) 23.47
Outstanding as of October 27, 2017 516
22.39
343
8.73
—
—

Total unrecognized stock-based compensation expense related to unvested Deferred Awards was approximately $9.0 million as of October 27, 2017, which is expected to be recognized ratably over a weighted average period of 2.4 years. Deferred Awards granted to various employees during Year to Date 2017 generally vest ratably for a period between fifteen months to four years.

~~There was no unrecognized stock-based compensation expense related to unvested Performance Awards as of October 27, 2017.~~

Total unrecognized stock-based compensation expense related to unvested Option Awards was approximately $2.5 million as of October 27, 2017, which is expected to be recognized ratably over a weighted average period of 3.4 years. The Option Awards vest ratably over 4.0 years and the contract to buy Option Awards extends for another 6.0 years. The fair value of each Option Award was estimated on the grant date using the Black-Scholes option pricing model. No Option Awards were exercisable as of October 27, 2017.

The fair value of Option Awards is determined on the grant date utilizing a Black-Scholes option pricing model. The following assumptions were utilized in deriving the fair value for Option Awards granted during Year to Date 2017:

Assumption Low High
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

The simplified method was used to calculate the Expected life (in years) to be utilized in the Black-Scholes option pricing model applied to Option Awards granted in Fiscal 2017. The simplified method was used as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of the Option Awards due to the limited period of time since the Company began publicly issuing shares.

~~NOTE 6. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES~~

The Company determines fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs—unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs—inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active

and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

~~Level 3 inputs—unobservable inputs for the asset or liability.~~

Restricted cash is reflected on the Condensed Consolidated Balance Sheets at fair value. The fair value of restricted cash was $1.6 million, $3.3 million and $3.3 million as of October 27, 2017, October 28, 2016 and January 27, 2017, respectively based on Level 1 inputs. Restricted cash amounts are valued based upon statements received from financial institutions.

Cash and cash equivalents, accounts receivable, accounts payable and other current liabilities are reflected on the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments.

~~Carrying values and fair values of long-term debt, including the short-term portion, in the Condensed Consolidated Balance Sheets are as follows:~~

October 27, 2017 October 28, 2016 January 27, 2017
(in thousands)
Carrying
Amount

Fair
Value
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Long-term debt, including short-term portion $ 496,975
$ 414,353
$ 502,125
$ 386,636
$ 500,838
$ 379,385

Long-term debt, including short-term portion was valued utilizing Level 2 valuation techniques based on the closing inactive market bid price on October 27, 2017, October 28, 2016, and January 27, 2017. There were no nonfinancial assets or nonfinancial liabilities recognized at fair value on a nonrecurring basis as of October 27, 2017, October 28, 2016, and January 27, 2017.

~~NOTE 7. GOODWILL AND INTANGIBLE ASSET~~

The Company's intangible assets, consisting of a trade name and goodwill, were valued as a result of business combinations accounted for under the purchase accounting method. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. The net carrying amounts of goodwill and trade name are included within the Company's Direct segment.

~~ASC 350,~~ ~~Intangibles - Goodwill and Other,~~ requires companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates that the carrying amount may not be recoverable. As a result of the 2016 annual impairment test the Company recorded a non-cash pretax trade name intangible asset impairment charge of $173.0 million in Fiscal 2016. There were no impairment charges recorded for the intangible asset 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.

~~The intangible asset was $257.0 million, $430.0 million and $257.0 million as of October 27, 2017, October 28, 2016 and January 27, 2017, respectively.~~

~~There were no impairments for goodwill during any periods presented or since goodwill was first recognized.~~

~~NOTE 8. INCOME TAXES~~

Lands’ End and Sears Holdings Corporation entered into a Tax Sharing Agreement in connection with the Separation which governs Sears Holdings Corporation’s and Lands’ End’s respective rights, responsibilities and obligations after the Separation with respect to liabilities for United States federal, state, local and foreign taxes attributable to the Lands’ End business. In addition to the allocation of tax liabilities, the Tax Sharing Agreement addresses the preparation and filing of tax returns for such taxes and dispute resolution with taxing authorities regarding such taxes. Generally, Sears Holdings Corporation is liable for all pre-Separation United States federal, state and local income taxes. Lands’ End generally is liable for all other income taxes attributable to its business, including all foreign taxes.

As of October 27, 2017, the Company had UTBs of $6.9 million. Of this amount, $4.5 million would, if recognized, impact its effective tax rate, with the remaining amount being comprised of UTBs related to gross temporary differences or other indirect benefits. Pursuant to the Tax Sharing Agreement, Sears Holdings Corporation is generally responsible for all United States federal, state and local UTBs, including interest and penalties, through the date of the Separation and, as such, an indemnification asset from Sears Holdings Corporation for the pre-Separation UTBs is recorded in Other assets in the Condensed Consolidated Balance Sheets. The indemnification asset was $12.0 million, $14.4 million and $11.4 million as of October 27, 2017, October 28, 2016, and January 27, 2017, respectively.

The Company classifies interest expense and penalties related to UTBs and interest income on tax overpayments as components of income tax expense. As of October 27, 2017, the total amount of interest expense and penalties recognized on our balance sheet was $5.5 million ($3.6 million net of federal benefit). The total amount of such net interest expense recognized in the Condensed Consolidated Statements of Operations was insignificant for all periods presented. The Company files income tax returns in the United States and various foreign jurisdictions. Sears Holdings and the Company are under examination by various state tax jurisdictions for the years 2003 to 2014.

control.

NOTE 6. STOCK-BASED COMPENSATION

The Company expenses the fair value of all stock awards over their respective vesting periods, ensuring that, the amount of cumulative compensation cost recognized at any date is at least equal to the portion of the grant-date fair value of the award that is vested at that date. The Company has elected to adjust compensation expense for an estimated forfeiture rate for those shares not expected to vest and to recognize compensation cost on a straight-line basis for awards that only have a service requirement with multiple vest dates.

The Company has granted the following types of stock awards to employees at management levels and above, each of which are granted under the Company’s stockholder approved stock plans, other than March 6, 2017 grants to the Company’s Chief Executive Officer which were made as inducement grants outside of the Company’s stockholder approved stock plans in accordance with NASDAQ Listing Rule 5635(c)(4):

Time vesting stock awards ("Deferred Awards") are in the form of restricted stock units and only require each recipient to complete a service period for the award to be earned. Deferred Awards generally vest over three years. The fair value of Deferred Awards is based on the closing price of the Company's common stock on the grant date and is reduced for estimated forfeitures of those awards not expected to vest due to employee turnover.

ii.

Performance-based stock awards ("Performance Awards") are in the form of restricted stock units and have, in addition to a service requirement, performance criteria that must be achieved for the awards to be earned. For Performance Awards the Target Shares earned can range from 50% to 200% once minimum thresholds have been reached and depend on the achievement of Adjusted EBITDA and revenue performance measures for the cumulative three-fiscal year performance period beginning with the fiscal year of the grant date. The applicable percentage of the Target Shares, as determined by performance, vest after the completion of the applicable three-year performance period and upon determination of achievement of the performance measures by the Compensation Committee of the Board of Directors, and unearned Target Shares are forfeited. The fair value of the Performance Awards is based on the closing price of the Company’s common stock on the grant date. Stock based compensation expense is recognized ratably over the related service period, reduced for estimated forfeitures of those awards not expected to vest due to employee turnover, and adjusted based on the Company's estimate of the percentage of the aggregate Target Shares expected to be earned. The 2018 Performance Awards vested on March 25, 2021 at 111%. The compensation expense associated with the 2021 Performance Awards and 2019 Performance Awards are accrued at 193% and 147% of Target Shares, respectively.

iii.

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 and vest ratably over a four-year period. The fair value of each Option Award is estimated on the grant date using the Black-Scholes option pricing model.

	13 Weeks Ended				26 Weeks Ended
(in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Deferred awards	$	1,484	$	1,383	$	2,845	$	3,024
Performance awards		2,072		1,144		3,121		1,144
Option awards	—			187		103		374
Total stock-based compensation expense	$	3,556	$	2,714	$	6,069	$	4,542

Table of Contents

The following table provides a summary of the Deferred Awards activity for Year-to-Date 2021:

	Deferred Awards
(in thousands, except per share amounts)	Number of Shares			Weighted Average Grant Date Fair Value per Share
Unvested as of January 29, 2021		1,093		$	10.86
Granted		245			29.95
Vested		(395	)		13.85
Forfeited or expired		(12	)		11.49
Unvested as of July 30, 2021		931			14.61

Total unrecognized stock-based compensation expense related to unvested Deferred Awards was approximately $10.5 million as of July 30, 2021, which is expected to be recognized ratably over a weighted average period of 2.2 years. Deferred Awards granted to employees during Fiscal 2021 vest ratably over a period of three years.

The following table provides a summary of the Performance Awards activity for Year-to-Date 2021:

	Performance Awards
(in thousands, except per share amounts)	Number of Shares			Weighted Average Grant Date Fair Value per Share
Unvested as of January 29, 2021		393		$	18.32
Granted ⁽¹⁾		166			29.95
Vested		(165	)		21.90
Forfeited or expired		0			0
Unvested as of July 30, 2021		394			21.72

⁽¹⁾	Performance shares granted assume achievement performance at 100% of target.

Total unrecognized stock-based compensation expense related to unvested Performance Awards was approximately $9.8 million as of July 30, 2021, which is expected to be recognized ratably over a weighted average period of 2.3 years. Performance Awards granted to employees during Fiscal 2021 and Fiscal 2019 vest, if earned, after completion of the applicable three-year performance period.

The following table provides a summary of the Options Award activity for Year-to-Date 2021:

	Option Awards
(in thousands, except per share amounts)	Number of Shares			Weighted Average Grant Date Fair Value per Share
Unvested as of January 29, 2021		85		$	8.73
Granted		0			0
Vested		(85	)		8.73
Forfeited or expired		0			0
Unvested as of July 30, 2021		—		—

As of July 30, 2021, there were 0 unvested Option Awards. The Option Awards have a contractual term of ten years and vested ratably over the first four years. As of July 30, 2021, 343,135 shares related to Option Awards were exercisable. NaN options have been exercised as of July 30, 2021.

NOTE 7. FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND LIABILITIES

Restricted cash is reflected on the Condensed Consolidated Balance Sheets at fair value. The fair value of restricted cash was $2.1 million, $1.8 million and $1.9 million as of July 30, 2021, July 31, 2020 and January 29, 2021, respectively based on Level 1 inputs. Restricted cash amounts are valued based upon statements received from financial institutions.

Table of Contents

Carrying values and fair values of long-term debt, including current portion, in the Condensed Consolidated Balance Sheets are as follows:

July 30, 2021

July 31, 2020

January 29, 2021

(in thousands)

Carrying

Amount

Fair

Value

Carrying

Amount

Fair

Value

Carrying

Amount

Fair

Value

Long-term debt, including current portion

264,688

263,030

382,812

352,666

271,563

277,265

Long-term debt, including current portion, was valued utilizing Level 3 valuation techniques based on a third-party analysis on July 30, 2021 and January 29, 2021. The fair value of the debt on July 31, 2020 was determined utilizing Level 2 techniques based on the closing inactive market bid price on July 31, 2020. There were 0 nonfinancial assets or nonfinancial liabilities recognized at fair value on a nonrecurring basis as of July 30, 2021, July 31, 2020, and January 29, 2021.

NOTE 8. INCOME TAXES

Provision for Income Taxes

At the end of each quarter, the Company estimates its effective income tax rate pursuant to ASC 740. The rate for the period consists of the tax rate expected to be applied for the full year to ordinary income adjusted for any discrete items recorded in the period.

The Company recorded a tax expense at an overall effective tax rate of 28.3% and 11.5% for the Second Quarter 2021 and 2020, respectively. The Second Quarter 2021 rate is higher than Second Quarter 2020 primarily as a result of changes in estimates due to uncertainties related to the Company’s performance as a result of the COVID-19 pandemic in 2020. The Company recorded a tax expense at an overall effective tax rate of 26.4% for Year-to-Date 2021 and a tax benefit of 34.7% for Year-to-Date 2020. The Year-to-Date 2021 rate is lower than Year-to-Date 2020 primarily due to the generation of pretax income in 2021 compared to a pretax loss in 2020 in addition to the estimated tax benefits recorded as a result of the CARES Act in 2020.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is party to 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 such pending claims, proceedings and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on results of operations, cash flows or financial position taken as a whole.

Beginning in 2005, the Company initiated claims in Iowa County Circuit Court against the City of Dodgeville (the "City") to recover overpaid taxes resulting from the City’s excessive property tax assessment of the Company’s headquarters campus for each tax year from 2005 through 2016.

As of June 6, 2017 the City has refunded, as the result of various court decisions and a settlement agreement, over $7.5 million in excessive taxes and interest to the Company. All excessive property tax assessment claims arising with respect to the tax years 2005 through 2016 are now closed.

The Company received refunds of $1.0 million of the above amount in First Quarter 2017, $1.2 million in Second Quarter 2016 and $1.1 million in Third Quarter 2016 which were recorded primarily within Selling and administrative costs disclosed in the ~~Condensed Consolidated Statements of Operations.~~

~~NOTE 10. RELATED PARTY TRANSACTIONS~~

According to statements on Schedule 13D filed with the SEC by ESL, ESL beneficially owns significant portions of both the Company's and Sears Holdings Corporation's outstanding shares of common stock. Therefore, Sears Holdings Corporation, the Company's former parent company, is considered a related party. In First Quarter 2017, ESL purchased approximately $4.0 million of the Company's outstanding debt at a discount of approximately $1.0 million. Due to the related party relationship, this discount was considered a cancellation of debt under Section 108 of the Internal Revenue Code, triggering additional income tax payments for the Company. As of May 4, 2017, ESL had divested itself of all of the Company's outstanding debt to an unrelated third party.

In connection with and subsequent to the Separation, the Company entered into various agreements with Sears Holdings which, among other things, (i) govern specified aspects of the Company's relationship following the Separation, especially with regards to the Lands’ End Shops at Sears, and (ii) establish terms pursuant to which subsidiaries of Sears Holdings Corporation are providing services to us. Descriptions of these transactions are included in the Company's 2016Company’s Annual Report on Form 10-K ~~and proxy statement filed with~~for the ~~SEC on March 31, 2017.~~

~~In its annual report on Form 10-K for its fiscal~~ year ended January ~~28, 2017, Sears Holdings disclosed~~29, 2021, the Company is the defendant in 3 separate lawsuits, each of which allege adverse health events and personal property damage as a result of wearing uniforms manufactured by Lands’ End: (1) Gilbert et al. v. Lands' End, Inc., United States District Court for the Western District of Wisconsin, Civil Action No. 3:19-cv-00823-JDP, complaint filed October 3, 2019; (2) Andrews et al. v. Lands' End, Inc., United States District Court for the Western District of Wisconsin, Civil Action No. 3:19-cv-01066-JDP, complaint filed on December 31, 2019, on behalf of 521 named plaintiffs, later amended to include 1,089 named plaintiffs; and (3) Davis et al. v. Lands' End, Inc. and Lands' End Business Outfitters, Inc., United States District Court for the Western District of Wisconsin, Case No. 3:20-cv-00195, complaint filed on March 4, 2020. Plaintiffs in Gilbert, Andrews, and Davis seek nationwide class certification on behalf of similarly situated Delta employees.

By order dated April 20, 2020, the Court consolidated the Gilbert and Andrews cases (the “Consolidated Wisconsin Action”) and stayed the Davis case.

Plaintiffs in the Consolidated Wisconsin Action and Davis each assert that ~~its historical operating results indicate substantial doubt exists~~the damages sustained by the members of the proposed class exceed $5,000,000. Plaintiffs in each caseseek damages for personal injuries, pain and suffering, severe emotional distress, financial or economic loss, including medical services and expenses, lost income and other compensable injuries. Plaintiffs in the Consolidated Wisconsin Action seek class certification with respect to performance of the uniforms and warranty claims and maintain individual claims for personal injury by numerous named plaintiffs.

Table of Contents

On August 18, 2021, the Court ruled on several pending motions. The Court denied Plaintiffs’ motion for class certification with respect to performance of the uniforms and warranty claims. The Court denied Plaintiffs’ motion for partial summary judgment regarding crocking claims and granted Lands’ End’s motion for partial summary judgment related to ~~its ability~~certain warranty claims. In addition, giving effect to ~~continue~~both the addition and voluntary dismissal of individual plaintiffs over the course of the litigation, the number of individual plaintiffs had been reduced from 1,089 to 603 as of August 18, 2021. On September 1, 2021, Plaintiffs filed a ~~going concern. Sears Holdings also disclosed it believes that actions it has taken in~~Rule 23(f) petition, seeking interlocutory review of the ~~last 12 months and expected benefits from actions~~Court’s decision denying class certification.

The Consolidated Wisconsin Action continues to be ~~taken~~ in ~~2017~~discovery. Lands' End is vigorously defending these lawsuits and believes they are probable to mitigate the substantial doubt raised by its historical operating results and therefore will satisfy its liquidity needs for the 12 months following the issuance of its financial statements.

~~The components of the transactions between the Company and Sears Holdings, which exclude pass-through payments to third parties, are as follows:~~

~~Lands’ End Shops at Sears~~

~~Related party costs charged by Sears Holdings to the Company related to Lands’ End Shops at Sears are as follows:~~

13 Weeks Ended 39 Weeks Ended
(in thousands, except for number of stores) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Rent, CAM and occupancy costs $ 5,376
$ 6,165
$ 16,882
$ 18,707
Retail services, store labor 5,268
6,004
16,410
18,034
Financial services and payment processing 479
573
1,627
1,963
Supply chain costs 167
183
558
735
Total expenses $ 11,290
$ 12,925
$ 35,477
$ 39,439
Number of Lands’ End Shops at Sears at period end 188
219
188
219

~~General Corporate Services~~

~~Related party costs charged by Sears Holdings to the Company for general corporate services are as follows:~~

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Sourcing $ 3,445
$ 4,941
$ 8,525
$ 7,979
Shop Your Way 83
596
780
1,670
Shared services 48
48
143
143
Total expenses $ 3,576
$ 5,585
$ 9,448
$ 9,792

~~The Company has extended the contract under which it receives sourcing services through June 30, 2020 and the contract governing its participation in the Shop Your Way program through April 4, 2018.~~

~~Use of Intellectual Property or Services~~

~~Related party revenue and costs charged by the Company to and from Sears Holdings for the use of intellectual property or services is as follows:~~

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Call Center Services $ —
$ 1,976
$ 1,160
$ 5,777
Lands' End Business Outfitters revenue 222
333
764
1,307
Credit card revenue 205
265
638
776
Royalty income 55
56
169
182
Gift card (expense) (7 ) (7 ) (20 ) (20 )
Total income $ 475
$ 2,623
$ 2,711
$ 8,022

~~Call Center Services~~

The Company had entered into a contract with SHMC to provide call center services in support of Sears Holdings’ SYW. This income is net of agreed upon costs directly attributable to the Company providing these services. The income is included in Net revenue and costs are included in Selling and administrative expenses in the Condensed Consolidated Statements of Operations. The contract for call center services expired on April 30, 2017.

~~Additional Balance Sheet Information~~

At October 27, 2017, October 28, 2016 and January 27, 2017, the Company included $3.1 million, $4.6 million and $3.7 million in Accounts receivable, net, respectively, and $3.1 million, $3.8 million and $3.1 million in Accounts payable, respectively, in the Condensed Consolidated Balance Sheets to reflect amounts due from and owed to Sears Holdings.

At October 27, 2017, October 28, 2016 and January 27, 2017, respectively, a $12.0 million, $14.4 million and $11.4 million receivable was recorded by the Company in Other assets in the Condensed Consolidated Balance Sheets to reflect the indemnification by Sears Holdings Corporation of the pre-Separation UTBs (including penalties and interest) for which Sears Holdings Corporation is responsible under the Tax Sharing Agreement.

~~NOTE 11. SEGMENT REPORTING~~

The Company is a leading multi-channel retailer of clothing, accessories and footwear, as well as home products, and has two operating segments: Direct and Retail. Product revenues are divided by product categories: Apparel and Non-apparel. The Non-apparel revenues include accessories, footwear, and home goods. Services and other revenue includes embroidery, monogramming, gift wrapping, shipping and other services. Net revenue is aggregated by product category in the following table:

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Net revenue:
Apparel $ 272,175
$ 252,082
$ 759,460
$ 725,062
Non-apparel 38,559
37,854
93,067
95,021
Service and other 14,755
21,540
43,517
56,836
Total net revenue $ 325,489
$ 311,476
$ 896,044
$ 876,919

The Company identifies reportable segments according to how business activities are managed and evaluated. Each of the Company’s operating segments are reportable segments and are strategic business units that offer similar products and services but are sold either directly from its warehouses (Direct) or through its retail stores (Retail). Adjusted EBITDA is the primary measure used to make decisions on allocating resources and assessing performance

of each operating segment. Adjusted EBITDA is computed as Income before taxes appearing on the Condensed Consolidated Statements of Operations net of interest expense, depreciation and amortization and other significant items that while periodically affecting the Company's results, may vary significantly from period to period and may have a disproportionate effect in a given period, which may affect comparability of results. Reportable segment assets are those directly used in or clearly allocable to an operating segment’s operations. Depreciation, amortization, and property and equipment expenditures are recognized in each respective segment. There were no material transactions between reporting segments for any periods presented.

The Direct segment sells products through the Company’s e-commerce websites and direct mail catalogs. Operating costs consist primarily of direct marketing costs (catalog and e-commerce marketing costs); order processing and shipping costs; direct labor and benefits costs and facility costs. Assets primarily include goodwill and trade name intangible assets, inventory, accounts receivable, prepaid expenses (deferred catalog costs), technology infrastructure, and property and equipment.

The Retail segment sells products and services through dedicated Lands’ End Shops at Sears across the United States and the Company’s stand-alone Lands’ End stores. Operating costs consist primarily of labor and benefits costs; rent, CAM and occupancy costs; distribution costs; and in-store marketing costs. Assets primarily include retail inventory, fixtures and leasehold improvements.

Corporate overhead and other expenses include unallocated shared-service costs, which primarily consist of employee services and financial services, legal and corporate expenses. These expenses include labor and benefits costs, corporate headquarters occupancy costs and other administrative expenses. Assets include corporate headquarters and facilities, corporate cash and cash equivalents and deferred income taxes.

~~Financial information by segment is presented in the following tables.~~

~~SUMMARY OF SEGMENT DATA~~

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Net revenue:

Direct $ 290,326

$ 272,080
$ 778,554
$ 750,660
Retail 35,104

39,340
117,317
126,077
Corporate / other 59

56
173
182
Total net revenue $ 325,489
$ 311,476
$ 896,044
$ 876,919

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Adjusted EBITDA:
Direct $ 29,100
$ 13,904
$ 54,018
$ 41,516
Retail (6,003 ) (3,583 ) (7,405 ) (7,063 )
Corporate / other (10,245 ) (9,035 ) (25,635 ) (25,271 )
Total adjusted EBITDA $ 12,852
$ 1,286
$ 20,978
$ 9,182
Product recall —
(212 ) —
(212 )
Loss on disposal of property and equipment 89
126
151
172
Transfer of corporate functions 475
—
2,401
—
Depreciation and amortization 6,347
4,795
19,031
13,419
Operating income (loss) $ 5,941
$ (3,423 ) $ (605 ) $ (4,197 )
Interest expense 6,350
6,149
18,642
18,493
Other income, net (576 ) (432 ) (1,812 ) (1,413 )
Income tax expense (benefit) 5
(1,918 ) (5,878 ) (6,316 )
NET INCOME (LOSS) $ 162
$ (7,222 ) $ (11,557 ) $ (14,961 )

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Depreciation and amortization:
Direct $ 5,747
$ 4,027
$ 17,015
$ 11,097
Retail 285
408
992
1,233
Corporate / other 315
360
1,024
1,089
Total depreciation and amortization $ 6,347
$ 4,795
$ 19,031
$ 13,419

(in thousands) October 27, 2017 October 28, 2016 January 27, 2017
Total Assets:
Direct $ 934,508
$ 1,073,975
$ 805,201
Retail 67,965
78,373
69,792
Corporate / other 118,007
160,830
239,398
Total assets $ 1,120,480
$ 1,313,178
$ 1,114,391

13 Weeks Ended 39 Weeks Ended
(in thousands) October 27, 2017 October 28, 2016 October 27, 2017 October 28, 2016
Capital expenditures:
Direct $ 8,791
$ 8,041
$ 29,004
$ 25,804
Retail —
25
10
279
Corporate / other 129
—
129
—
Total capital expenditures $ 8,920
$ 8,066
$ 29,143
$ 26,083

~~NOTE 12. PROPERTY, PLANT AND EQUIPMENT~~

As part of a multi-year plan to implement a global ERP system, assets were placed in service in connection with financial suite assets. No new ERP assets were placed in service during Third Quarter 2017 and $30.7 million were placed in service in Year to Date 2017. The Company began depreciating the assets over useful lives of 3 to 10 years.

without merit.

NOTE ~~13. RECENT ACCOUNTING PRONOUNCEMENTS~~

~~Intangibles - Goodwill~~10. SEGMENT REPORTING

The Company’s operating segments consist of: U.S. eCommerce, Europe eCommerce, Japan eCommerce, Outfitters, Third Party and ~~Other~~

Retail. The Company ~~elected to early adopt ASU 2017-04,~~ ~~Intangibles - Goodwill and Other, which simplifies the test for goodwill impairment by removing the second step~~determined that each of the ~~goodwill impairment test. Under~~operating segments have similar economic and other qualitative characteristics thus the ~~new guidance,~~results of the ~~Company will apply a one-step quantitative test~~operating segments are aggregated into 1 reportable external segment, consistent with the Company’s multi-channel business approach.

Lands’ End identifies 5 separate distribution channels for revenue reporting purposes:

•

U.S. eCommerce offers products through the Company’s eCommerce website utilizing digital marketing and direct mail catalogs.

•

International offers products primarily to consumers located in Europe and Japan through eCommerce international websites and third-party affiliates.

•

Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S., through negotiated arrangements to make specific styles or customized products which are made available for purchase on the Company’s eCommerce websites.

•

Third Party sells the same products as U.S. eCommerce but direct to consumers through third-party marketplace websites and through domestic wholesale customers.

•

Retail sells products through Company Operated stores.

Net revenue is presented by distribution channel in the following table:

	13 Weeks Ended				26 Weeks Ended
(in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Net revenue:
U.S. eCommerce	$	237,618	$	220,906	$	441,191	$	359,743
International		47,819		44,187		104,263		85,386
Outfitters		65,633		37,416		106,313		69,215
Third Party		19,098		5,108		30,902		6,614
Retail		13,941		4,466		22,737		8,133
Total net revenue	$	384,109	$	312,083	$	705,406	$	529,091

NOTE 11. REVENUE

Revenue includes sales of merchandise and ~~record~~delivery revenue related to merchandise sold. Substantially all of the ~~amount~~Company's revenue is recognized when control of ~~goodwill impairment as~~product passes to customers, which for the ~~excess of a reporting unit's carrying amount over its fair value, not to exceed~~eCommerce, Outfitters and Third Party channels is when the ~~total amount of goodwill allocated to the reporting unit, during its annual test for impairment~~merchandise is expected to be ~~conducted as~~received by the customer and for the Retail channel is at the time of sale in the ~~end of Fiscal November 2017.~~store. The ~~new guidance does not amend the optional qualitative assessment of goodwill impairment.~~

~~Revenue from Contracts with Customers~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers, which provides guidance for~~Company recognizes revenue, ~~recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services~~including shipping and handling fees billed to customers, in anthe amount ~~that reflects the consideration to which the company expects~~expected to be ~~entitled~~received when control of the Company's products transfers to customers, and is presented net of various forms of promotions, which range from contractually-fixed percentage price reductions to sales returns, discounts, and other incentives that may vary in ~~exchange for those goods or services. In doing so, companies will need~~amount. Variable amounts are estimated based on an analysis of historical experience and adjusted as better estimates become available.

Table of Contents

The Company's revenue is disaggregated by distribution channel and geographic location. Revenue by distribution channel is presented in Note 10, Segment Reporting. Revenue by geographic location was:

	13 Weeks Ended				26 Weeks Ended
(in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Net revenue:
United States	$	330,890	$	264,162	$	591,296	$	436,906
Europe		38,019		32,375		84,906		62,775
Asia		10,490		12,304		20,549		23,653
Other		4,710		3,242		8,655		5,757
Total net revenue	$	384,109	$	312,083	$	705,406	$	529,091

Contract Liabilities

Contract liabilities consist of payments received in advance of the transfer of control to ~~use more judgment~~the customer. As products are delivered and ~~make more estimates than under today’s guidance. These may include identifying performance obligations~~control transfers, the Company recognizes the deferred revenue in Net revenue in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance was deferred by ASU 2015-14, ~~Revenue from Contracts with Customers~~, issued by the FASB in August 2015, and will be effective for Lands' End in the first quarter of its fiscal year ending February 1, 2019. Subsequently, the FASB has also issued accounting standards updates which clarify the guidance.

The Company has developed a road map for implementation and is currently assessing the impact of adopting ASU 2014-09 on our revenue recognition practices. While most revenue recognition policies are not expected to change, the Company has identified anticipated changes to our Condensed Consolidated ~~Statement~~Statements of ~~Operations related~~Operations. The following table summarizes the deferred revenue associated with payments received in advance of the transfer of control to the ~~timing of revenue recognition for gift card breakage and to~~customer, which is reported in Other current liabilities in the Condensed Consolidated Balance Sheets, as well as amounts recognized through Net revenue for each period presented. The majority of deferred revenue as of July 30, 2021 is expected to be recognized in Net revenue in the fiscal quarter ending October 29, 2021, as products are delivered to customers.

	13 Weeks Ended						26 Weeks Ended
(in thousands)	July 30, 2021			July 31, 2020			July 30, 2021			July 31, 2020
Deferred revenue beginning of period	$	25,374		$	15,896		$	17,187		$	8,096
Deferred revenue recognized in period		(25,160	)		(15,896	)		(16,973	)		(8,096	)
Revenue deferred in period		18,141			11,901			18,141			11,901
Deferred revenue end of period	$	18,355		$	11,901		$	18,355		$	11,901

Revenue from gift cards is recognized when (i) the gift card is redeemed by the customer for merchandise, or (ii) as gift card breakage, an estimate of gift cards which will not be redeemed where the Company does not have a legal obligation to remit the value of the unredeemed gift cards to the ~~presentation~~relevant jurisdictions. Gift card breakage is recorded within Net revenue in the Condensed Consolidated Statements of Operations. Prior to their redemption, gift cards are recorded as a liability, included within Other current liabilities in the Condensed Consolidated Balance Sheets. The liability is estimated based on expected breakage that considers historical patterns of redemption. The following table provides the reconciliation of the ~~reserve for~~contract liability related to gift cards:

	13 Weeks Ended						26 Weeks Ended
(in thousands)	July 30, 2021			July 31, 2020			July 30, 2021			July 31, 2020
Balance as of beginning of period	$	27,466		$	23,202		$	26,798		$	22,592
Gift cards sold		13,949			11,104			24,996			19,935
Gift cards redeemed		(12,963	)		(10,587	)		(23,228	)		(18,714	)
Gift card breakage		(111	)		(68	)		(225	)		(162	)
Balance as of end of period	$	28,341		$	23,651		$	28,341		$	23,651

Refund Liabilities

Refund liabilities, primarily associated with product sales returns and retrospective volume rebates, represent variable consideration and are estimated and recorded as a reduction to Net revenue based on historical experience. As of July 30, 2021, July 31, 2020 and January 29, 2021, $17.4 million, $23.2 million and $25.7 million, respectively, of refund liabilities, primarily associated with product returns, were reported in ~~addition to increased disclosures required. The Company is continuing to study the impacts of this standard and its amendments and expects to finalize its evaluation~~Other current liabilities in the ~~fourth quarter of Fiscal 2017.~~

~~Recognition of Breakage~~Condensed Consolidated Balance Sheets. An asset for ~~Certain~~product returns is recorded in Prepaid ~~Stored-Value Products~~

~~In March 2016, the FASB issued ASU 2016-04,~~ ~~Recognition of Breakage for Certain Prepaid Stored-Value Products. This update clarifies when it is acceptable to recognize the unredeemed portion of prepaid gift cards into income. This guidance will be effective for Lands' End~~expenses and other current assets in the ~~first quarter of its fiscal year ending February 1, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's~~ Condensed Consolidated ~~Financial Statements.~~

~~Classification~~Balance Sheets.

Table of ~~Certain Cash Receipts and Cash Payments~~

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~. This update clarifies issues to reduce the current and potential future diversity in practice of the classification of certain cash receipts and cash payments within the statement of cash flows. This guidance will be effective for Lands' End in the first quarter of its fiscal year ending February 1, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Condensed Consolidated Financial Statements.

~~Restricted Cash~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Restricted Cash~~. This ASU requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. This guidance will be effective for the Company in the first quarter of its fiscal year ending February 1, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's Condensed Consolidated Financial Statements.

~~Leases~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases,~~ ~~which will replace the existing guidance in ASC 840,~~ ~~Leases~~. This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. This guidance will be effective for the Company in the first quarter of its fiscal year ending January 31, 2020. While it is expected that the standard will have a material increase in the assets and liabilities recorded on the Company's Consolidated Balance Sheet, the Company is still evaluating the overall impact on the Company's Condensed Consolidated Financial Statements.

Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the Condensed Consolidated Financial Statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to ~~risk,~~risks, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. See ~~“Cautionary Statements~~"Cautionary Statement Concerning Forward-Looking ~~Statements”~~Statements" below, ~~and~~ "Item 1A. Risk Factors" in our Annual Report filed on Form 10-K for the year ended January ~~27, 2017,~~29, 2021 and "Part II, Item 1A Risk Factors" of this Quarterly Report on Form 10-Q, for a discussion of the uncertainties, risks and assumptions associated with these statements.

As used in this Quarterly Report on Form 10-Q, references to the ~~“Company”~~"Company", ~~“Lands' End”~~"Lands' End", ~~“we”~~"we", ~~“us”~~"us", ~~“our”~~"our" and similar terms refer to Lands' End, Inc., and its subsidiaries. Our fiscal year ends on the Friday preceding the Saturday closest to January 31. Other terms that are commonly used in this Quarterly Report on Form 10-Q are defined as follows:

•

ABL Facility -Asset-based senior secured credit agreements, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders, as amended to date

•~~ABL Facility - Asset-based senior secured~~

•

CARES Act – The Coronavirus Aid, Relief and Economic Security Act signed into law on March 27, 2020

•

Company Operated stores - Lands' End retail stores in the Retail channel

•

Debt Facilities - Collectively, the Current Term Loan Facility and ABL Facility

•

First Quarter 2020 - The 13 weeks ended May 1, 2020

•

Fiscal 2022 – The 52 weeks ending January 27, 2023

•

Fiscal 2021 – The 52 weeks ending January 28, 2022

•

Fiscal 2020 - The 52 weeks ended January 29, 2021

•

Fiscal 2019 – The 52 weeks ended January 31, 2020

•

GAAP - Accounting principles generally accepted in the United States

•

LIBOR - London inter-bank offered rate

•

SEC - United States Securities and Exchange Commission

•

Second Quarter 2021 – The 13 weeks ended July 30, 2021

•

Second Quarter 2020 – The 13 weeks ended July 31, 2020

•

Second Quarter 2019 – The 13 weeks ended August 2, 2019

•

Third Quarter 2021 – The 13 weeks ending October 29, 2021

•

Third Quarter 2020 – The 13 weeks ended October 30, 2020

•

Year-to-Date 2021 - The 26 weeks ended July 30, 2021

•

Year-to-Date 2020 - The 26 weeks ended July 31, 2020

•

Year-to-Date 2019 – The 26 weeks ended August 2, 2019

Table of ~~April 4, 2014, with Bank of America, N.A. and certain other lenders~~

•~~Debt Facilities - Collectively, the ABL Facility and the Term Loan Facility and excluding the New ABL Facility~~

•~~ERP - Enterprise resource planning software solutions~~

•~~ESL - ESL Investments, Inc. and its investment affiliates, including Edward S. Lampert~~

•~~Fiscal 2017 - the fifty-three weeks ending February 2, 2018~~

•~~Fiscal 2016 - the fifty-two weeks ended January 27, 2017~~

•~~Fiscal 2014 - The fifty-two weeks ended January 30, 2015~~

•~~Fiscal November 2017 - the four week fiscal month ending November 24, 2017~~

•~~GAAP - Accounting principles generally accepted in the United States~~

•~~New ABL Facility - Asset-based senior secured credit agreement, dated as of November 16, 2017, with Wells Fargo Bank, National Association~~

•~~Same Store Sales - Net sales, from stores that have been open for at least 12 full months where selling square footage has not changed by 15% or more within the past fiscal year~~

•~~Sears Holdings or Sears Holdings Corporation - Sears Holdings Corporation, a Delaware Corporation, and its consolidated subsidiaries~~

•~~SEC - United States Securities and Exchange Commission~~

•~~Separation - On April 4, 2014 Sears Holdings distributed 100% of the outstanding common stock of Lands' End to its shareholders~~

•~~Term Loan Facility - Term loan credit agreement, dated as of April 4, 2014, with Bank of America, N.A. and certain other lenders~~

•~~Third Quarter 2017 - the thirteen weeks ended October 27, 2017~~

•~~Third Quarter 2016 - the thirteen weeks ended October 28, 2016~~

•~~UK Borrower - A United Kingdom subsidiary borrower of Lands’ End under the ABL Facility~~

•~~Year to Date 2017 - the thirty-nine weeks ended October 27, 2017~~

•~~Year to Date 2016 - the thirty-nine weeks ended October 28, 2016~~

Contents

~~Introduction~~

Management's discussion and analysis of financial condition and results of operations accompanies our Condensed Consolidated Financial Statements and provides additional information about our business, financial condition, liquidity and capital resources, cash flows and results of operations. We have organized the information as follows:

~~Executive overview.~~ ~~This section provides a brief description of our business, accounting basis of presentation and a brief summary of our results of operations.~~

~~Discussion and analysis.~~ ~~This section highlights items affecting the comparability of our financial results and provides an analysis of our segment results of operations for Third Quarter 2017 and Third Quarter 2016.~~

~~Liquidity and capital resources.~~ This section provides an overview of our historical and anticipated cash and financing activities. We also review our historical sources and uses of cash in our operating, investing and financing activities.

~~Contractual Obligations and Off-Balance-Sheet Arrangements.~~ ~~This section provides details of the Company's off-balance-sheet arrangements and contractual obligations for the next five years and thereafter.~~

~~Financial Instruments with Off-Balance-Sheet Risk.~~ ~~This section discusses financial instruments of the Company that could have off-balance-sheet risk.~~

~~Application of critical accounting policies and estimates.~~ This section summarizes the accounting policies that we consider important to our financial condition and results of operations and which require significant judgment or estimates to be made in their application.

~~Recent accounting pronouncements.~~ ~~This section summarizes recently issued accounting pronouncements and the impact or expected impact on the Company's financial statements.~~

Executive Overview

Description of the Company

~~Lands’~~

Lands' End ~~Inc.~~ is a leading ~~multi-channel~~uni-channel retailer of casual clothing, accessories, footwear and ~~footwear,~~home products. Operating out of America’s heartland, we believe our vision and values make a strong connection with our core customers. We offer products online at www.landsend.com, on third-party online marketplaces and through our own Company Operated stores, as well as ~~home products. We offer products through catalogs, online at~~ ~~www.landsend.com~~ ~~and affiliated specialty and international websites, and through~~third-party retail ~~locations, primarily at Lands’ End Shops at Sears and Lands’ End stores.~~locations. We are a classic American lifestyle brand with a passion for quality, legendary service and real value and we seek to deliver timeless style for women, men, ~~women,~~ kids and the home.

Lands’ End was founded in 1963 ~~in Chicago~~ by Gary Comer and his partners to sell sailboat hardware and equipment by catalog. While our product focus has shifted significantly over the years, we have continued to adhere to our founder’s motto as one of our guiding principles: ~~“Take~~"Take care of the customer, take care of the employee and the rest will take care of itself.”

~~The~~"

We seek to provide a common customer experience regardless of whether our customers are interacting with us on our company websites, third-party marketplaces, at our Company ~~identifies~~Operated stores or other distribution channels.

We have one external reportable segment and identify our operating segments according to how our business activities are managed and evaluated. ~~Each~~Our operating segments consist of: U.S. eCommerce, Europe eCommerce, Japan eCommerce, Outfitters, Third Party and Retail. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the ~~Company’s~~results of our operating segments are aggregated into one external reportable segment.

Distribution Channels

We identify five separate distribution channels for revenue reporting purposes:

•

U.S. eCommerce offers products through our eCommerce website utilizing digital marketing and direct mail catalogs.

•

International offers products primarily to consumers located in Europe and Japan through our eCommerce international websites and third-party affiliates.

•

Outfitters sells uniform and logo apparel to businesses and their employees, as well as to school households through school relationships, located primarily in the U.S., through negotiated arrangements to make specific styles or customized products which are made available for purchase on the Company’s eCommerce websites.

•

Third Party sells the same products as U.S. eCommerce but direct to consumers through third-party marketplace websites and through domestic wholesale customers.

•

Retail sells products through our Company Operated stores.

Impact of the COVID-19 Pandemic

COVID-19 surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic. The onset of the COVID-19 pandemic had a disruptive impact on our business operations and an unfavorable impact on our results of operations during the first half of Fiscal 2020. During the Second Quarter 2020, we began a significant recovery that continued to build on the momentum experienced before the COVID-19 pandemic. Our strong foundation and ongoing enhancements across the four strategic pillars of product, digital, uni-channel distribution and business ~~units~~processes supported us during this COVID-19 pandemic and continues to support the strength of our financial performance and encouraging customer metrics. The COVID-19 pandemic continues to adversely impact us and our supply chain and remains a threat to our workforce.

We continue to believe that ~~offer similar products~~we will emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the duration and ~~services but are sold either directly~~severity of this global pandemic or its ultimate impact on the global economy and our business and results.

Health and Safety of our People and Consumers

From the beginning of the COVID-19 pandemic, our priority has been the safety of our employees and customers. On March 16, 2020, we temporarily closed our Company Operated stores. These stores reopened during Second Quarter 2020. Additionally, we opened four new U.S. Company Operated stores in Second Quarter 2020. These new stores were already planned, and construction

Table of Contents

was underway prior to the start of the COVID-19 pandemic. Since the onset of the COVID-19 pandemic, we have taken extra precautions in our offices and distribution centers, which have varied from time to time based on the then current guidance from global, federal and state health authorities. These measures have included COVID-19 retail guidelines, work from home policies, social distancing, masking, thermal scanning and partitions in all facilities. With the emergence of the delta variant of COVID-19, we have been required to keep these measures in place longer than anticipated.

Supply Chain

The COVID-19 pandemic continues to cause supply chain disruptions across all industries, and we continually monitor our ~~warehouses (Direct)~~supply chain for manufacturing and transportation delays caused or exacerbated by the COVID-19 pandemic. In the first half of Fiscal 2021, the COVID-19 pandemic impacted our distribution centers, third-party manufacturing partners and logistics partners, including freight capacity, port congestion, other logistics constraints, and closure of certain third-party manufacturing facilities and production lines. These disruptions and constraints resulted in later timing of Spring 2021 inventory receipts and deliveries, as well as higher freight, distribution and other supply chain costs. These disruptions have led, at times, to lower inventory positions and higher than normal back orders, as manufacturing, transport, receipt and stocking of inbound product is delayed. In addition, increased demand for parcel delivery has led to carrier limitations, as well as rate surcharges, throughout the industry, generally, and for the Company, in particular.

We expect these supply chain disruptions and constraints and increases in costs to continue through the balance of Fiscal 2021 and into Fiscal 2022. As a result of these impacts, we anticipate later than expected fall and holiday season inventory receipts and deliveries to our ~~retail stores (Retail).~~

wholesale customers and inventory availability for our distribution channels. These additional costs and shipping delays may impact our future net sales and gross margin results, depending upon the ultimate timing of delivery and availability of product to sell.

Expense Reduction

Beginning in First Quarter 2020, we took aggressive actions to reduce overall expenses as a response to decreased customer demand due to the COVID-19 pandemic. We reduced our operating expenses and structural costs by enacting employee furloughs, and temporary tiered salary reductions for the executive team and corporate staff. In addition, other discretionary operating expenses and planned capital expenditures for Fiscal 2020 were significantly reduced. As the COVID-19 pandemic continues and new variants emerge, we will continue to monitor the impact of the COVID-19 pandemic to manage overall expenses.

Basis of Presentation

The Condensed Consolidated Financial Statements have been prepared in accordance with GAAP and include the accounts of Lands' End, Inc., and its subsidiaries. All intercompany transactions and balances have been eliminated.

~~Following~~ The COVID-19 pandemic had a material impact on our results for the ~~Separation, we began operating~~26 weeks ended July 31, 2020. As such, this interim period, as ~~a separate, publicly traded company, independent from Sears Holdings. According~~well as upcoming periods, may not be comparable to ~~statements on Schedule 13D filed with the SEC by ESL, ESL beneficially owns significant portions~~past performance or indicative of both the Company's and Sears Holdings Corporation's outstanding shares of common stock. Therefore Sears Holdings Corporation, the Company's former parent company, is considered a related party both prior to and subsequent to the Separation.

future performance.

Seasonality

We experience seasonal fluctuations in our ~~Net~~net revenue and operating results and historically have realized a significant portion of our net ~~sales~~revenue and earnings for the year during our fourth fiscal quarter. We generated ~~an average of 33%~~37.7% and 37.9% of our ~~Net~~net revenue in the fourth fiscal quarter of ~~the past three years.~~Fiscal 2020 and Fiscal 2019 respectively. Thus, lower than expected fourth quarter ~~Net~~net revenue could have an adverse impact on our annual operating results.

Working capital requirements typically increase during the second and third ~~quarter~~quarters of the fiscal year as inventory builds to support peak shipping/selling ~~period~~periods and, accordingly, typically decrease during the fourth quarter of the fiscal year as inventory is shipped/sold. Cash provided by operating activities is typically higher in the fourth quarter of the fiscal year due to reduced working capital requirements during that period.

Table of Contents

Results of Operations

The following table sets forth, for the periods indicated, selected income statement data:

	13 Weeks Ended
	July 30, 2021						July 31, 2020
(in thousands)	$'s			% of Net revenue			$’s		% of Net revenue
Net revenue	$	384,109			100.0	%	$	312,083		100.0	%
Cost of sales (excluding depreciation and amortization)		206,320			53.7	%		176,661		56.6	%
Gross profit		177,789			46.3	%		135,422		43.4	%
Selling and administrative		136,649			35.6	%		111,478		35.7	%
Depreciation and amortization		9,791			2.5	%		9,378		3.0	%
Other operating expense, net		—			—	%		3,373		1.1	%
Operating income		31,349			8.2	%		11,193		3.6	%
Interest expense		8,837			2.3	%		4,916		1.6	%
Other (income) expense, net		(123	)		(0.0	)%		1,333		0.4	%
Income before income taxes		22,635			5.9	%		4,944		1.6	%
Income tax expense		6,414			1.7	%		568		0.2	%
NET INCOME	$	16,221			4.2	%	$	4,376		1.4	%

	26 Weeks Ended
	July 30, 2021						July 31, 2020
(in thousands)	$'s			% of Net revenue			$’s			% of Net revenue
Net revenue	$	705,406			100.0	%	$	529,091			100.0	%
Cost of sales (excluding depreciation and amortization)		379,880			53.9	%		299,514			56.6	%
Gross profit		325,526			46.1	%		229,577			43.4	%
Selling and administrative		262,171			37.2	%		217,276			41.1	%
Depreciation and amortization		19,695			2.8	%		18,164			3.4	%
Other operating expense, net		443			(0.0	)%		7,656			1.4	%
Operating income (loss)		43,217			6.1	%		(13,519	)		(2.6	)%
Interest expense		17,897			2.5	%		10,227			1.9	%
Other (income) expense, net		(290	)		(0.0	)%		1,160			0.2	%
Income (loss) before income taxes		25,610			3.6	%		(24,906	)		(4.7	)%
Income tax expense (benefit)		6,750			0.9	%		(8,639	)		(1.6	)%
NET INCOME (LOSS)	$	18,860			2.7	%	$	(16,267	)		(3.1	)%

13 Weeks Ended

October 27, 2017 October 28, 2016
(in thousands) $'s
% of
Net revenue $’s % of
Net revenue
Net revenue $ 325,489
100.0 % $ 311,476
100.0 %
Cost of sales (excluding depreciation and amortization) 183,515
56.4 % 177,825
57.1 %
Gross profit 141,974
43.6 % 133,651
42.9 %
Selling and administrative 129,122
39.7 % 132,365
42.5 %
Depreciation and amortization 6,347
1.9 % 4,795
1.5 %
Other operating expense (income), net 564
0.2 % (86 ) — %
Operating income (loss) 5,941
1.8 % (3,423 ) (1.1 )%
Interest expense 6,350
2.0 % 6,149
2.0 %
Other income, net (576 ) (0.2 )% (432 ) (0.1 )%
Income (loss) before income taxes 167
0.1 % (9,140 ) (2.9 )%
Income tax expense (benefit) 5
— % (1,918 ) (0.6 )%
NET INCOME (LOSS) $ 162
— % $ (7,222 ) (2.3 )%

39 Weeks Ended
October 27, 2017 October 28, 2016
(in thousands) $’s % of
Net revenue $’s % of Net revenue
Net revenue $ 896,044
100.0 % $ 876,919
100.0 %
Cost of sales (excluding depreciation and amortization) 497,262
55.5 % 477,446
54.4 %
Gross profit 398,782
44.5 % 399,473
45.6 %
Selling and administrative 377,804
42.2 % 390,291
44.5 %
Depreciation and amortization 19,031
2.1 % 13,419
1.5 %
Other operating expense (income), net 2,552
0.3 % (40 ) — %
Operating loss (605 ) (0.1 )% (4,197 ) (0.5 )%
Interest expense 18,642
2.1 % 18,493
2.1 %
Other income, net (1,812 ) (0.2 )% (1,413 ) (0.2 )%
Loss before income taxes (17,435 ) (1.9 )% (21,277 ) (2.4 )%
Income tax benefit (5,878 ) (0.7 )% (6,316 ) (0.7 )%
NET LOSS $ (11,557 ) (1.3 )% $ (14,961 ) (1.7 )%

Depreciation and amortization isare 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 Income (Loss) and Adjusted EBITDA

We recorded Net income of ~~$0.2~~$16.2 million in ~~Third~~Second Quarter ~~2017~~2021 compared to a Net ~~loss~~income of ~~$7.2~~$4.4 million in ~~Third~~the Second Quarter ~~2016.~~2020. In addition to our Net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted EBITDA ~~measurement.~~metric. Adjusted EBITDA is computed as Net income (loss) appearing on the Condensed Consolidated Statements of Operations net of Income tax ~~expense~~ expense/(benefit), ~~Other income, net,~~ Interest expense, Depreciation and amortization and certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our ~~businesses,~~business for comparable periods, and as ~~well as~~a basis for an executive compensation ~~metrics, for~~metric. The methods used by us to calculate our non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable ~~periods.~~to similar measures provided by other companies. 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.

Table of Contents

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and is 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.

~~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.
◦ ~~We exclude a benefit related to the reversal of a portion of the product recall accrual recognized in Fiscal 2014 as this was an unusual event that affects the~~ comparability of results. We have adjusted our ~~financial results.~~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.

•

Corporate restructuring – corporate restructuring actions and activities including severance for the reduction in corporate positions for the 13 weeks and 26 weeks ended July 31, 2020.

◦

~~Transfer of corporate functions - severance~~

•

Goodwill and long-lived asset impairment – charges associated with ~~a transition~~the non-cash write down of goodwill and certain ~~corporate activities from our New York office to our Dodgeville headquarters.~~long-lived assets for the 13 weeks and 26 weeks ended July 31, 2020.

•

Other – amortization of transaction related costs associated with Third Party channel for the 13 weeks and 26 weeks ended July 30, 2021.

◦

~~Gain or loss~~

•

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.~~operations for the 13 weeks ended July 31, 2020 and for the 26 weeks ended July 30, 2021 and July 31, 2020.

	13 Weeks Ended
	July 30, 2021						July 31, 2020
(in thousands)	$’s			% of Net revenue			$’s		% of Net revenue
Net income	$	16,221			4.2	%	$	4,376		1.4	%
Income tax expense		6,414			1.7	%		568		0.2	%
Other (income) expense, net		(123	)		(0.0	)%		1,333		0.4	%
Interest expense		8,837			2.3	%		4,916		1.6	%
Operating income		31,349			8.2	%		11,193		3.6	%
Depreciation and amortization		9,791			2.5	%		9,378		3.0	%
Corporate restructuring		—			—	%		2,925		0.9	%
Goodwill and long-lived asset impairment		—			—	%		400		0.1	%
Other		250			0.1	%		—		—	%
Loss on property and equipment		—			—	%		48		0.0	%
Adjusted EBITDA	$	41,390			10.8	%	$	23,944		7.7	%

	26 Weeks Ended
	July 30, 2021						July 31, 2020
(in thousands)	$’s			% of Net revenue			$’s			% of Net revenue
Net income (loss)	$	18,860			2.7	%	$	(16,267	)		(3.1	)%
Income tax expense (benefit)		6,750			0.9	%		(8,639	)		(1.6	)%
Other (income) expense, net		(290	)		(0.0	)%		1,160			0.2	%
Interest expense		17,897			2.5	%		10,227			1.9	%
Operating income (loss)		43,217			6.1	%		(13,519	)		(2.6	)%
Depreciation and amortization		19,695			2.8	%		18,164			3.4	%
Corporate restructuring		—			—	%		2,925			0.6	%
Goodwill and long-lived asset impairment	—				—	%		3,844			0.7	%
Other		500			0.1	%	—				—	%
Loss on property and equipment		443			0.1	%		887			0.2	%
Adjusted EBITDA	$	63,855			9.1	%	$	12,301			2.3	%

13 Weeks Ended

October 27, 2017
October 28, 2016
(in thousands)
$’s
% of
Net revenue
$’s
% of
Net revenue
Net income (loss)
$ 162

— %
$ (7,222 )
(2.3 )%
Income tax expense (benefit)
5

— %
(1,918 )
(0.6 )%
Other income, net
(576 )
(0.2 )%
(432 )
(0.1 )%
Interest expense
6,350

2.0 %
6,149

2.0 %
Operating income (loss)
5,941

1.8 %
(3,423 )
(1.1 )%
Depreciation and amortization
6,347

1.9 %
4,795

1.5 %
Product recall —
— % (212 ) (0.1 )%
Transfer of corporate functions
475

0.1 %
—

— %
Loss on disposal of property and equipment
89

— %
126

— %
Adjusted EBITDA
$ 12,852

3.9 %
$ 1,286

0.4 %

39 Weeks Ended
October 27, 2017 October 28, 2016
(in thousands) $’s % of
Net revenue $’s % of
Net revenue
Net loss $ (11,557 ) (1.3 )% $ (14,961 ) (1.7 )%
Income tax benefit (5,878 ) (0.7 )% (6,316 ) (0.7 )%
Other income, net (1,812 ) (0.2 )% (1,413 ) (0.2 )%
Interest expense 18,642
2.1 % 18,493
2.1 %
Operating loss (605 ) (0.1 )% (4,197 ) (0.5 )%
Depreciation and amortization 19,031
2.1 % 13,419
1.5 %
Product recall —
— % (212 ) — %
Transfer of corporate functions 2,401
0.3 % —
— %
Loss on disposal of property and equipment 151
— % 172
— %
Adjusted EBITDA $ 20,978
2.3 % $ 9,182
1.0 %

Table of Contents

In assessing the operational performance of our business, we consider a variety of financial measures. We operate in ~~two reportable segments: Direct (sold through e-commerce websites~~five revenue channels: U.S. eCommerce, International, Outfitters, Third Party and ~~direct mail catalogs) and Retail (sold through stores).~~Retail. A key measure in the evaluation of our business is revenue performance by ~~segment.~~channel. 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~~U.S. eCommerce, International, Outfitters and Third Party channels, we use Net revenue. For our Retail ~~segment,~~channel, we ~~use~~have historically used Company Operated stores Same Store Sales as a key measure in evaluating performance. ~~A store is included in~~However, due to the impact of the COVID-19 pandemic on the Retail channel, we are not currently using 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~~key measure in evaluating performance. The Retail channel is currently evaluated on sales productivity which is a ~~remodel, expansion, reduction or relocation are excluded from Same Store Sales calculations until the first day they have comparable prior year sales. Online~~metric measuring sales traffic and ~~sales generated through our in-store computer kiosks are considered revenue in our Direct segment and are excluded from Same Store Sales.~~

customer conversion.

Discussion and Analysis

~~Third~~

Second Quarter ~~2017~~2021 compared with ~~Third~~Second Quarter ~~2016~~

2020

Due to the impact of the COVID-19 pandemic on our financial operating results during the Second Quarter 2020, we also have included select comparisons to Second Quarter 2019 as management believes such comparisons are relevant to rate of recovery during the COVID-19 pandemic and performance of our business.

Net Revenue

Net revenue for ~~Third~~Second Quarter ~~2017~~2021 was ~~$325.5~~$384.1 million, an increase of $72.0 million or 23.1% compared with ~~$311.5~~$312.1 million in the ~~comparable period~~Second Quarter 2020, and an increase of $85.8 million or 28.8% compared with $298.3 million in the Second Quarter 2019.

U.S. eCommerce Net revenue was $237.6 million for Second Quarter 2021, an increase of $16.7 million or 7.6%, from $220.9 million during the Second Quarter 2020, and an increase of $62.5 million or 35.7% from $175.1 million during the Second Quarter 2019. The increase in revenue in Second Quarter 2021 was primarily driven by stronger website traffic and a higher average order value as customers continued to react positively to the product assortments and digital capabilities, which drove a year over year increase in our new customers acquired and our overall customer file.

International eCommerce Net revenue was $47.8 million for Second Quarter 2021, an increase of $3.6 million or 8.2%, from $44.2 million during the Second Quarter 2020, and an increase of $7.4 million or 18.3% from $40.4 million during the Second Quarter 2019. These increases in revenue were primarily driven by implementing U.S. eCommerce initiatives in Europe eCommerce which resulted in stronger demand as customers reacted positively to the product assortments and digital capabilities, which drove a year over year increase in our new customers acquired and overall customer file.

Outfitters Net revenue was $65.6 million for Second Quarter 2021, an increase of $28.2 million or 75.4%, from $37.4 million during the Second Quarter 2020, and an increase of $0.1 million or 0.2% from $65.5 million during the Second Quarter 2019. Compared to the Second Quarter 2020, the increase was primarily attributed to stronger demand within our travel-related national accounts and school uniforms as households roughly recovered to prior ~~year,~~back-to-school shopping patterns, with a slower recovery in our small and medium-sized customers.

Third Party Net revenue was $19.1 million for Second Quarter 2021, an increase of $14.0 million ~~or 4.5%.~~from $5.1 million during the Second Quarter 2020. The increase was ~~comprised~~primarily attributed to the launch of Lands’ End product on Kohls.com and at 150 Kohl’s retail locations in the Third Quarter 2020 as well as the impact of expanding our swimwear assortment into an additional 150 Kohl’s retail locations during Second Quarter 2021.

Retail Net revenue was $14.0 in Second Quarter 2021, an increase of $9.5 million or 211.1% from $4.5 million during Second Quarter 2020, and a decrease of $0.2 million or 1.4% from $14.2 million during Second Quarter 2019. Compared to Second Quarter 2020, the increase was attributed to the stores being closed for a portion of Second Quarter 2020 and an increase in ~~our Direct segment of $18.2 million and~~overall conversion partially offset by a decrease in ~~our Retail segment of $4.2 million.~~

~~Net~~traffic. Compared to Second Quarter 2019, the reduction in revenue ~~in our Direct segment~~ was $290.3 million for Third Quarter 2017, an increase of $18.2 million, or 6.7%, from the comparable period of the prior year. The increase in the Direct segment was primarily attributable to an increase in our U.S. consumer business. We increased circulation and customer contacts in our U.S. consumer business which resulted in an increase, particularly in the outwear and bottoms categories.

~~Net revenue in our Retail segment was $35.1 million for Third Quarter 2017,~~driven by a decrease ~~of $4.2 million, or 10.8%, from the comparable period of the prior year. The decrease was attributable to a decrease~~in traffic partially offset by improved conversion and an increase in the number of ~~Lands’ End Shops at Sears and a decrease in Same Store Sales of 1.3%.~~U.S. Company Operated stores. On ~~October 27, 2017, the~~July 30, 2021 there were 31 U.S. Company ~~operated 188 Lands’ End Shops at Sears and 14 global Lands’ End~~Operated stores compared ~~with 219 Lands’ End Shops at Sears and 14 global Lands’ End~~to 30 U.S. Company Operated stores on ~~October 28, 2016.~~

July 31, 2020 and 21 U.S. Company Operated stores on August 2, 2019.

Gross Profit

~~Total~~

Gross profit was $177.8 million for Second Quarter 2021, an increase of $42.4 million or 31.3% from $135.4 million during the Second Quarter of 2020. Gross margin increased ~~$8.3 million~~ to ~~$142.0 million and~~46.3% in Second Quarter 2021, compared with 43.4% in Second Quarter 2020.

Table of Contents

Compared to Second Quarter 2020, gross margin increased ~~approximately 70 basis points~~due to ~~43.6%~~merchandise margin expansion in the U.S. eCommerce channel driven by enhanced promotional strategies and continued use of analytics for both our pricing and inventory management, partially offset by increased shipping costs and surcharges as well as higher sales mix from the lower-margin Third Party channel.

Selling and Administrative Expenses

Selling and administrative expenses increased $25.1 million to $136.6 million or 35.6% of total Net revenue in ~~Third~~Second Quarter ~~2017,~~2021 compared with ~~$133.7~~$111.5 million or ~~42.9%~~35.7% of ~~total~~ Net revenue in ~~Third~~Second Quarter ~~2016. The Gross profit increase was comprised of an increase in our Direct segment of $13.2 million and a decrease in our Retail segment of $4.9 million.~~

Gross profit in the Direct segment was $129.9 million compared with $116.7 million for Third Quarter 2017 and Third Quarter 2016, respectively. Gross margin in the Direct segment increased approximately 190 basis points to 44.8% in Third Quarter 2017 versus 42.9% in the comparable prior year period.2020. The increase in ~~gross margin during third quarter was primarily attributable~~expenses is due to ~~a $4.4 million write down~~the continued investment in digital marketing and lower operating expenses in Second Quarter 2020 due to actions taken at the onset of ~~under performing Canvas by Lands' End inventory that occurred in Third Quarter 2016~~the COVID-19 pandemic to reduce operating expenses and ~~did not reoccur in Third Quarter 2017.~~

Retail segment Gross profit decreased $4.9 million to $12.0 million in Third Quarter 2017 from $16.9 million in Third Quarter 2016. Retail segment gross margin decreased approximately 880 basis points to 34.1% for Third Quarter 2017 compared to 42.9% for Third Quarter 2016 driven by certain shrink and liquidation activities that occurred in Third Quarter 2017.

~~Selling and Administrative Expenses~~

Selling and administrative expenses were $129.1 million, or 39.7% of total Net revenue, compared with $132.4 million, or 42.5% of total Net revenue, in Third Quarter 2017 and Third Quarter 2016, respectively.structural costs. The approximately 280 basis point decrease in Selling and administrative expenses as a percentage of sales was primarily due to a decrease of $2.0 million in the Direct Segment and a decrease of $2.5 million in the Retail segment, partially offset by an increase of $1.2 million in the Corporate segment.

~~The Direct segment Selling and administrative expenses were $100.8 million compared with $102.8 million for Third Quarter 2017 and Third Quarter 2016, respectively. The approximately 310~~10 basis point decrease was ~~largely attributable to a reduction~~driven by improved leverage from higher sales and continued expense controls mostly offset by continued investment in digital marketing expenses ~~partially offset by increased incentive compensation expense.~~

~~The Retail segment Selling~~ and ~~administrative~~lower operating expenses ~~were $18.0 million compared with $20.5 million for Third~~in Second Quarter ~~2017 and Third Quarter 2016, respectively. The~~2020 due to actions taken at the onset of the COVID-19 pandemic. This was an approximately 80540 basis point decrease ~~was largely attributable~~compared to ~~a decrease in personnel and occupancy costs associated with store closures.~~

~~The Corporate segment Selling and administrative expenses were $10.3 million compared with $9.1 million for Third~~Second Quarter ~~2017 and Third Quarter 2016, respectively. The $1.2 million, or 13.2%, increase was largely attributable to an increase in incentive compensation expenses, partially offset by lower professional fees.~~

2019 despite the higher digital marketing expenses.

Depreciation and Amortization

Depreciation and amortization expense was ~~$6.3~~$9.8 million in ~~Third~~Second Quarter ~~2017,~~2021, an increase of ~~$1.6~~$0.4 million or ~~32.4%~~4.4%, compared with ~~$4.8~~$9.4 million in ~~Third~~Second Quarter ~~2016,~~2020. The increase was primarily attributable to ~~an increase in~~ depreciation associated with our ~~ongoing multi-year ERP system implementation.~~

continued investment in our digital information technology infrastructure.

Other Operating Expense ~~(Income), Net~~

Other operating expense, net was ~~$0.6~~zero in Second Quarter 2021 compared to $3.4 million in ~~Third~~Second Quarter ~~2017~~2020. The decrease of $3.4 million was primarily attributed to $2.9 million of corporate restructuring costs which includes severance for the reduction of corporate positions in Second Quarter 2020.

Operating Income

Operating income was $31.3 million in Second Quarter 2021 compared to ~~$0.1~~$11.2 million ~~of income~~ in ~~Third~~Second Quarter ~~2016 as~~2020. The increase was driven by the ~~result of a severance charge~~increase in Gross profit from the increased revenue and improved margins over Second Quarter 2020 partially offset by higher selling and administrative expenses.

Interest Expense

Interest expense was $8.8 million in Second Quarter 2021 compared to $4.9 million in Second Quarter 2020. The $3.9 million increase was primarily attributed to higher interest rates associated with the ~~transition of certain corporate activities from the New York office to the Company's Dodgeville headquarters.~~

~~Operating~~Current Term Loan Facility.

Other Income ~~(Loss)~~

~~Operating~~

Other income was ~~$5.9~~$0.1 million in ~~Third~~Second Quarter ~~2017~~2021 compared to ~~an operating loss~~Other expense of ~~$3.4~~$1.3 million in ~~Third~~Second Quarter ~~2016~~2020. The decrease is primarily ~~due~~attributed to ~~increased revenue and lower marketing costs.~~

~~Interest Expense~~

~~Interest expense was $6.4 million~~a final payment in ~~Third~~the Second Quarter ~~2017 compared to $6.1 million in Third Quarter 2016.~~

2020 associated with the transitioning of a sourcing office.

Income Tax Expense ~~(Benefit)~~

~~Income~~

We recorded income tax expense ~~was insignificant for Third Quarter 2017 compared to the $1.9 million benefit in Third Quarter 2016. The~~at an overall effective tax rate ~~was 3.0%~~of 28.3% and 11.5% for Second Quarter 2021 and Second Quarter 2020, respectively. The Second Quarter 2021 rate is higher than Second Quarter 2020 primarily as a result of changes in ~~Third Quarter 2017 compared with 21.0%~~estimates due to uncertainties related to our performance as a result of the COVID-19 pandemic in ~~Third Quarter 2016.~~

2020.

Net Income ~~(Loss)~~

As a result of the above factors, Net income was ~~$0.2~~$16.2 million and diluted earnings per share was ~~$0.01~~$0.48 in ~~Third~~Second Quarter ~~2017~~2021 compared with a Net ~~loss~~income of ~~$7.2~~$4.4 million and diluted ~~loss~~earnings per share of ~~$0.23~~$0.13 in ~~Third~~Second Quarter ~~2016.~~

2020.

Adjusted EBITDA

As a result of the above factors, Adjusted EBITDA ~~increased to $12.9~~was $41.4 million in ~~Third~~Second Quarter ~~2017 from $1.3~~2021 compared to $23.9 million in ~~Third~~Second Quarter ~~2016.~~

~~Year to Date 2017~~2020.

Table of Contents

Year-to-Date 2021 compared with ~~Year~~Year-to-Date 2020

Due to ~~Date 2016~~

the impact of the COVID-19 pandemic on our financial operating results Year-to-Date 2020, we also have included select comparisons to Year-to-Date 2019 as management believes such comparisons are relevant to rate of recovery during the COVID-19 pandemic and performance of our business.

Net Revenue

Net revenue for ~~Year to Date 2017~~Year-to-Date 2021 was ~~$896.0~~$705.4 million, an increase of $176.3 million or 33.3% compared with ~~$876.9~~$529.1 million in the ~~comparable period of the prior year,~~Year-to-Date 2020, and an increase of ~~$19.1~~$144.7 million or ~~2.2%. The~~25.8% compared with $560.7 million in the Year-to-Date 2019.

U.S. eCommerce Net revenue was $441.2 million for Year-to-Date 2021, an increase ~~was comprised~~ of $81.5 million or 22.7%, from $359.7 million during the Year-to-Date 2020, and an increase of $99.8 million or 29.2% from $341.4 million during the Year-to-Date 2019. These increases in revenue were primarily driven by stronger website traffic and a higher average order value as customers continue to react positively to the product assortments and digital capabilities, which drove a year over year increase in our ~~Direct segment~~new customers acquired and our overall customer file.

International eCommerce Net revenue was $104.2 million for Year-to-Date 2021, an increase of ~~$27.9~~$18.8 million or 22.0%, from $85.4 million during the Year-to-Date 2020, and an increase of $22.9 million or 28.2% from $81.3 million during the Year-to-Date 2019. These increases in revenue were primarily driven by implementing U.S. eCommerce initiatives in Europe eCommerce which resulted in stronger demand as customers reacted positively to the product assortments and digital capabilities, which drove a year over year increase in our new customers acquired and overall customer file.

Outfitters Net revenue was $106.3 million for Year-to-Date 2021, an increase of $37.1 million or 53.6%, from $69.2 million during the Year-to-Date 2020, and a decrease of $2.2 million or 2.0% from $108.5 million during the Year-to-Date 2019. Compared to the Year-to-Date 2020, the increase was primarily attributed to stronger demand within our travel-related national accounts and school uniforms as households roughly recovered to prior back-to-school shopping patterns, with a slower recovery in our ~~Retail segment of $8.8 million.~~

small and medium-sized customers.

Third Party Net revenue ~~in our Direct segment~~ was ~~$778.6~~$30.9 million for ~~Year to Date 2017,~~Year-to-Date 2021, an increase of ~~$27.9~~$24.3 million ~~or 3.7%,~~ from $6.6 million during the comparable period of the prior year. The increase was primarily attributed to the launch of Lands’ End product on Kohls.com and at 150 Kohl’s retail locations in the ~~Direct segment~~Third Quarter 2020 as well as the impact of expanding our swimwear assortment into an additional 150 Kohl’s retail locations during the Second Quarter 2021.

Retail Net revenue was ~~largely attributable~~$22.8 million in Year-to-Date 2021, an increase of $14.7 million or 181.5% from $8.1 million during Year-to-Date 2020, and a decrease of $1.8 million or 7.6% from $24.6 million during Year-to-Date 2019. Compared to Year-to-Date 2020, the increase was attributed to the stores being closed for a portion of Year-to-Date 2020 and 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, particularly in Women's swimwear.~~

~~Net revenue in our Retail segment was $117.3 million for Year to Date 2017, a decrease of $8.8 million, or 6.9%, from the comparable period of the prior year. The decrease was driven~~overall conversion partially offset by a decrease in traffic. Compared to Year-to-Date 2019, the reduction in revenue was the result of traffic not having returned to pre-COVID-19 pandemic levels partially offset by improved conversion and an increase in the number of ~~Lands’ End Shops at Sears, partially~~the U.S. Company Operated stores.

Gross Profit

Gross profit was $325.5 million for Year-to-Date 2021, an increase of $95.9 million or 41.8% from $229.6 million during the Year-to-Date of 2020. Gross margin increased to 46.2% in Year-to-Date 2021, compared with 43.4% in Year-to-Date 2020. Compared to Year-to-Date 2020, gross margin increased due to merchandise margin expansion in the U.S. eCommerce channel driven by enhanced promotional strategies and continued use of analytics for both our pricing and inventory management, offset by ~~an increase in Same Store Sales of 1.7%. On October 27, 2017,~~increased shipping costs and surcharges as well as higher sales mix from the ~~Company operated 188 Lands’ End Shops at Sears~~lower-margin Third Party channel.

Selling and ~~14 global Lands’ End stores compared with 219 Lands’ End Shops at Sears~~Administrative Expenses

Selling and ~~14 global Lands’ End stores on October 28, 2016.~~

~~Gross Profit~~

~~Total Gross profit decreased $0.7~~administrative expenses increased $44.9 million to ~~$398.8~~$262.2 million ~~and gross margin decreased approximately 110 basis points to 44.5%~~or 37.2% of total Net revenue in ~~Year to Date 2017,~~Year-to-Date 2021 compared with ~~$399.5~~$217.3 million or ~~45.6%~~41.1% of ~~total~~ Net revenue in ~~Year~~Year-to-Date 2020. The increase in expenses was attributable to ~~Date 2016.~~the continued investment in digital marketing and lower expenses Year-to-Date 2020 due to expense reductions taken at the onset of the COVID-19 pandemic. The ~~Gross profit~~approximately 390 basis point decrease was ~~comprised of an increase in our Direct segment of $6.6 million~~driven by improved leverage from higher sales and ~~a decrease in our Retail segment of $7.3 million.~~

Gross profit in the Direct segment was $352.6 million compared with $346.0 million for Year to Date 2017 and Year to Date 2016, respectively. Gross margin in the Direct segment decreased approximately 80 basis points to 45.3% in Year to Date 2017 versus 46.1% in the comparable prior year period. The decrease in gross margin during Year to Date 2017 was primarily attributable to increased promotional activity in the highly competitive retail environment as well as increased shipping expenses, partially offset by a $4.4 million write down of under performing Canvas by Lands' End inventory that occurred in Third Quarter 2016 and did not reoccur in Third Quarter 2017.

Retail segment Gross profit decreased $7.3 million to $46.0 million in Year to Date 2017 from $53.3 million in Year to Date 2016. Retail segment gross margin decreased approximately 300 basis points to 39.2% for Year to Date 2017 compared to 42.2% for Year to Date 2016 primarily attributable to store closures and increased promotional activity in the highly competitive retail environment

~~Selling and Administrative Expenses~~

Selling and administrative expenses were $377.8 million, or 42.2% of total Net revenue, compared with $390.3 million, or 44.5% of total Net revenue, in Year to Date 2017 and Year to Date 2016, respectively. The approximately 230 basis points decrease in Selling and administrative expenses was primarily due to a decrease of $5.9 million in the Direct segment and a decrease of $6.9 million in the Retail segment, partially offset by an increase of $0.3 million in the Corporate segment.

The Direct segment Selling and administrative expenses were $298.6 million compared with $304.5 million for Year to Date 2017 and Year to Date 2016, respectively. The $5.9 million, or 1.9%, decrease was largely attributable to a reduction in marketing expenses, partiallycontinued expense controls slightly offset by increased ~~incentive compensation expense.~~

The Retail segment Selling and administrative expenses were $53.4 million compared with $60.3 million for Year to Date 2017 and Year to Date 2016, respectively. The $6.9 million, or 11.4%, decrease was primarily attributable to a decrease indigital marketing expenses ~~as well as occupancy~~ and ~~other operating expenses associated with closed stores.~~

~~Corporate / other Selling and administrative expenses increased to $25.8 million in Year to Date 2017~~expense reductions taken at the onset of the COVID-19 pandemic. This was also an approximately 540 basis point decrease compared to ~~$25.5 million in Year to Date 2016 primarily due to an increase in incentive compensation~~Year-to-Date 2019 despite the higher digital marketing expenses.

Table of Contents

Depreciation and Amortization

Depreciation and amortization expense was ~~$19.0~~$19.7 million in ~~Year to Date 2017,~~Year-to-Date 2021, an increase of ~~$5.6~~$1.5 million or ~~41.8%~~8.4%, compared with ~~$13.4~~$18.2 million in ~~Year to Date 2016,~~Year-to-Date 2020. The increase was primarily attributable to ~~an increase in~~ depreciation associated with our ~~ongoing multi-year ERP system implementation.~~

continued investment in our digital information technology infrastructure.

Other Operating Expense ~~(Income), Net~~

Other operating expense, ~~(income),~~ net was ~~income of $2.6~~$0.4 million in ~~Year~~Year-to-Date 2021 and $7.7 million in Year-to-Date 2020. The decrease of $7.3 million was attributed to ~~Date 2017 as~~ the ~~result~~$3.3 million impairment charge of goodwill allocated to our Japan eCommerce reporting unit and $2.9 million of corporate restructuring costs which includes severance ~~charges~~for the reduction of corporate positions and $0.5 million impairment charge of certain long-lived assets recognized Year-to-Date 2020.

Operating Income (Loss)

Operating income was $43.2 million in Year-to-Date 2021 compared to Operating loss of $13.5 million in Year-to-Date 2020. The increase was driven by the increase in Gross profit from the increased revenue and improved margins over Year-to-Date 2020 partially offset by higher selling and administrative expenses.

Interest Expense

Interest expense was $17.9 million in Year-to-Date 2021 compared to $10.2 million in Year-to-Date 2020. The $7.7 million increase was primarily attributed to higher interest rates associated with the ~~transition of certain corporate activities from the New York office to the Company's Dodgeville headquarters.~~

~~Operating Loss~~

~~Operating loss decreased to $0.6~~Current Term Loan Facility.

Other Income

Other income was $0.3 million in ~~Year~~Year-to-Date 2021 compared to ~~Date 2017 from~~Other expense of $1.2 million in Year-to-Date 2020. The decrease is primarily attributed to a ~~$4.2 million loss~~final payment in ~~Year to Date 2016~~the Second Quarter 2020 associated with the transitioning of a sourcing office.

Income Tax Expense (Benefit)

We recorded income tax expense at an overall effective tax rate of 26.4% for Year-to-Date 2021 and an income tax benefit of 34.7% for Year-to-Date 2020. The Year-to-Date 2021 rate is lower than Year-to-Date 2020 primarily due to ~~lower Selling and administrative expenses discussed above.~~

~~Interest Expense~~

~~Interest expense was $18.6 million~~the generation of pretax income in ~~Year to Date 2017~~2021 compared to ~~$18.5 million~~a pretax loss in ~~Year~~2020 in addition to ~~Date 2016.~~

the estimated tax benefits recorded as a result of the CARES Act in 2020.

Net Income ~~Tax Benefit~~

~~Income tax benefit was $5.9 million for Year to Date 2017 compared to $6.3 million in Year to Date 2016. The effective tax rate was 33.7% in Year to Date 2017 compared with 29.7% in Year to Date 2016.~~

~~Net Loss~~

(Loss)

As a result of the above factors, Net ~~loss~~income was ~~$11.6~~$18.9 million and diluted ~~loss~~earnings per share was ~~$0.36~~$0.56 in ~~Year to Date 2017~~Year-to-Date 2021 compared with a Net loss of ~~$15.0~~$16.3 million and diluted loss per share of ~~$0.47~~$0.50 in ~~Year to Date 2016.~~

Year-to-Date 2020.

Adjusted EBITDA

As a result of the above factors, Adjusted EBITDA ~~increased to $21.0~~was $63.9 million in ~~Year~~Year-to-Date 2021 compared to ~~Date 2017 from $9.2~~$12.3 million in ~~Year to Date 2016.~~

Year-to-Date 2020.

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 ~~New~~ ABL Facility serve as sources of liquidity for short-term working capital needs and general corporate purposes. The ABL Facility had a balance outstanding of $25.0 million on July 30, 2021 other than letters of credit. Cash generated from our net revenue and profitability, and to a lesser extent our changes in working capital, are driven by the seasonality of our business, with a significant amount of net revenue and operating cash flows generally occurring in the fourth fiscal quarter of each year. We expect that our cash on hand and cash flows from operations, along with ~~our New~~revolving on the 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~~

Table of ~~our business, with a disproportionate amount of Net revenue and operating cash flows generally occurring in the fourth fiscal quarter of each year.~~

Contents

Description of Material Indebtedness

Debt Arrangements

~~On April 4, 2014, Lands’ End entered into the~~

Our $275.0 million revolving ABL Facility ~~which provided for maximum borrowings of $175.0 million for Lands’ End, subject to~~includes a ~~borrowing base, with a $30.0 million sub facility for the UK Borrower. The ABL Facility had a sub-limit of~~ $70.0 million ~~for domestic letters of credit and a sub-limit of $15.0 million~~sublimit for letters of credit ~~for the UK Borrower. The ABL Facility was available for working capital~~ and other general corporate purposes, and was undrawn at October 27, 2017 and October 28, 2016, other than for letters of credit. The Company had borrowing availability under the ABL Facility of $157.2 million as of October 27, 2017, net of outstanding letters of credit of $17.8 million.

Also 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.

On November 16, 2017, the Company entered into an asset-based lending credit agreement with Wells Fargo Bank, National Association, which provides on the closing date for maximum borrowings of $175.0 million for the Company, subject to a borrowing base. The New ABL Facility has a letter of credit sub-limit of $70.0 million. The New ABL Facility is available for working capital and other general corporate ~~purposes~~liquidity needs. The balance outstanding was $25.0 million and zero on July 30, 2021 and July 31, 2020, respectively. The balance of outstanding letters of credit was ~~undrawn as~~$16.7 million and $12.0 million on July 30, 2021 and July 31, 2020, respectively.

During Fiscal 2020, we exercised the “accordion” feature under the ABL Facility increasing the maximum borrowings available under the facility from $175.0 million to $275.0 million, subject to a borrowing base (the “Loan Cap”). This was completed in two separate transactions. The first was a $25.0 million increase effective March 19, 2020 and the second was a $75.0 million increase effective September 9, 2020. The latter was completed through the Second Amendment to the ABL Facility executed on August 12, 2020.

On July 29, 2021, we executed the Third Amendment to the ABL Facility resulting in favorable financial terms compared to the Second Amendment to the ABL Facility and extension of the ~~closing date.~~

~~Also on November 16, 2017,~~maturity date of the ABL Facility, as discussed below.

On September 9, 2020, we entered into the Current Term Loan Facility which provides a term loan facility of $275.0 million, the proceeds of which were used, along with borrowings of $125.0 million under our ABL Facility, to repay all the indebtedness under the Former Term Loan Facility and pay fees and expenses in connection with the ~~effectiveness~~financing. Origination costs, including an Original Issue Discount (OID) of 3% and $5.1 million in debt origination fees were paid upon entering into the Current Term Loan Facility.

Interest; Fees

Between September 9, 2020 and July 30, 2021, the ABL Facility provided that for LIBOR loans, the interest rate was LIBOR (subject to an interest rate floor of 0.75%) plus a borrowing margin which was, where the average daily total loans outstanding for the previous quarter were (i) less than $50.0 million, 1.75%, (ii) equal to or greater than $50.0 million but less than $100.0 million, 2.00%, (iii) equal to or greater than $100.0 million but less than $200.0 million, 2.25%, and (iv) greater than $200.0 million, 3.50%. For Base Rate loans, the borrowing margin was, where the average daily total loans outstanding for the previous quarter were (i) less than $50.0 million for the previous quarter, 1.00%, (ii) equal to or greater than $50.0 million but less than $100.0 million, 1.25%, (iii) equal to or greater than $100.0 million but less than $200.0 million, 1.50%, and (iv) greater than $200.0 million, 2.75%.

Pursuant to the Third Amendment of the ~~New~~ABL Facility for LIBOR loans, commencing July 31, 2021 the borrowing margin will be, where the average daily total loans outstanding for the previous quarter are (i) less than $ 95.0 million, 1.25%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 1.50%, and (iii) greater than or equal to $180.0 million, 1.75%. For Base Rate loans, the borrowing margin will be, where the average daily total loans outstanding for the previous quarter are (i) less than $95.0 million for the previous quarter, 0.50%, (ii) equal to or greater than $95.0 million but less than $180.0 million, 0.75%, and (iii) greater than or equal to $180.0 million, 1.00%. The Third Amendment to the ABL Facility replaced the 0.75% LIBOR floor with a 0.0% LIBOR floor.

The interest rates per annum applicable to the loans under the Current Term Loan Facility are based on a fluctuating rate of interest measured by reference to, at the borrower’s election, either (1) an adjusted LIBOR (with a minimum rate of 1.00%) plus 9.75% or (2) an alternative base rate (which is the greater of (i) the prime rate published in the Wall Street Journal, (ii) the federal funds rate, which shall be no lower than 0.00% plus ½ of 1.00%, and (iii) the one month LIBOR rate plus 1.00% per annum) plus 8.75%.

Pursuant to theSecond Amendment to the ABL Facility, the ABL Facility fees also included (i) commitment fees which range from 0.25% to 0.375% based upon the average daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter and (ii) customary letter of credit fees.

Effective with the Third Amendment to the ABL Facility, the ~~company terminated~~ABL Facility fees include (i) commitment fees of 0.25% based upon the average daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter and (ii) customary letter of credit fees. As of the end of Second Quarter 2021, we had borrowings of $25.0 million on the ABL Facility.

Customary agency fees are payable in respect of the Debt Facilities.

Table of Contents

Maturity; Amortization and Prepayments

The Third Amendment to the ABL Facility ~~was to mature on April 4, 2019. The New ABL Facility will mature no later than~~extended the maturity from November 16, 2022 ~~subject~~ to ~~customary extension provisions provided for therein. The~~the earlier of (a) July 29, 2026 and (b) June 9, 2025 if, on or prior to such date, the Current Term Loan Facility ~~will mature~~has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness.

The Current Term Loan Facility matures on ~~April 4, 2021~~September 9, 2025 and ~~will amortize~~amortizes at a rate equal to 1%1.25% per ~~annum, and~~quarter. It is subject to mandatory ~~prepayment~~prepayments in an amount equal to a percentage of the borrower’s excess cash flows in each fiscal year, ranging from 0% to ~~50%~~75% depending on ~~Lands’ End’s secured~~our total leverage ratio, and with the proceeds ~~from~~of certain asset sales, casualty events and ~~casualty events.~~

extraordinary receipts. The loan may not be voluntarily prepaid during the first two years of its term, without significant penalties. A prepayment premium is applicable to voluntary prepayments and certain mandatory prepayments made prior to the fourth anniversary of the closing date of the Current Term Loan Facility.

Guarantees; Security

All ~~domestic~~ obligations under the Debt Facilities are unconditionally guaranteed by ~~the Company~~Lands’ End, Inc. and, subject to certain exceptions, each of its existing and future direct and indirect ~~domestic~~ subsidiaries. ~~In addition, the obligations of the UK Borrower under the ABL Facility were guaranteed by its existing and future direct and indirect subsidiaries organized in the United Kingdom.~~ The ABL Facility ~~was~~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 Current Term Loan Facility is secured by a second priority security interest in the same collateral, with certain exceptions.

The Current 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~~such as real estate, stock of ~~subsidiaries.~~the subsidiaries and intellectual property, in each case, subject to certain exceptions. The ABL Facility ~~was~~is secured by a second priority interest in the same collateral, with certain exceptions.

The Former Term Loan Facility, which was replaced by the Current Term Loan Facility on September 9, 2020, had the same priority security interest in the same ~~collateral.~~

~~Guarantees; Security for the New ABL Facility~~

~~All obligations under the New ABL Facility are unconditionally guaranteed by the Company and, subject to~~collateral, with certain ~~exceptions, each of its existing and future direct and indirect wholly-owned domestic subsidiaries.~~

The New ABL Facility is secured by (1) a first priority security interest in certain working capital of the Company and guarantors consisting primarily of accounts receivable and inventory and (2) a second priority security interest in certain property and assets of the Company and guarantors, including certain fixed assets and stock of subsidiaries.

~~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) LIBOR 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 was subject to adjustment based on the average excess availability under the ABL Facility for the preceding fiscal quarter, and ranged from 1.50% to 2.00% in the case of LIBOR borrowings and ranged from 0.50% to 1.00% in the case of base rate borrowings.

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

~~Interest; Fees for New ABL Facility~~

Under the New ABL Facility entered into on November 16, 2017, the interest rates per annum applicable to the loans under the New ABL Facility are based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (1) an adjusted LIBOR plus a borrowing margin, or (2) an alternative base rate plus a borrowing margin. The borrowing margin for the New ABL Facility is subject to adjustment based on the average daily availability under the ABL Facility for the preceding fiscal quarter, and will range from 1.25% to 1.75% in the case of LIBOR borrowings and will range from 0.50% to 1.00% in the case of base rate borrowings.

exceptions.

Representations and Warranties; ~~Covenant~~s

Covenants

Subject to specified exceptions, the Debt Facilities ~~and the New ABL Facility~~ contain various representations and warranties and restrictive covenants that, among other things, restrict ~~the ability of the Company~~Lands’ End, Inc.’s and its ~~subsidiaries~~subsidiaries’ ability 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,~~

The Current Term Loan Facility contains certain financial covenants, including a quarterly maximum total leverage ratio test, a weekly minimum liquidity test and an annual maximum capital expenditure amount.

Under the ABL Facility, if excess availability ~~under the ABL Facility or the New ABL Facility~~ falls below the greater of 10% of the ~~loan cap~~Loan Cap amount or ~~$15~~$15.0 million, ~~the Company~~we will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0.

Effective with the Second Amendment to the ABL Facility, the ABL Facility had a cash maintenance provision which applied a limit of $75.0 million on the amount of cash and cash equivalents (subject to certain exceptions) that we could hold when outstanding loans under the ABL Facility equaled or exceeded $125.0 million. The Third Amendment to the ABL Facility eliminated this cash maintenance provision.

The Debt Facilities contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and ~~the New ABL Facility do not otherwise contain financial maintenance covenants.~~

~~The Company was~~notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances.

As of July 30, 2021, we were in compliance with all ~~financial~~of our covenants ~~related to~~in the Debt ~~Facilities as of October 27, 2017.~~

Facilities.

Events of Default

The Debt Facilities ~~and the New ABL Facility~~ 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.

Table of Contents

Cash Flows from Operating Activities

~~Operating~~

Net cash provided by operating activities ~~used~~increased to $30.5 million Year-to-Date 2021 from $8.0 million Year-to-Date 2020. The $22.5 million increase in cash provided by operating activities was driven by an increase in year over year net ~~cash of $87.8 million~~income partially offset by a year over year increase in net working capital changes and ~~provided net cash of $66.9 million for Year to Date 2017 and Year to Date 2016, respectively, primarily due to the combination of:~~

~~Increased use of cash to pay down accounts payable due to higher payables entering the current year, and~~

~~Increased inventory build due to more timely receipts in the current year.~~

other non-cash items.

Cash Flows from Investing Activities

Net cash used in investing activities was ~~$27.5~~$12.0 million and ~~$26.0~~$19.8 million ~~for Year to Date 2017~~Year-to-Date 2021 and ~~Year to Date 2016,~~Year-to-Date 2020, respectively. Cash used in investing activities for both periods was primarily used for investments to update our digital information technology ~~infrastructure and property and equipment.~~

infrastructure.

For Fiscal ~~2017,~~2021, we plan to invest ~~a total of~~ approximately ~~$35.0 million to $45.0~~$26 million in capital expenditures for strategic investments and infrastructure, primarily ~~associated with our ERP investment, other~~in technology ~~investments~~ and general corporate needs.

~~Cash~~

Cash Flows from Financing Activities

Net cash used byin financing activities was ~~$4.5~~$12.9 million and ~~$4.3~~$3.0 million ~~for Year to Date 2017~~Year-to-Date 2021 and ~~Year to Date 2016, respectively, consisting~~Year-to-Date 2020, respectively. Year-to-Date 2021 primarily includes principal payments on Current Term Loan Facility and payment of ~~our quarterly payments under~~tax withholdings associated with the ~~Term Loan.~~

vesting of restricted stock.

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.~~

29, 2021, except for the Third Amendment to the ABL Facility for which the maturity date was extended from November 16, 2022 to the earlier of (a) July 29, 2026 and (b) June 9, 2025 if, on or prior to such date, the Current Term Loan Facility has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness.

Financial Instruments with Off-Balance-Sheet Risk

~~On April 4, 2014, Lands’ End entered into the~~

The $275.0 million ABL Facility ~~which provided for maximum borrowings of $175.0 million for Lands’ End, subject to~~includes a ~~borrowing base, with a $30.0 million sub facility for the UK Borrower. The ABL Facility had a sub-limit of~~ $70.0 million sublimit for ~~domestic~~ letters of credit and ~~a sub-limit of $15.0 million for letters of credit for~~ the UK Borrower. The ABL Facility was available for working capital and other general corporate purposes, and was undrawn at October 27, 2017 and October 28, 2016, other than for letters of credit. The Company had borrowing availability underThird Amendment to the ABL Facility ~~of $157.2 million as of October 27, 2017, net of outstanding letters of credit of $17.8 million.~~

~~New ABL Facility~~

Onextended the maturity from November 16, ~~2017,~~2022 to the ~~Company entered into an asset-based lending credit agreement with Wells Fargo Bank, National Association, which provides~~earlier of (a) July 29, 2026 and (b) June 9, 2025 if, on or prior to such date, the ~~closing date for maximum borrowings of $175.0 million for the Company, subject to a borrowing base. The New ABL~~Current Term Loan Facility has ~~a letter of credit sub-limit of $70.0 million.~~not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness. The ~~New~~ ABL Facility is available for working capital and other general corporate ~~purposes.~~liquidity needs. The ~~New ABL Facility will mature no later than November 16, 2022, subject to customary extension provisions provided for therein.~~

~~Also~~balance outstanding on ~~November 16, 2017, in connection with the effectiveness~~July 30, 2021 and July 31, 2020 was $25.0 million and zero, respectively. The balance of ~~the New ABL Facility, the company terminated the ABL Facility.~~

~~Guarantees; Security for the New ABL Facility~~

All obligations under the New ABL Facility are unconditionally guaranteed by the Company and, subject to certain exceptions, each of its existing and future direct and indirect wholly-owned domestic subsidiaries.

~~Interest; Fees for New ABL Facility~~

Under the New ABL Facility entered into on November 16, 2017, the interest rates per annum applicable to the loans under the New ABL Facility are based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (1) an adjusted LIBOR plus a borrowing margin, or (2) an alternative base rate plus a borrowing margin. The borrowing margin for the New ABL Facility is subject to adjustment based on the average daily availability under the New ABL Facility for the preceding fiscal quarter, and will range from 1.25% to 1.75% in the case of LIBOR borrowings and will range from 0.50% to 1.00% in the case of base rate borrowings.

Customary agency fees are payable in respect of the New ABL Facility and include (1) commitment fees in an amount equal to 0.25% of the daily unused portions of the New ABL Facility, and (2) customary letteroutstanding letters of credit ~~fees.~~

was $16.7 million and $12.0 million on July 30, 2021 and July 31, 2020, respectively.

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.~~

As previously discussed, the Company reviews its indefinite-lived intangible asset, the Lands’ End trade name, for impairment by comparing the carrying amount of the asset to the fair value on an annual basis, or more frequently if events occur or29, 2021. There have been no significant changes in circumstances indicate that the carrying value is not recoverable. At the date of its most recent annual impairment assessment, the Company determined that the income approach, specifically the relief from royalty method, was most appropriate for analyzing its indefinite-lived asset. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) theour critical accounting policies or their application of these royalty rates to a revenue stream and discounting the resulting cash flows 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.

As a result of 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 the 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.

since January 29, 2021.

Recent Accounting Pronouncements

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

Table of Contents

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, adjusted EBITDA, cash flow, financial condition, financings, 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," “targeting” 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 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~~29, 2021 and "Part II, Item 1A Risk Factors" of this Quarterly Report on Form 10-Q. 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.

Table of Contents

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 ~~October 27, 2017,~~July 30, 2021, we had ~~$18.3~~$13.5 million of cash denominated in foreign currencies, principally in ~~British~~ Pound ~~Sterling, Euros~~sterling, Euro and ~~Yen.~~Japanese 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 the Current Term Loan Facility and the ~~New~~ ABL Facility, as both require the Company to pay interest on outstanding borrowings at variable rates. Each one percentage point change in interest rates (above the 1.00% LIBOR floor) associated with the Current Term Loan Facility would result in a ~~$5.1~~$2.6 million change in our annual cash interest expenses. Assuming our ABL Facility was fully drawn to a principal amount equal to ~~$175.0~~$275.0 million, each one percentage point change in interest rates would result in a ~~$1.8~~$2.8 million change in our annual cash interest expense.

Table of Contents

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 ~~October 27, 2017,~~July 30, 2021, 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 Fiscal 2017, the Company implemented phases of 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~~

There have been no changes in the Company's internal ~~control~~controls over financial reporting identified in connection with the evaluation required by Rules 13a-15 under the Exchange Act during the ~~third quarter ended October 27, 2017~~Second Fiscal Quarter Ended July 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~We are involved in~~

The Company is party to 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 -~~position taken as a whole.

For a description of our legal proceedings, see Note 9, Commitments and Contingencies in Notes to Condensed Consolidated Financial Statements~~" Note 9,~~ ~~Commitments and Contingencies, for additional information regarding~~ of this Quarterly Report on Form 10-Q, which description of legal proceedings ~~(incorporated herein~~is incorporated by ~~reference).~~

reference herein.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in ~~our~~the Company’s Annual Report on Form 10-K for the year ended January ~~27, 2017, which was~~29, 2021, filed with the SEC on March ~~31, 2017.~~

25, 2021.

Table of Contents

Index of Exhibits

ITEM 6. EXHIBITS

The following documents are filed as exhibits to this report:


3.1
~~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~~Current Report on Form 8-K filed by Lands’ End, Inc. on April 8, 2014 (File No. 001-09769)).

~~31.1~~4.1		Third Amendment to ABL Credit Agreement, dated July 29, 2021, by and among Lands’ End, Inc. (as the Lead Borrower), the guarantors party thereto, the lenders party thereto and Wells Fargo Bank, National Association (as administrative agent and collateral agent) (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by Lands’ End, Inc. on August 4, 2021 (File No. 001-09769)).

10.1		Amended and Restated Executive Severance Agreement by and between Lands’ End, Inc. and James Gooch, dated July 2, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-Kfiled by Lands’ End, Inc. on July 2, 2021 (File No. 001-09769)).

10.2		Executive Severance Agreement by and between Lands’ End, Inc. and Jerome S. Griffith, dated December 19, 2016.*

10.3		Executive Severance Agreement by and between Lands' End, Inc. and Peter L. Gray, dated April 21, 2017.*

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 DocumentDocument – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document*

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		Inline XBRL Taxonomy Extension Definition Document*

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)*

*	Filed herewith.

**	~~Furnished herewith.~~

**	Furnished herewith.

Table of Contents

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: ~~December 5, 2017~~

September 2, 2021


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


Delaware		36-2512786
~~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)


☒
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



	13 Weeks Ended						39 Weeks Ended
(in thousands, except per share data)	October 27, 2017			October 28, 2016			October 27, 2017			October 28, 2016
Net revenue	$	325,489		$	311,476		$	896,044		$	876,919
Cost of sales (excluding depreciation and amortization)	183,515			177,825			497,262			477,446
Gross profit	141,974			133,651			398,782			399,473

Selling and administrative	129,122			132,365			377,804			390,291
Depreciation and amortization	6,347			4,795			19,031			13,419
Other operating expense (income), net	564			(86		)	2,552			(40		)
Operating income (loss)	5,941			(3,423		)	(605		)	(4,197		)
Interest expense	6,350			6,149			18,642			18,493
Other income, net	(576		)	(432		)	(1,812		)	(1,413		)
Income (loss) before income taxes	167			(9,140		)	(17,435		)	(21,277		)
Income tax expense (benefit)	5			(1,918		)	(5,878		)	(6,316		)
NET INCOME (LOSS)	$	162		$	(7,222	)	$	(11,557	)	$	(14,961	)
NET INCOME (LOSS) PER COMMON SHARE (Note 2)
Basic:	$	0.01		$	(0.23	)	$	(0.36	)	$	(0.47	)
Diluted:	$	0.01		$	(0.23	)	$	(0.36	)	$	(0.47	)

Basic weighted average common shares outstanding	32,095			32,029			32,068			32,018
Diluted weighted average common shares outstanding	32,117			32,029			32,068			32,018



(in thousands, except share data)	October 27, 2017			October 28, 2016			January 27, 2017
ASSETS
Current assets
Cash and cash equivalents	$	92,913		$	131,532		$	213,108
Restricted cash	1,640			3,300			3,300
Accounts receivable, net	39,044			40,101			39,284
Inventories, net	423,540			425,290			325,314
Prepaid expenses and other current assets	48,934			40,942			26,394
Total current assets	606,071			641,165			607,400
Property and equipment, net	129,955			115,871			122,836
Goodwill	110,000			110,000			110,000
Intangible asset, net	257,000			430,000			257,000
Other assets	17,454			16,142			17,155
TOTAL ASSETS	$	1,120,480		$	1,313,178		$	1,114,391
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	160,340		$	180,608		$	162,408
Other current liabilities	103,886			101,093			86,446
Total current liabilities	264,226			281,701			248,854
Long-term debt, net	487,197			490,992			490,043
Long-term deferred tax liabilities	91,392			158,048			90,467
Other liabilities	14,568			16,766			13,615
TOTAL LIABILITIES	857,383			947,507			842,979
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000,000 shares; issued and outstanding: 32,095,021, 32,029,359 and 32,029,359, respectively	320			320			320
Additional paid-in capital	346,153			343,319			343,971
Retained (deficit) earnings	(72,010		)	34,368			(60,453		)
Accumulated other comprehensive loss	(11,366		)	(12,336		)	(12,426		)
Total stockholders’ equity	263,097			365,671			271,412
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,120,480		$	1,313,178		$	1,114,391



Assumption	Low		High
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



	13 Weeks Ended				39 Weeks Ended
(in thousands, except for number of stores)	October 27, 2017		October 28, 2016		October 27, 2017		October 28, 2016
Rent, CAM and occupancy costs	$	5,376	$	6,165	$	16,882	$	18,707
Retail services, store labor	5,268		6,004		16,410		18,034
Financial services and payment processing	479		573		1,627		1,963
Supply chain costs	167		183		558		735
Total expenses	$	11,290	$	12,925	$	35,477	$	39,439
Number of Lands’ End Shops at Sears at period end	188		219		188		219