In reliance on the Securities and Exchange Commission (the “SEC”) Order Under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, SEC Release No. 34-88465, dated March 25, 2020 (the “Order”), the Company delayed the filing of this Quarterly Report on Form 10-Q, which was originally due on June 10, 2020.

The Company required additional time to finalize this Quarterly Report on Form 10-Q due to circumstances related to the coronavirus disease 2019 (COVID-19) pandemic. Areas such as impairment review of goodwill and long-lived assets, inventory reserves, lease accounting, other contingencies and accounting for the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) were complexities due to the impact of the COVID-19 pandemic that the Company deemed it necessary to review further prior to the finalization of the financial statements. Among other factors, the furlough of a majority of its corporate staff through May 26, 2020 and the “Safer at Home” order that was in effect for the State of Wisconsin from March 26, 2020 to May 14, 2020 materially impacted the Company’s employees, including employees who assist in preparing this Quarterly Report on Form 10-Q. In addition, since mid-March, management of the Company has been focused on responding to the pandemic and implementing programs and changes at the Company, including those regarding furloughs, workforce reductions, inventory management, liquidity management and financial flexibility, reductions in capital investment, store closures and re-opening plans, and the safety and wellness of employees in operations that have remained operational on its campus (primarily its distribution and customer care centers).

Condensed Consolidated Statements of Operations

(Unaudited)

	13 Weeks Ended
(in thousands, except per share data)	May 1, 2020			May 3, 2019
Net revenue	$	217,008		$	262,433
Cost of sales (excluding depreciation and amortization)		122,853			142,559
Gross profit		94,155			119,874

Selling and administrative		105,796			116,844
Depreciation and amortization		8,786			7,618
Other operating expense, net		4,285			148
Operating loss		(24,712	)		(4,736	)
Interest expense		5,311			7,834
Other income, net		(173	)		(867	)
Loss before income taxes		(29,850	)		(11,703	)
Income tax benefit		(9,207	)		(4,885	)
NET LOSS	$	(20,643	)	$	(6,818	)
NET LOSS PER COMMON SHARE
Basic:	$	(0.64	)	$	(0.21	)
Diluted:	$	(0.64	)	$	(0.21	)

Basic weighted average common shares outstanding		32,448			32,261
Diluted weighted average common shares outstanding		32,448			32,261

~~(Unaudited)~~

13 Weeks Ended
(in thousands, except per share data) May 3, 2019 May 4, 2018
Net revenue $ 262,433

$ 299,825
Cost of sales (excluding depreciation and amortization) 142,559
166,800
Gross profit 119,874
133,025

Selling and administrative 116,844
124,000
Depreciation and amortization 7,618

6,161
Other operating expense, net 148
337
Operating (loss) income (4,736 ) 2,527
Interest expense 7,834
6,912
Other (income) expense, net (867 ) 3,864
Loss before income taxes (11,703 ) (8,249 )
Income tax benefit (4,885 ) (5,619 )
NET LOSS $ (6,818 )
$ (2,630 )
NET LOSS PER COMMON SHARE
Basic: $ (0.21 )
$ (0.08 )
Diluted: $ (0.21 ) $ (0.08 )

Basic weighted average common shares outstanding 32,261

32,125
Diluted weighted average common shares outstanding 32,261

32,125

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Comprehensive Operations

(Unaudited)

	13 Weeks Ended
(in thousands)	May 1, 2020			May 3, 2019
NET LOSS	$	(20,643	)	$	(6,818	)
Other comprehensive loss, net of tax
Foreign currency translation adjustments		(1,259	)		(234	)
COMPREHENSIVE LOSS	$	(21,902	)	$	(7,052	)

~~(Unaudited)~~

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
NET LOSS $ (6,818 ) $ (2,630 )
Other comprehensive loss, net of tax
Foreign currency translation adjustments (234 )
(1,636 )
COMPREHENSIVE LOSS $ (7,052 ) $ (4,266 )

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)	May 1, 2020			May 3, 2019			January 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	59,134		$	40,221		$	77,148
Restricted cash		1,953			1,821			2,149
Accounts receivable, net		35,381			27,510			50,953
Inventories, net		383,163			319,319			375,670
Prepaid expenses and other current assets		46,221			35,304			39,458
Total current assets		525,852			424,175			545,378
Property and equipment, net		155,511			152,405			157,665
Operating lease right-of-use asset		38,621			29,327			38,665
Goodwill		106,700			110,000			110,000
Intangible asset, net		257,000			257,000			257,000
Other assets		4,651			5,473			4,921
TOTAL ASSETS	$	1,088,335		$	978,380		$	1,113,629
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current borrowings on ABL Facility	$	75,000		$	—		$	—
Current borrowings on Term Loan		382,858			5,150			5,150
Accounts payable		101,445			98,623			158,436
Lease liability - current		5,867			8,786			5,864
Other current liabilities		82,904			84,172			114,116
Total current liabilities		648,074			196,731			283,566
Long-term debt, net		—			381,504			378,657
Lease liability - long-term		41,388			24,772			39,841
Deferred tax liabilities		65,446			56,108			57,651
Other liabilities		5,529			4,060			5,532
TOTAL LIABILITIES		760,437			663,175			765,247
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000 shares; issued and outstanding: 32,596, 32,363 and 32,382, respectively		326			324			324
Additional paid-in capital		362,072			354,016			360,656
Accumulated deficit		(20,253	)		(25,718	)		390
Accumulated other comprehensive loss		(14,247	)		(13,417	)		(12,988	)
TOTAL STOCKHOLDERS' EQUITY		327,898			315,205			348,382
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,088,335		$	978,380		$	1,113,629

~~(Unaudited)~~

(in thousands, except share data) May 3, 2019 May 4, 2018 February 1, 2019
ASSETS
Current assets
Cash and cash equivalents $ 40,221

$ 141,616
$ 193,405
Restricted cash 1,821

2,081

1,948
Accounts receivable, net 27,510
48,610
34,549
Inventories, net 319,319
304,543
321,905
Prepaid expenses and other current assets 35,304
41,595
36,574
Total current assets 424,175
538,445
588,381
Property and equipment, net 152,405
138,495
149,894
Operating lease right-of-use asset 29,327
0
0
Goodwill 110,000

110,000

110,000
Intangible asset, net 257,000

257,000

257,000
Other assets 5,473
8,557
5,636
TOTAL ASSETS $ 978,380

$ 1,052,497

$ 1,110,911
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 98,623
$ 97,405
$ 123,827
Lease liability - current 8,786
0
0
Other current liabilities 89,322
95,550
117,424
Total current liabilities 196,731
192,955
241,251
Long-term debt, net 381,504

485,299

482,453
Lease liability - long-term 24,772
0
0
Long-term deferred tax liabilities 56,108
58,708
58,670
Other liabilities 4,060
10,681
5,826
TOTAL LIABILITIES 663,175
747,643
788,200
Commitments and contingencies (Note 9)

STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000,000 shares; issued and outstanding: 32,363,220, 32,208,118 and 32,220,080, respectively 324
320
320
Additional paid-in capital 354,016
348,142
352,733
Accumulated deficit (25,718 ) (31,380 ) (17,159 )
Accumulated other comprehensive loss (13,417 )
(12,228 )
(13,183 )
Total stockholders’ equity 315,205
304,854
322,711
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$ 978,380
$ 1,052,497
$ 1,110,911

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	13 Weeks Ended
(in thousands)	May 1, 2020			May 3, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(20,643	)	$	(6,818	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,786			7,618
Amortization of debt issuance costs		429			434
Loss (gain) on property and equipment		842			(55	)
Stock-based compensation		1,828			1,974
Deferred income taxes		8,132			(2,501	)
Goodwill impairment		3,300			—
Other		821			(133	)
Change in operating assets and liabilities:
Inventories		(8,502	)		2,234
Accounts payable		(54,084	)		(20,205	)
Other operating assets		6,902			10,612
Other operating liabilities		(28,009	)		(29,450	)
Net cash used in operating activities		(80,198	)		(36,290	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(10,789	)		(15,042	)
Net cash used in investing activities		(10,789	)		(15,042	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under ABL Facility		75,000			—
Payments of term-loan		(1,288	)		(101,287	)
Payments of employee withholding taxes on share-based compensation		(410	)		(687	)
Net cash provided by (used in) financing activities		73,302			(101,974	)
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(525	)		(5	)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(18,210	)		(153,311	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		79,297			195,353
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	61,087		$	42,042
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment	$	4,707		$	4,901
Income taxes paid, net of refunds	$	(1,210	)	$	12
Interest paid	$	4,667		$	6,966
Lease liabilities arising from obtaining Operating lease right-of-use assets	$	3,074		$	3,731

~~(Unaudited)~~

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (6,818 ) $ (2,630 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 7,618
6,161
(Gain) loss on property and equipment (55 ) 336
Amortization of debt issuance costs 434
535
Stock-based compensation 1,974
967
Noncash lease impacts (133 ) —
Deferred income taxes (2,501 ) 6
Change in operating assets and liabilities:
Inventories 2,234
26,373
Accounts payable (20,205 ) (55,603 )
Other operating assets 10,612
(13,843 )
Other operating liabilities (29,450 ) (3,499 )
Net cash used in operating activities (36,290 ) (41,197 )
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (15,042 ) (10,748 )
Net cash used in investing activities (15,042 )
(10,748 )
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loan facility (101,287 ) (1,288 )
Payments of employee withholding taxes on share-based compensation (687 ) (610 )
Net cash used in financing activities (101,974 ) (1,898 )
Effects of exchange rate changes on cash, cash equivalents and restricted cash (5 ) (397 )
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (153,311 ) (54,240 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 195,353
197,937
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD $ 42,042
$ 143,697
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment $ 4,901
$ 5,059
Income taxes paid, net of refunds $ 12
$ 171
Interest paid $ 6,966
$ 6,139

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS' END, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	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

	Common Stock Issued					Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(in thousands)	Shares			Amount		Capital			Deficit			Loss			Equity
Balance at February 1, 2019		32,220		$	320	$	352,733		$	(17,159	)	$	(13,183	)	$	322,711
Net loss		—			—		—			(6,818	)		—			(6,818	)
Cumulative translation adjustment, net of tax		—			—		—			—			(234	)		(234	)
Change in accounting principle related to lease accounting, net of tax		—			—		—			(1,741	)		—			(1,741	)
Stock-based compensation expense		—			—		1,974			—			—			1,974
Vesting of restricted shares		185			4		(4	)		—			—			—
Restricted stock shares surrendered for taxes		(42	)		—		(687	)		—			—			(687	)
Balance at May 3, 2019		32,363		$	324	$	354,016		$	(25,718	)	$	(13,417	)	$	315,205

Common Stock Issued
Additional Paid-in
Capital
Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity
(in thousands except share data) Shares Amount
Balance at February 2, 2018 32,101,793
$ 320
$ 347,175
$ (29,810 ) $ (10,592 ) $ 307,093
Net loss —
—
—
(2,630 ) —
(2,630 )
Cumulative translation adjustment, net of tax —
—
—
—
(1,636 ) (1,636 )
Change in accounting principle related to revenue recognition —
—
—
1,060
—
1,060
Stock-based compensation expense —
—
967
—
—
967
Vesting of restricted shares 132,620
—
—
—
—
—
Restricted stock shares surrendered for taxes (26,295 ) —

—
—
—
Balance at May 4, 2018 32,208,118
320
348,142
(31,380 ) (12,228 ) 304,854

Balance at February 1, 2019 32,220,080
320
352,733
(17,159 ) (13,183 ) 322,711
Net loss —
—
—
(6,818 ) —
(6,818 )
Cumulative translation adjustment, net of tax —
—
—
—
(234 ) (234 )
Change in accounting principle related to lease accounting —
—
—
(1,741 ) —
(1,741 )
Stock-based compensation expense —
—
1,974
—
—
1,974
Vesting of restricted shares 185,052
4
(4 ) —
—
—
Restricted stock shares surrendered for taxes (41,912 ) —
(687 ) —
—
(687 )
Balance at May 3, 2019 32,363,220
$ 324
$ 354,016
$ (25,718 ) $ (13,417 ) $ 315,205

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

Lands' End, Inc. ("Lands' End" or the "Company") is a leading ~~multi-channel~~uni-channel retailer of casual clothing, accessories, ~~and~~ footwear ~~as well, as~~and home products. ~~The Company~~Lands’ End offers products online at www.landsend.com ~~international websites,~~, on third party online marketplaces and through retail locations.

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

•

ABL Facility - Asset-based senior secured credit agreements, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders

•

Adjusted EBITDA - Net income (loss) net of Income tax benefit, Other income (expense), net, Interest expense, Depreciation and amortization and certain significant items

•

ASC - FASB 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 - FASB Accounting Standards Update

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

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

•

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

•

Deferred Awards - Time vesting stock awards

•

EPS - Earnings per share

•

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

•

FASB - Financial Accounting Standards Board

•

First Quarter ~~2018 -~~2020 – The 13 weeks ended May ~~4, 2018~~1, 2020

•

First Quarter 2019 - The 13 weeks ended May 3, 2019

•

Fiscal 2018 - The 52 weeks ended February 1, 2019

•

Fiscal 2019 - The 52 weeks ~~ending~~ended January 31, 2020

•

GAAP - Accounting principles generally accepted in the United States

~~• Lands' End Shops at Sears - Lands' End shops operated within Sears stores~~

•

LIBOR - London inter-bank offered rate

•

Option Awards - Stock option awards

•

Performance Awards - Performance-based stock awards

•

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 2020 – the 13 weeks ending July 31, 2020

Table of Contents

•

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

~~Table of Contents~~

•

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

~~• Third Quarter 2018 - The 13 weeks ended November 2, 2018~~

•

Transform Holdco - Transform Holdco LLC, an affiliate of ESL, which on February 11, 2019 acquired from Sears Holdings substantially all of the go-forward retail footprint, and other ~~asset~~assets and component businesses of Sears Holdings as a going concern

~~• UTBs~~

Year-to-Date 2020 - ~~Gross unrecognized tax benefits~~The 13 weeks ended May 1, 2020

•

Year-to-Date 2019 - The ~~thirteen~~13 weeks ended May 3, 2019

~~• Year-to-Date 2018 - The thirteen weeks ended May 4, 2018~~

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 ~~28, 2019.~~

23, 2020.

Pursuant to ASC 205, Presentation of Financial Statements, the Company is required to and does evaluate at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company’s Term Loan Facility matures on April 4, 2021, which is within one year after the date of the Condensed Consolidated Financial Statements issued with this Quarterly Report on Form 10-Q. As of May 1, 2020, the remaining balance outstanding under the Term Loan Facility was $384.1 million. In addition, in the event the Term Loan Facility debt is not extended, repaid or otherwise refinanced at least six months before its maturity date, the Company’s ABL Facility would mature on January 4, 2021. Given the amount currently outstanding under the Term Loan Facility and its maturity date of April 4, 2021, and based on the definitions in the relevant accounting standards, management has determined that this condition raises substantial doubt about the Company’s ability to continue as a going concern. This evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt is deemed to exist, management may evaluate the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

The Company is in the process of seeking new financing to replace the Term Loan Facility and, to the extent this can be successfully secured, is expected to alleviate the doubt raised by the application of ASC 205. Due to the Company’s recent trends of profitable growth, management believes that it will be able to refinance the Term Loan Facility on acceptable terms despite the challenging financial environment reflecting the COVID-19 pandemic. The Company currently has received non-binding term sheets from multiple investors for transactions which would allow it to refinance the Term Loan Facility debt and is in active discussions and negotiations regarding the refinancing. The Company’s financial forecasts indicate sufficient liquidity for at least the next twelve months under the terms of these proposals. However, as the ability to secure a refinancing is conditional upon the execution of agreements with new or existing investors, which is considered outside of the Company’s control, for an amount that allows the Company to meet its obligations as they become due within a period of at least one year from the date of issuance of its financial statements, the refinancing is not considered probable of occurring until such time as the refinancing is completed. The Condensed Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Impact of the COVID-19 Pandemic

COVID-19 surfaced in late 2019 and has spread around the world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic. During First Quarter 2020 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.

Table of Contents

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 26 U.S. stores. These stores remained closed at the end of First Quarter 2020 with a phased reopening in Second Quarter 2020. Additionally, the Company has implemented extra precautions in its office and distribution centers. These precautions were developed in line with guidance from global, federal and state health authorities, including work-from-home policies, social distancing, thermal scanning and partitions in all facilities.

Customer Demand

In the First Quarter 2020, demand across all operating segments decreased. The ultimate timing and impact of demand levels will depend on the duration and scope of the COVID-19 pandemic, overall economic conditions and consumer preferences.

Supply Chain

During First Quarter 2020, the Company did not experience any significant disruption of its supply chain. However, in response to decreased demand, future orders were reduced and some existing product was repurposed. The Company continues to place a priority on business continuity and contingency planning. The Company may experience additional disruptions in the supply chain as the pandemic continues, though the Company cannot reasonably estimate the potential impact or timing of those events, and the Company may not be able to mitigate such impact.

Expense Reduction

Beginning in First Quarter 2020, the Company took the following actions to reduce overall expense as a response to decreased demand due to the COVID-19 pandemic:

Temporarily reduced base salaries, including a reduction of 50% in the base salary of its Chief Executive Officer and President, 20% reductions in the base salaries of the Company’s other senior management members and scaled salary reductions throughout the Company.

Furlough of approximately 70% of corporate employees and nearly 100% of retail employees beginning on March 28, 2020. Some personnel returned to work beginning on April 13, 2020, however approximately 49% of the workforce remained furloughed at the end of First Quarter 2020.

Fiscal 2020 merit increases were eliminated.

The Board of Directors compensation was temporarily reduced.

The Company's 401(k) match was temporarily suspended.

Planned capital expenditures for Fiscal 2020 were reduced by approximately 50%.

Other discretionary operating expenses were significantly reduced.

Liquidity and Capital Resources

The Term Loan Facility matures on April 4, 2021. The ABL Facility matures on November 16, 2022, however in the event the Term Loan Facility debt is not extended, repaid or otherwise refinanced at least six months before its maturity date, the ABL Facility would mature on January 4, 2021. During First Quarter 2020, the Company increased capacity under the ABL Facility by $25.0 million so that maximum borrowings are $200.0 million. The Company is in the process of seeking to refinance the Term Loan Facility however the timeline for this process has been increased due to the impact of the COVID-19 pandemic on the financial markets.

Goodwill and Indefinite-Lived Intangible Asset

The duration and severity of the COVID-19 pandemic could result in future impairment charges for goodwill and the trade name indefinite-lived intangible asset. The Company considered the COVID-19 pandemic to be a triggering event in First Quarter 2020 for the 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 interim tests employed the assumption that revenue in the Outfitters and Japan eCommerce reporting units will return to Fiscal 2019 levels by Fiscal 2023 (the 53 weeks ending February 2, 2024). The testing resulted in no impairment of the Outfitters reporting unit and full impairment of the $3.3 million of goodwill allocated to Japan eCommerce reporting unit.

Lease Modifications

Table of Contents

In April 2020, the FASB issued guidance indicating that entities may elect not to evaluate whether a concession provided by lessors is a lease modification. Under existing lease guidance, an entity would have to determine if a lease concession was the result of a new arrangement reached with the landlord, which would be accounted for under the lease modification framework, or if the concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The FASB guidance provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. During the First Quarter 2020, the Company did not modify any leases as a result of the COVID-19 pandemic and as a result, the Company has not yet made a policy election with respect to lease modifications.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

~~Leases~~

In ~~February~~June 2016, the FASB issued ASU ~~2016-02, Leases (“ASC 842”),~~ 2016-13, Financial Statements - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which ~~changed how~~requires companies ~~account~~to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates relating to trade receivables, loans and other financial instruments. The standard is effective for leases. On February 2, 2019, the Company adopted the guidance using the modified retrospective approach. Lands' End elected the practical expedient package, which among other practical expedients, includes the option to retain the historical classification of leases entered into prior to February 2,fiscal years beginning after December 15, 2019. The Company ~~also elected the practical expedient related to lease versus non-lease components, allowing the Company to recognize lease and non-lease components as a single lease. Additionally, the Company~~ adopted ~~an optional transition method finalized by the FASB~~this accounting standard in ~~July 2018 that waives the requirement to apply ASC 842 in the comparative periods presented within the financial statements in the year of adoption.~~

~~The Company is a lessee under various lease agreements for its retail operations and equipment.~~

The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease possession (date in which the Company takes possession of the asset), at which time the Company also measures and recognizes a right-of-use asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement. The lease term is defined as the noncancelable portion of the lease term plus any periods covered by an option to extend the lease, if it is reasonably certain that that the option will be exercised. For the purposes of recognizing right-of-use assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient of not recognizing a right-of-use asset or lease liability for short-term leases, which are leases with a term of twelve months or less. The Company's leases are classified as operating leases, which are included in the Operating lease right-of-use asset, Lease liability - current and Lease liability - long-termFirst Quarter 2020. There was no material impact on the Company's Condensed Consolidated ~~Balance sheets.~~

~~Right-of-use assets~~Financial Statements and ~~lease liabilities~~related disclosures as a result of adoption.

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. Early adoption is permitted. Certain amendments within this ASU are ~~recognized based~~required to be applied on 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 is currently evaluating the impact the adoption of this standard will have on the present value of the future minimum lease payments over the lease term as of the possession date. Minimum lease payments include only the fixed lease component of the agreement, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Lease terms may include options to renew. If it is determined the lease will more likely than not be renewed, the right-of-use asset and lease liability for that lease will be adjusted to reflect the updated lease term. The Company does not have any leases with residual value guarantees or restrictions or covenants imposed by the lease.

The Company reviews its long-lived assets, including Operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of the asset group exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset, the Company performs an impairment analysis. An impairment charge is recognized to the extent the sum of the estimated discounted future cash flows from the use of the asset is less than the carrying value, which is allocated pro-rata to the assets in the asset group, including the Operating lease right-of-use asset. No assets are written down below their indicated fair value which, for the Operating lease right-of-use assets, can be based on market comparisons of rent.

Due to the absence of an implicit rate in the Company’s lease contracts the Company estimates its incremental borrowing rate for each lease based on the lease term, lease currency and the Company’s credit spread. The yield curve selected at the lease possession date represents one notch above the Company’s unsecured credit rating, and therefore is considered a close proxy for the incremental borrowing rate the Company would incur for secured debt.

Lease expense is recognized on a straight-line basis over the lease term and is included in Selling and administrative expense in the Condensed Consolidated Statements of Operations. Variable lease payments that do not depend on a rate or index and short-term rentals (leases with terms less than 12 months) are expensed as incurred.

~~The impact of adoption of the new lease guidance on the Condensed Consolidated Balance Sheets as of February 2, 2019 was:~~

~~Table of Contents~~

(in thousands) February 1, 2019 (As reported) Impact of Adoption February 2, 2019
Assets:
   Operating lease right-of-use asset $ —
$ 27,494
$ 27,494

Liabilities:
   Lease liability - current —
9,892
9,892
   Lease liability - long-term —
21,700
21,700

Stockholders' Equity:
   Accumulated deficit (17,159 ) (1,741 )
⁽¹⁾
(18,900 )

(1) At the time of implementation, the Company determined certain Operating lease right-of-use assets were impaired and recorded an adjustment to beginning retained earnings related to these impairments, net of tax.

~~See Note 13,~~ ~~Leases~~ ~~for additional disclosures.~~

consolidated financial statements.

NOTE 3. ~~EARNINGS/(LOSS)~~LOSS PER SHARE

The numerator for both basic and diluted EPS is net ~~income (loss).~~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 U.S. GAAP. Potentially dilutive securities for the diluted EPS calculations consist of nonvested 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.

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

	13 Weeks Ended
(in thousands, except per share amounts)	May 1, 2020			May 3, 2019
Net loss	$	(20,643	)	$	(6,818	)

Basic weighted average common shares outstanding		32,448			32,261
Dilutive effect of stock awards		—			—
Diluted weighted average common shares outstanding		32,448			32,261

Basic loss per share	$	(0.64	)	$	(0.21	)
Diluted loss per share	$	(0.64	)	$	(0.21	)

13 Weeks Ended
(in thousands, except per share amounts) May 3, 2019 May 4, 2018
Net loss $ (6,818 ) $ (2,630 )

Basic weighted average common shares outstanding 32,261
32,125
Dilutive effect of stock awards —
—
Diluted weighted average common shares outstanding 32,261
32,125

Basic Loss per share $ (0.21 ) $ (0.08 )
Diluted Loss per share $ (0.21 ) $ (0.08 )

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 ~~796,269~~1,205,821 and ~~647,799~~796,269 anti-dilutive shares excluded from the diluted weighted average shares outstanding for First Quarter ~~2019~~2020 and First Quarter ~~2018.~~

~~Table of Contents~~

2019, respectively.

NOTE 4. OTHER COMPREHENSIVE ~~INCOME (LOSS)~~

LOSS

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

Table of Contents

	13 Weeks Ended
(in thousands)	May 1, 2020			May 3, 2019
Beginning balance: Accumulated other comprehensive loss (net of tax of $3,453 and $3,505 respectively)	$	(12,988	)	$	(13,183	)
Other comprehensive loss:
Foreign currency translation adjustments (net of tax benefit of $337 and $61 respectively)		(1,259	)		(234	)
Ending balance: Accumulated other comprehensive loss (net of tax of $3,790 and $3,566 respectively)	$	(14,247	)	$	(13,417	)

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Beginning balance: Accumulated other comprehensive loss (net of tax of $3,505 and $2,816 respectively) $ (13,183 ) $ (10,592 )
Other comprehensive income (loss):
Foreign currency translation adjustments (net of tax (benefit) expense of $61 and $434, respectively) (234 ) (1,636 )
Ending balance: Accumulated other comprehensive loss (net of tax of $3,567 and $3,250, respectively) $ (13,417 ) $ (12,228 )

No amounts were reclassified out of Accumulated other comprehensive ~~income (loss)~~loss during any of the periods presented.

NOTE 5. DEBT

The Company's debt consisted of the following:

	May 1, 2020					May 3, 2019					January 31, 2020
(in thousands)	Amount		Rate			Amount		Rate			Amount		Rate
Term Loan Facility, maturing April 4, 2021	$	384,100		4.25	%	$	389,250		5.75	%	$	385,388		5.05	%
ABL Facility, maturing November 16, 2022		75,000		2.07	%		—	—%				—	—%
		459,100					389,250					385,388
Less: Current maturities in Current liabilities		457,858					5,150					5,150
Less: Unamortized debt issuance costs		1,242					2,596					1,581
Long-term debt, net	$	—				$	381,504				$	378,657

May 3, 2019 May 4, 2018 February 1, 2019
(in thousands) Amount Rate Amount Rate Amount Rate
Term Loan Facility, maturing April 4, 2021 $ 389,250
⁽¹⁾
5.75 % $ 494,400
5.13 % $ 490,538
5.77 %
ABL Facility, maturing November 16, 2022 —
— % —
— % —
— %
389,250
494,400
490,538

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

Less: Unamortized debt issuance costs 2,596
3,951
2,935

Long-term debt, net $ 381,504
$ 485,299
$ 482,453

~~(1) Reflects voluntary prepayment of $100 million to the Term Loan Facility in First Quarter 2019.~~

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

(in thousands)	May 1, 2020		May 3, 2019		January 31, 2020
ABL Facility maximum borrowing	$	200,000	$	175,000	$	175,000
Current borrowings under ABL		75,000		—		—
Outstanding letters of credit		8,656		11,203		23,299
Borrowing availability under ABL	$	116,344	$	163,797	$	151,701

(in thousands) May 3, 2019 May 4, 2018 February 1, 2019
ABL Facility maximum borrowing $ 175,000
$ 175,000
$ 175,000
Outstanding letters of credit 11,203
15,500
21,111
Borrowing availability under ABL $ 163,797
$ 159,500
$ 153,889

During First Quarter 2020, the Company increased capacity under the ABL Facility by $25.0 million so that maximum borrowings are $200.0 million.

Interest; Fees

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

~~Table of Contents~~

Customary agency fees are payable in respect of the Debt Facilities. The ABL Facility fees also include (i) commitment fees in an amount equal to 0.25% of the daily unused portions of the ABL Facility, and (ii) customary letter of credit fees.

As of the end of First Quarter 2020 the Company had borrowings of $75.0 million on the ABL Facility.

Representations and Warranties; Covenants

Subject to specified exceptions, the Debt Facilities contain various representations and warranties, and restrictive covenants that, among other things, restrict the ability of Lands’ End and its subsidiaries to incur indebtedness (including guarantees), grant

Table of Contents

liens, make investments, make dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers or change the nature of their business. In addition, if excess availability under the ABL Facility falls below the greater of 10% of the loan cap amount or $15.0 million, Lands’ End will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0. The Debt Facilities do not otherwise contain financial maintenance covenants. The Company was in compliance with all financial covenants related to the Debt Facilities as of May ~~3, 2019.~~

1, 2020.

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

Events of Default and Maturity

The Debt Facilities include customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross defaults related to certain other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, and material judgments and change of control. The Term Loan Facility will mature on April 4, 2021. The ABL Facility matures on November 16, 2022, however in the event the Term Loan Facility debt is not extended, repaid or otherwise refinanced at least six months before its maturity date, the ABL Facility would mature on January 4, 2021.

Pursuant to ASC 205, Presentation of Financial Statements, the Company is required to and does evaluate at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company’s Term Loan Facility matures on April 4, 2021, which is within one year after the date of the Condensed Consolidated Financial Statements issued with this Quarterly Report on Form 10-Q. As of May 1, 2020, the remaining balance outstanding under the Term Loan Facility was $384.1 million. Given the amount currently outstanding under the Term Loan Facility and its maturity date of April 4, 2021, and based on the definitions in the relevant accounting standards, management has determined that this condition raises substantial doubt about the Company’s ability to continue as a going concern. This evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt is deemed to exist, management may evaluate the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

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:

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.

Table of Contents


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

~~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 granted prior to Fiscal 2018 had annual vesting, but due to the performance criteria, were not eligible for straight-line expensing. All Performance Awards granted prior to Fiscal 2018 were forfeited during the First Quarter 2018. For Performance Awards granted in Fiscal 2018 and after, the Target Shares earned can range from 0%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 in 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~~three-year performance period, and unearned Target Shares are forfeited. The fair value of the Performance Awards granted in Fiscal 2018 and after are 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. ~~Based on performance~~

iii.

Stock option awards ("Option Awards") provide the recipient with the option to ~~date,~~purchase a set number of shares at a stated exercise price over the ~~Company is currently accruing for performance shares based on a 100% payout,~~term of the contract, which is ~~reflected in~~ten years for all Option Awards currently outstanding. Options are granted with a strike price equal to the ~~financial information below.~~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.

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
(in thousands)	May 1, 2020		May 3, 2019
Deferred Awards	$	1,641	$	1,365
Performance Awards		—		422
Option Awards		187		187
Total stock-based compensation expense	$	1,828	$	1,974

~~Table of Contents~~

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Deferred Awards $ 1,365
$ 709
Option Awards 187
187
Performance Awards 422
71
Total stock-based compensation expense
$ 1,974
$ 967

The following table provides a summary of the Deferred Awards activity for ~~First Quarter 2019:~~Year-to-Date 2020:

	Deferred Awards
(in thousands, except per share amounts)	Number of Shares			Weighted Average Grant Date Fair Value per Share
Unvested as of January 31, 2020		745		$	18.49
Granted		753			6.85
Vested		(275	)		19.87
Forfeited or expired		(17	)		17.21
Unvested as of May 1, 2020		1,206			10.91

Deferred Awards
(in thousands, except per share amounts) Number of Shares Weighted Average Grant Date Fair Value per Share
Unvested as of February 1, 2019 594
$ 21.96
Granted 410
15.73
Vested (184 ) 22.41
Forfeited or expired (23 ) 18.40
Unvested as of May 3, 2019 797
18.61

Total unrecognized stock-based compensation expense related to unvested Deferred Awards was approximately ~~$11.8~~$9.7 million as of May ~~3, 2019,~~1, 2020, which is expected to be recognized ratably over a weighted average period of ~~2.2~~2.1 years. Deferred Awards granted to employees during Fiscal ~~2019 generally~~2020 vest ratably over a period of three years.

The following table provides a summary of the Performance Awards activity for ~~First Quarter 2019:~~Year-to-Date 2020:

	Performance Awards
(in thousands, except per share amounts)	Number of Shares		Weighted Average Grant Date Fair Value per Share
Unvested as of January 31, 2020		412	$	18.15
Granted		—		—
Vested		—		—
Forfeited or expired		—		—
Unvested as of May 1, 2020		412		18.15

Performance Awards
(in thousands, except per share amounts) Number of Shares Weighted Average Grant Date Fair Value per Share
Unvested as of February 1, 2019 176
$ 21.93
Granted 265
15.73
Vested —
—
Forfeited or expired (5 ) 21.90
Unvested as of May 3, 2019 436
18.17

Total unrecognized stock-based compensation expense related to unvested Performance Awards was approximately ~~$5.8~~$3.2 million as of May ~~3, 2019,~~1, 2020, which is expected to be recognized ratably over a weighted average period of ~~2.5~~1.6 years. Performance

Table of Contents

Awards granted to employees during Fiscal 2019 and Fiscal 2018 vest, if earned, after completion of the applicable three-year performance period.

~~Table of Contents~~

The following table provides a summary of the Options Award activity for ~~First Quarter 2019:~~Year-to-Date 2020:

	Option Awards
(in thousands, except per share amounts)	Number of Shares			Weighted Average Grant Date Fair Value per Share
Unvested as of January 31, 2020		171		$	8.73
Granted		—			—
Vested		(74	)		8.49
Forfeited or expired		—			—
Unvested as of May 1, 2020		97			8.92

Option Awards
(in thousands, except per share amounts) Number of Shares Weighted Average Grant Date Fair Value per Share
Unvested as of February 1, 2019 257
$ 8.73
Granted —
—
Vested (74 ) 8.49
Forfeited or expired —
—
Unvested as of May 3, 2019 183
8.85

Total unrecognized stock-based compensation expense related to unvested Option Awards was approximately ~~$1.4~~$0.7 million as of May ~~3, 2019,~~1, 2020, which is expected to be recognized ratably over a weighted average period of ~~1.9~~0.9 years. The Option Awards have a life of ten years and vest ratably over the first four years. ~~The fair value of each Option Award was estimated on the grant date using the Black-Scholes option pricing model.~~ As of May ~~3, 2019, 159,314~~1, 2020, 245,098 shares related to Option Awards were exercisable. No options have been exercised as of May ~~3, 2019.~~

1, 2020.

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 $2.0 million, $1.8 million ~~$2.1 million~~ and ~~$1.9~~$2.1 million as of May 1, 2020, May 3, 2019 ~~May 4, 2018~~ and ~~February 1, 2019,~~January 31, 2020, respectively based on Level 1 inputs. Restricted cash amounts are valued based upon statements received from financial institutions.

The carrying amount of the Company's Cash and cash equivalents, Accounts receivable, net, Accounts payable, Current borrowings on ABL Facility, and Other current liabilities approximate their fair value as recorded due to the short-term maturity 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:

May 1, 2020*

May 3, 2019

January 31, 2020

(in thousands)

Carrying

Amount

Fair

Value

Carrying

Amount

Fair

Value

Carrying

Amount

Fair

Value

Long-term debt, including short-term portion

384,100

299,118

389,250

381,952

385,388

378,643

May 3, 2019 May 4, 2018 February 1, 2019
(in thousands)
Carrying
Amount

Fair
Value
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Long-term debt, including short-term portion $ 389,250
$ 381,952
$ 494,400
$ 452,994
$ 490,538
$ 460,493

* At the end of First Quarter 2020 all debt is short- term.

Long-term debt, including short-term portion was valued utilizing Level 2 valuation techniques based on the closing inactive market bid price on May 1, 2020, May 3, 2019, ~~May 4, 2018,~~ and ~~February 1, 2019.~~January 31, 2020. There were no nonfinancial assets or nonfinancial liabilities recognized at fair value on a nonrecurring basis as of May 1, 2020, May 3, 2019, ~~May 4, 2018,~~ and ~~February 1, 2019.~~

January 31, 2020.

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 benefit at an overall effective tax rate of ~~41.7%~~30.8% and ~~68.1%~~41.7% for First Quarter ~~2019~~2020 and First Quarter ~~2018,~~2019, respectively. The First Quarter 2020 rate reflects the estimated tax benefits as a result of the CARES Act. The First Quarter 2019 rate reflects the tax benefits resulting from the change in status of various foreign jurisdictions.

Table of Contents

The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of employer side social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.

Discrete items that were recognized during the three months ended May 1, 2020 included the vesting of certain share-based compensation awards and the technical corrections aspect of the CARES Act related to carryback of net operating losses (“NOLs”) in years beginning in 2017. The effective income tax rate for ~~First Quarter 2019~~the full year is determined by the ~~result~~level and composition of ~~the Company’s election~~income (loss) before income taxes, excluding discrete items as discussed above, which is subject to ~~treat~~

~~certain~~federal, state, local and foreign ~~entities as a U.S. branch. The tax rate for First Quarter 2018 reflects the reversal of UTBs due to favorable state tax audit settlements for periods prior to the Separation.~~

income taxes.

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~~position.

As disclosed in the Company’s Annual Report on Form 10-K for the year ended January 1, 2020, the Company is the defendant in three separate lawsuits, each of which seeks class certification and allege adverse health events and personal property damage as a ~~whole.~~

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”), stayed the Davis case and denied Lands’ End’s motion to strike class allegations. A fourth case, DeCrescentis et al., v. Lands' End, Inc., United States District Court for the Southern District of New York, Civil Action No. l 9-cv- 4717-LJL, complaint filed May 22, 2019, was voluntarily dismissed, without prejudice, on May 15, 2020. The Consolidated Wisconsin Action is in discovery.

The Company is vigorously defending the Consolidated Wisconsin Action and believes it is without merit.

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.

On February 11, 2019 Transform Holdco acquired from Sears Holdings substantially all of the go-forward retail footprint, and other assets and component businesses of Sears Holdings as a going concern. The Company believes that ESL holds a significant portion of the membership interest of Transform Holdco and therefore considers that entity to be a related party as well.

~~In connection~~

Table of Contents

Sourcing

The Company is party to a contract 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 subsidiariesa subsidiary of Sears Holdings ~~Corporation are providing~~to provide agreed upon buying agency services, ~~to the Company. Some of these agreements have been assumed by and assigned to Transform Holdco~~on a non-exclusive basis, in ~~connection with the proceedings related to the Sears Filing (as defined below).~~

~~The components of the transactions between~~foreign territories from where the Company purchases merchandise. These services, primarily based upon quantities purchased, include quality-control functions, regulatory compliance, product claims management and ~~Sears Holdings, which exclude pass-through payments~~new vendor selection and setup assistance. Total expense from these services in First Quarter 2020 was $1.4 million compared to ~~or from third parties,~~$1.7 million in First Quarter 2019. These amounts are ~~as follows:~~

~~Lands’ End Shops at Sears~~

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

13 Weeks Ended
(in thousands, except for number of stores) May 3, 2019 May 4, 2018
Rent, CAM and occupancy costs $ 1,106
$ 4,494
Retail services, store labor 988
4,129
Financial services and payment processing 68
389
Supply chain costs 78
130
Total expenses $ 2,240
$ 9,142
Number of Lands’ End Shops at Sears at period end 39
159

~~Table of Contents~~

~~General Corporate Services~~

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

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Sourcing $ 1,595
$ 1,817
Shop Your Way 35
167
Shared services 47
48
Total expenses $ 1,677
$ 2,032

~~Use of Intellectual Property or Services~~

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

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Lands' End business outfitters revenue $ 2
$ 325
Credit card revenue 75
153
Royalty income 23
27
Gift card expense (2 ) (5 )
Total income $ 98
$ 500

~~Additional Balance Sheet Information~~

On October 15, 2018, Sears Holdings Corporation and certain of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of Title 11 of the United States Code (collectively the “Sears Filing"). Following the Sears Filing, the Company began netting payables due to Sears Holdings or Transform Holdco, as applicable, against receivables due from Sears Holdings if and as allowed under its contracts. As a result, receivables and payables have been netted,capitalized into inventory and are ~~presented as a net receivable balance~~expensed through cost of goods sold over the course of inventory turns and included in ~~Accounts receivable, net~~Cost of sales in the Condensed Consolidated ~~Balance Sheets.~~

~~At May 3, 2019, the Company recorded a $0.2 million net receivable balance from Sears Holdings or Transform Holdco in Accounts receivable, net~~Statements of Operations.

The Company’s contract for these services expires on June 30, 2020 and ~~$0 in Accounts payable in the Condensed Consolidated Balance Sheets. On May 4, 2018 the Company recorded $2.2 million in Accounts receivable net,~~services rendered to reflect amounts due from Sears Holdings and $1.9 million in Accounts payable to reflect amounts due to Sears Holdings in the Condensed Consolidated Balance Sheets. At February 1, 2019, the Company recorded a $0.1 million net receivable balance from Sears Holdings in Accounts receivable, net and $0 in Accounts payable in the Consolidated Balance Sheets.

In the Third Quarter 2018, the Company recorded a non-cash charge of $2.6 million in Other expense, net, in its Condensed Statement of Operations to reflect a reserve relating to pre-Separation UTBs (including penalties and interest) for which Sears Holdings Corporation indemnified the Company under a Tax Sharing Agreement entered into in connection with the Separation, the recovery of which had become uncertain as a result of the Sears Filing. Sears Holdings rejected the Tax Sharing Agreement, per an order approvedthis contract ceased on April ~~4, 2019. At May 3, 2019 and February 1, 2019 the indemnification receivable was $0, as a result of continuing substantial doubt regarding the collectability of this contingent asset.~~

20, 2020.

NOTE 11. SEGMENT REPORTING

The Company is a leading multi-channel retailer of casual clothing, accessories and footwear, as well as home products. Lands' End is growing its multi-channel distribution network which allows the consumer to interact with the Company with a consistent customer experience whether on company websites, third party marketplaces, at company

~~Table of Contents~~

owned stores or other distribution channels. As the Company expands this distribution network, and in conjunction with the accelerated closures of Lands' End Shops at Sears, the historical structure of separate reportable segments for retail stores and direct-to-consumer was no longer representative of the way the current Chief Operating Decision Maker evaluates the business units and allocates resources.

~~Therefore, as of February 1, 2019, the Company updated its segment reporting to better align with this multi-channel strategy. The Company's~~Company’s operating segments consist of U.S. eCommerce, Outfitters, Europe eCommerce, Japan eCommerce and Retail. The Company determined that each of the operating segments ~~share~~have similar economic and other qualitative characteristics thus the results of the operating segments are aggregated into one reportable external segment, consistent with the ~~Company's~~Company’s multi-channel business approach. ~~Prior year information has been restated to reflect this change.~~

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

	13 Weeks Ended
(in thousands)	May 1, 2020		May 3, 2019
Net revenue:
eCommerce	$	181,541	$	208,902
Outfitters		31,799		43,083
Retail		3,668		10,448
Total net revenue	$	217,008	$	262,433

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Net revenue:
eCommerce $ 208,902
$ 198,768
Outfitters 43,083
74,605
Retail 10,448
26,452
Total net revenue $ 262,433
$ 299,825

NOTE 12. REVENUE

Revenue includes sales of merchandise and delivery revenue related to merchandise sold. Substantially all of the Company's revenue is recognized when control of product passes to customers, which for the eCommerce and Outfitters channels is when the merchandise is expected to be received by the customer and for the Retail channel is at the time of sale in the store. The Company recognizes revenue, including shipping and handling fees billed to customers, in the amount expected to be 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 amount. Variable amounts are estimated based on an analysis of historical experience and adjusted as better estimates become available. ~~There were no changes to estimates in First Quarter 2019.~~

The Company's revenue is disaggregated by product channel and geographic location. Revenue by product channel is presented in Note 11, Segment Reporting. Revenue by geographic location was:

	13 Weeks Ended
(in thousands)	May 1, 2020		May 3, 2019
Net revenue:
United States	$	172,746	$	216,873
Europe		30,376		30,826
Asia		11,348		11,844
Other		2,538		2,890
Total Net revenue	$	217,008	$	262,433

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Net revenue:
United States $ 216,873
$ 253,022
Europe 30,826
29,690
Asia 11,844
13,289
Other 2,890
3,824
Total Net revenue $ 262,433
$ 299,825

Contract Liabilities

Contract liabilities consist of payments received in advance of the transfer of control to the customer. As products are delivered and control transfers, the Company recognizes the deferred revenue in Net revenue in the Condensed Consolidated Statements of Operations. The following table summarizes the deferred revenue associated

~~Table of Contents~~

with payments received in advance of the transfer of control to the customer, which is reported in Other current liabilities in the Condensed Consolidated Balance Sheets, as

Table of Contents

well as amounts recognized through Net revenue for each period presented. The remainder of deferred revenue as of May ~~3, 2019~~1, 2020 is expected to be recognized in Net revenue in the fiscal quarter ending ~~August 2, 2019,~~July 31, 2020, as products are delivered to customers.

	13 Weeks Ended
(in thousands)	May 1, 2020			May 3, 2019
Deferred Revenue Beginning of Period	$	8,096		$	9,051
Deferred Revenue Recognized in Period		(8,096	)		(9,051	)
Revenue Deferred in Period		15,896			10,199
Deferred Revenue End of Period	$	15,896		$	10,199

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Deferred Revenue Beginning of Period $ 9,051
$ 12,993
Deferred Revenue Recognized in Period (9,051 ) (12,993 )
Revenue Deferred in Period 10,199
16,062
Deferred Revenue End of Period $ 10,199
$ 16,062

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 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 ~~total contract liability related to gift cards issued was $20.0 million, $19.3 million and $18.2 million as of May 3, 2019, May 4, 2018 and February 1, 2019, respectively. The~~ liability is estimated based on expected breakage that considers historical patterns of redemption. The following table provides the reconciliation of the contract liability related to gift cards:

	13 Weeks Ended
(in thousands)	May 1, 2020			May 3, 2019
Balance as of Beginning of Period	$	22,592		$	18,191
Gift cards sold		8,831			15,117
Gift cards redeemed		(8,127	)		(13,033	)
Gift card breakage		(94	)		(265	)
Balance as of End of Period	$	23,202		$	20,010

13 Weeks Ended
(in thousands) May 3, 2019 May 4, 2018
Balance as of Beginning of Period $ 18,191
$ 19,272
Gift cards sold 15,117
16,072
Gift cards redeemed (13,033 ) (14,664 )
Gift card breakage (265 ) (1,390 )
Balance as of May 3, 2019 $ 20,010
$ 19,290

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 May 1, 2020, May 3, 2019 ~~May 4, 2018~~ and ~~February 1, 2019,~~January 31, 2020, $16.7 million, $17.3 million ~~$17.7 million~~ and ~~$22.2~~$21.6 million, respectively, of refund liabilities, primarily associated with product returns, were reported in Other current liabilities in the Condensed Consolidated Balance Sheets.

~~NOTE 13. LEASES~~

~~The Company~~ An asset for product returns is ~~a lessee under various lease agreements for its retail operations~~recorded in Prepaid expenses and ~~equipment including a master lease agreement for its Lands' End Shops at Sears. Refer also to Note 10,~~ ~~Related Party Transactions~~. All leases are classified as operating leases. The Company’s leases have remaining terms of less than one year to ten years and contain various renewal options. The period which is subject to an option to extend the lease is includedother current assets in the ~~lease term if it is reasonably certain that the option will be exercised. Options to extend are reviewed within two years of the option date.~~

Rent expense totaled $4.6 million in First Quarter 2019 and includes operating lease expense, of $2.6 million, as well as expenses for variable lease payments that do not depend on a rate or index, including items such as CAM and real estate taxes for the Company's real estate leases, in the amounts of $2.0 million. Short-term lease cost was not material for First Quarter 2019.

Condensed Consolidated Balance Sheets.

Table of Contents

~~Supplemental balance sheet information related to operating leases are as follows:~~

13 Weeks Ended
(in thousands) May 3, 2019
Operating lease right-of-use asset $ 29,327
Lease liability - current 8,786
Lease liability - long-term 24,772
Weighted average remaining lease term in years 7.1
Weighted average discount rate 6.07 %

~~Supplemental cash flow information related to operating leases are as follows:~~



~~(in thousands)~~	~~May 3, 2019~~
~~Operating cash flows from operating leases~~	~~2,352~~

~~Maturities of operating lease liabilities as of May 3, 2019 are as follows (in thousands):~~

2019, excluding the quarter ended May 3, 2019 $ 8,477
2020 6,339
2021 5,139
2022 4,397
2023 3,618
Thereafter 14,519
Total operating lease payments $ 42,489
Less imputed interest 8,931
Present value of lease liabilities $ 33,558

Total future commitments under the Company’s operating leases as of February 1, 2019 were as follows for the fiscal years ending (in thousands). The table was updated from the version previously included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2019 within the Notes to Consolidated Financial Statements to adjust for certain inconsistencies that management identified in First Quarter 2019 during the implementation of ASC 842, ~~Leases. Specifically, the Company corrected the schedule to include additional lease commitments for lease contracts signed in Fiscal 2018, with commencement dates in Fiscal 2019:~~

2019 $ 10,851
2020 6,338
2021 4,873
2022 3,828
2023 2,839
Thereafter 10,590
Total minimum payments required $ 39,319

During First Quarter 2019, the Company took possession of several retail spaces that resulted in increases in Operating lease right-of-use asset of $3.4 million, Lease liability - current of $0.3 million and Lease liability - long-term of $3.4 million. Between the end of First Quarter 2019 and the filing of Form 10-Q, the Company entered into one additional lease that will likely commence in Second Quarter 2019.

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

~~Table of Contents~~

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 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 Concerning Forward-Looking Statements" below, ~~and~~ "Item 1A. Risk Factors" in our Annual Report filed on Form 10-K for the year ended ~~February 1, 2019~~January 31, 2020, the risk factors contained in our Current Report on Form 8-K dated June 2, 2020 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", "Lands' End", "we", "us", "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, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders

•

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 ABL Facility and the Term Loan Facility

•~~ERP -~~

EOM – Enterprise ~~resource planning~~order management software solutions

•

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

•

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

First Quarter 2019 - The 13 weeks ended May 3, 2019

Fiscal 2020 – The 52 weeks ending January 29, 2021

Fiscal 2019 - The ~~fifty-two~~52 weeks ~~ending~~ended January 31, 2020

•

GAAP - Accounting principles generally accepted in the United States

•

Lands' End Shops at Sears - Lands' End shops operated within Sears stores

•

LIBOR - London inter-bank offered rate

•

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 agreements, dated as of April 4, 2014, with Bank of America, N.A. and certain other lenders

•~~First Quarter~~

Transform Holdco - Transform Holdco LLC, an affiliate of ESL, which on February 11, 2019 acquired from Sears Holdings substantially all of the go-forward retail footprint, and other assets and component businesses of Sears Holdings as a going concern

Year-to-Date 2020 - The 13 weeks ended May 1, 2020

Year-to-Date 2019 - The ~~thirteen~~13 weeks ended May 3, 2019

•~~First Quarter 2018 - The thirteen weeks ended May 4, 2018~~

•~~UTBs - Gross unrecognized tax benefits~~

•~~Year-to-Date 2019 - The thirteen weeks ended May 3, 2019~~

•~~Year-to-Date 2018 - The thirteen weeks ended May 4, 2018~~

Table of Contents

Executive Overview

Description of the Company

Lands' End ~~Inc.~~ is a leading ~~multi-channel~~uni-channel retailer of casual clothing, accessories, ~~and~~ footwear ~~as well as~~and 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 ~~international websites,~~, on third party online marketplaces and through retail locations. We are a classic American lifestyle brand with a passion for ~~delivering~~ quality, ~~products,~~ legendary service and real value, ~~to our customers~~ and we seek to deliver timeless style for women, men, kids and the home.

~~Table of Contents~~

Lands’ End was founded in 1963 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 care of the customer, take care of the employee and the rest will take care of itself."

~~As the~~

Lands’ End seeks to provide a common customer experience regardless of whether our customers are interacting with us on our company websites, on third party marketplaces, at Company evolves our multi-channel strategy, and in conjunction with the accelerated closures of Lands' End Shops at Sears, during Fiscal 2018 we determined it was more appropriate to combine the previously disclosed external reportable segments of Direct and Retail, intoOperated stores or through other distribution outlets. We have one ~~combined~~ external reportable segment ~~as it more closely represents how we are managing the Company. We~~and identify our operating segments according to how our business activities are managed and evaluated. Our operating segments consist of U.S. eCommerce, Retail, Lands' End Outfitters ("Outfitters"), Europe eCommerce and Japan eCommerce. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into one external reportable segment.

Lands' End's product channels are eCommerce, Retail and Outfitters. eCommerce offers products through the Company's eCommerce websites, third party online marketplaces and direct mail catalogs. Retail sells products and services through Company Operated stores. Outfitters sells products to end consumers, located primarily in the United States, through negotiated arrangements with client organizations to make specific styles or embroidered products available to members of client organizations, as well as through the Company's eCommerce websites and direct mail catalogs.

Impact of the COVID-19 Pandemic

Over the past few months, we have seen the profound impact that COVID-19 pandemic is having on human health, the global economy and society at large. Lands’ End has been actively addressing the COVID-19 pandemic and its impact globally, working to mitigate the potential impacts to our employees, customers and business. The impact of the COVID-19 pandemic and measures to prevent its spread are affecting our business in a number of ways.

We continue to believe that we will emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the duration and 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 26 U.S. stores. These stores remained closed at the end of First Quarter 2020 with a phased reopening in Second Quarter 2020. Additionally, we have implemented extra precautions at our offices and distribution centers. These precautions were developed in line with guidance from global, federal and state health authorities, including work-from-home policies, social distancing, thermal scanning and partitions in our facilities.

Customer Demand

Supply Chain

During First Quarter 2020, we did not experience any significant disruption of our supply chain. However, in response to decreased demand, future orders were reduced and some existing product was repurposed. We continue to place a priority on business continuity and contingency planning, including for potential extended closures of any key facilities or disruptions related to our key suppliers that might arise related to the COVID-19 pandemic. We may experience additional disruptions in our supply chain as the pandemic continues, though we cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact.

Table of Contents

Expense Reduction

Beginning in First Quarter 2020, we took the following actions to reduce overall expense as a response to decreased demand due to the COVID-19 pandemic:

Temporarily reduced base salaries, including a reduction of 50% in the base salary of our Chief Executive Officer and President, 20% reductions in the base salaries of our other senior management members and scaled salary reductions throughout the Company.

Furlough of approximately 70% of corporate employees and nearly 100% of retail employees beginning on March 28, 2020. Some personnel returned to work beginning April 13, 2020, however approximately 49% of the workforce remained furloughed at the end of First Quarter 2020.

Fiscal 2020 merit increases were eliminated.

The Board of Directors compensation was temporarily reduced.

The Company's 401(k) match was temporarily suspended.

Planned capital expenditures for Fiscal 2020 were reduced by approximately 50%.

Other discretionary operating expenses were significantly reduced.

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.

The COVID-19 pandemic has had a material impact on our results for First Quarter 2020 and we expect it to continue to have an adverse impact on our results. As such, this interim period, as well as upcoming periods, may not be comparable to past performance or indicative of future performance.

Related party

Following the Separation, we began operating as a separate, publicly traded company, independent from Sears Holdings. According to statements on Schedule 13D filed with the SEC by ESL, ESL beneficially owned 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 both prior to and subsequent to the Separation. On February 11, 2019, Transform Holdco acquired from Sears Holdings substantially all of the go-forward retail footprint, and other assets and component businesses of Sears Holdings as a going concern. We believe that ESL holds a significant portion of the membership interests of Transform Holdco and therefore consider that entity to be a related party as well.

Seasonality

We experience seasonal fluctuations in our 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 35.1%~~37.9% and 34.6% of our ~~Net~~net revenue in the fourth fiscal quarter of ~~the past three years.~~Fiscal 2019 and Fiscal 2018 respectively. Thus, lower than expected fourth quarter 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.

Results of Operations

We initially delivered strong performance across all segments with revenue increasing 11.1% in February 2020 as compared to the prior year. As the COVID-19 pandemic began to impact the consumer in mid-March 2020, all operating segments were challenged.

Global eCommerce saw a significant drop in revenue at the onset of the COVID-19 pandemic. However, revenue rebounded in April 2020 and continued to recover following First Quarter 2020, with May 2020 accelerating to double digit revenue growth versus prior year.

Within Outfitters, we successfully completed the American Airlines uniform launch during First Quarter 2020. Outfitters is expected to be slower to recover from the impacts of the COVID-19 pandemic. Outfitters is split approximately evenly among

Table of Contents

~~Results~~

national accounts, small and mid-size businesses (“SMB”), and school uniforms. National accounts, with the majority in the travel industry, are expected to take longer to recover due to the decline in travel related to the COVID-19 pandemic. SMB is expected to recover at varying rates, depending on the industries served. Assuming the schools reopen in the fall, we would expect the school uniform business to recover to prior year levels.

Company Operated stores achieved comparable same store sales growth of ~~Operations~~

14.2% in February before temporarily closing all U.S. Company Operated stores on March 16, 2020 due to the COVID-19 pandemic. The Company initiated and completed a phased reopening of its stores in Second Quarter 2020.

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

	13 Weeks Ended
	May 1, 2020						May 3, 2019
(in thousands)	$'s			% of Net revenue			$’s			% of Net revenue
Net revenue	$	217,008			100.0	%	$	262,433			100.0	%
Cost of sales (excluding depreciation and amortization)		122,853			56.6	%		142,559			54.3	%
Gross profit		94,155			43.4	%		119,874			45.7	%
Selling and administrative		105,796			48.8	%		116,844			44.5	%
Depreciation and amortization		8,786			4.0	%		7,618			2.9	%
Other operating expense, net		4,285			2.0	%		148			0.1	%
Operating loss		(24,712	)		(11.4	)%		(4,736	)		(1.8	)%
Interest expense		5,311			2.4	%		7,834			3.0	%
Other income, net		(173	)		(0.1	)%		(867	)		(0.3	)%
Loss before income taxes		(29,850	)		(13.8	)%		(11,703	)		(4.5	)%
Income tax benefit		(9,207	)		(4.2	)%		(4,885	)		(1.9	)%
NET LOSS	$	(20,643	)		(9.5	)%	$	(6,818	)		(2.6	)%

13 Weeks Ended

May 3, 2019 May 4, 2018
(in thousands) $'s
% of
Net revenue $’s % of
Net revenue
Net revenue $ 262,433
100.0 % $ 299,825
100.0 %
Cost of sales (excluding depreciation and amortization) 142,559
54.3 % 166,800
55.6 %
Gross profit 119,874
45.7 % 133,025
44.4 %
Selling and administrative 116,844
44.5 % 124,000
41.4 %
Depreciation and amortization 7,618
2.9 % 6,161
2.1 %
Other operating expense, net 148
0.1 % 337
0.1 %
Operating income (4,736 ) (1.8 )% 2,527
0.8 %
Interest expense 7,834
3.0 % 6,912
2.3 %
Other (income) expense, net (867 ) (0.3 )% 3,864
1.3 %
Loss before income taxes (11,703 ) (4.5 )% (8,249 ) (2.8 )%
Income tax benefit (4,885 ) (1.9 )% (5,619 ) (1.9 )%
NET LOSS $ (6,818 ) (2.6 )% $ (2,630 ) (0.9 )%

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

Net ~~Income (Loss)~~Loss and Adjusted EBITDA

We recorded aNet loss of $20.6 million in First Quarter 2020 compared to Net loss of $6.8 million in ~~First Quarter 2019 compared to a Net loss of $2.6 million in~~ the First Quarter ~~2018.~~2019. In addition to our Net ~~loss~~income determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted EBITDA measurement. Adjusted EBITDA is computed as Net ~~loss~~income appearing on the Condensed Consolidated Statements of Operations net of Income tax ~~benefit,~~expense/(benefit), Interest expense, Depreciation and amortization, and certain significant items set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our businesses for comparable periods, and as an executive compensation metric. The methods used by the Company to calculate its 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 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.

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

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.


◦	~~Gain or loss on property and equipment - management considers the gains or losses on asset valuation, including impairments, to result from investing decisions rather than ongoing operations.~~

Corporate restructuring – exit costs associated with retail operations and other corporate restructuring actions and activities in Fiscal 2019.

Table of Contents

Goodwill and long-lived asset impairment – charge associated with the non-cash write-down of certain long-lived assets and goodwill in Fiscal 2020.

Loss (gain) on property and equipment - management considers the gains or losses on asset valuation to result from investing decisions rather than ongoing operations in Fiscal 2020 and Fiscal 2019.


	13 Weeks Ended										13 Weeks Ended
	May 3, 2019					May 4, 2018					May 1, 2020						May 3, 2019
(in thousands)	$’s			% of Net revenue		$’s			% of Net revenue		$’s			% of Net revenue			$’s			% of Net revenue
Net loss	$	(6,818	)	(2.6	)%	$	(2,630	)	(0.9	)%	$	(20,643	)		(9.5	)%	$	(6,818	)		(2.6	)%
Income tax benefit	(4,885		)	(1.9	)%	(5,619		)	(1.9	)%		(9,207	)		(4.2	)%		(4,885	)		(1.9	)%
Other (income) expense, net	(867		)	(0.3	)%	3,864			1.3	%
Other income, net												(173	)		(0.1	)%		(867	)		(0.3	)%
Interest expense	7,834			3.0	%	6,912			2.3	%		5,311			2.4	%		7,834			3.0	%
Operating (loss) income	(4,736		)	(1.8	)%	2,527			0.8	%
Operating loss												(24,712	)		(11.4	)%		(4,736	)		(1.8	)%
Depreciation and amortization	7,618			2.9	%	6,161			2.1	%		8,786			4.0	%		7,618			2.9	%
Other Operating Expense	203			0.1	%	1			—	%
(Gain) loss on property and equipment	(55		)	—	%	336			0.1	%
Corporate restructuring												—			0.0	%		203			0.1	%
Goodwill and long-lived asset impairment												3,444			1.6	%		—			0.0	%
Loss (gain) on property and equipment												842			0.4	%		(55	)		(0.0	)%
Adjusted EBITDA	$	3,030		1.2	%	$	9,025		3.0	%	$	(11,640	)		(5.4	)%	$	3,030			1.2	%

In assessing the operational performance of our business, we consider a variety of financial measures. We operate in three channels: eCommerce, Outfitters, and Retail. A key measure in the evaluation of our business is revenue performance by channel. We also consider gross margin and Selling and administrative expenses in evaluating the performance of our business.

To evaluate revenue performance for the eCommerce and Outfitters channels we use Net revenue. For our Retail channel, we use Company Operated stores ~~sales~~Same Store Sales as a key measure in evaluating performance. A store is included in Same Store Sales calculations when it has been open for at least ~~15 full~~14 months and selling square footage has not changed by 15% or more within the past year. Online sales and sales generated through our in-store web portal are considered revenue in our eCommerce channel and are excluded from Same Store Sales.

Discussion and Analysis

First Quarter ~~2019~~2020 compared with First Quarter ~~2018~~

2019

Net Revenue

Net revenue for First Quarter ~~2019~~2020 was ~~$262.4~~$217.0 million, compared with ~~$299.8~~$262.4 million in the comparable period of the prior year, a decrease of ~~$37.4~~$45.4 million, or ~~12.5%~~17.3%. ~~Sales growth in our eCommerce channel of 5.1% was more than offset by decreases in our Outfitters and Retail channels of 42.3% and 60.5% respectively.~~

eCommerce Net revenue was ~~$208.9~~$181.5 million for First Quarter 2019, an increase of $10.1 million or 5.1%, from the comparable period of the prior year. The increase in the eCommerce channel was primarily attributable to the growth in the U.S. eCommerce business driven by the focus on key items, such as knit tops and bottoms, in our product assortment, and continued growth in new customers.

~~Outfitters Net revenue was $43.1 million for First Quarter 2019~~2020 a decrease of ~~$31.5~~$27.4 million or ~~42.3%~~13.1%, from the comparable period of the prior year. The decrease ~~in Outfitters~~ was ~~largely attributable~~due to lower demand due to the ~~Delta Air Lines launch which concluded in the second quarter of Fiscal 2018.~~

~~Retail~~COVID-19 pandemic.

Outfitters Net revenue was ~~$10.4~~$31.8 million infor First Quarter ~~2019,~~2020, a decrease of ~~$16.0~~$11.3 million or ~~60.5%~~26.2%, from the comparable period of the prior ~~year, primarily~~year. The decrease was due to lower demand due to the COVID-19 pandemic.

Retail Net revenue was $3.7 million in First Quarter 2020, a decrease of $6.8 million or 64.9%, from the comparable period of the prior year. This decrease was driven by ~~a significant reduction in~~ the ~~number~~exit of ~~our~~all Lands' End Shops at Sears ~~locations.~~locations as of January 31, 2020 and the temporary closure of U.S. Company Operated stores on March 16, 2020 due to the COVID-19 pandemic. Our U.S. Company Operated stores experienced ~~an increase of 12.0% in Same Store Sales. Consolidated Same Store Sales decreased 7.0% as compared to the same period of the prior year driven by the~~a decrease of ~~19.5%~~57.3% in Same Store Sales ~~in our Lands’ End Shops at Sears.~~due to the store closures driven by the COVID-19 pandemic. On May ~~3, 2019, the Company~~1, 2020 we had ~~39 Lands’ End Shops at Sears and 21~~26 U.S. Company Operated stores compared with ~~159 Lands’ End Shops at Sears and 14~~21 U.S. Company Operated stores on May ~~4, 2018.~~

~~Table of Contents~~

3, 2019.

Gross Profit

Gross profit decreased ~~$13.2~~$25.7 million to ~~$119.9~~$94.2 million primarily ~~due~~driven by lower demand. Gross margin decreased to ~~the impact of the Delta Air Lines launch~~43.4%, in ~~the~~ First Quarter ~~2018 and fewer Lands' End Shops at Sears, offset by the growth in our eCommerce business. Gross margin increased to~~2020, compared with 45.7%, in First Quarter 2019 ~~compared with gross margin of 44.4%, in First Quarter 2018. The gross margin increase of approximately 130 basis points was primarily related~~due to a more aggressive promotional environment throughout the industry due to the ~~inclusion~~COVID-19 pandemic and additional inventory reserves.

Table of ~~the lower margin Delta Air Lines launch in the same period last year combined with improvement in inventory management driving increased efficiencies and better full price selling mix.~~

Contents

Selling and Administrative Expenses

Selling and administrative expenses decreased ~~$7.2~~$11.0 million to ~~$116.8~~$105.8 million primarily due to the decrease in number of Lands' End Shops at Sears locations and the non-recurrence of expenses associated with the Delta Air Lines launch. Selling and administrative expenses increased approximately 310 basis points to 44.5%or 48.8% of total Net revenue, in First Quarter ~~2019,~~2020, compared with ~~$124.0~~$116.8 million or ~~41.4%~~44.5% of Net revenue, in First Quarter ~~2018. The basis point increase reflects deleverage~~2019. This decrease was primarily ~~related~~due to actions taken to reduce non-essential operating expenses and structural costs including employee furloughs and temporary tiered salary reductions for the Company’s executive management and corporate employees in response to the ~~Delta Air Lines launch last year.~~

COVID-19 pandemic.

Depreciation and Amortization

Depreciation and amortization expense was $8.8 million in First Quarter 2020, an increase of $1.2 million or 15.3%, compared with $7.6 million in First Quarter ~~2019,~~2019. This increase was primarily attributable to depreciation associated with the Company’s EOM system implementation, continued investment in the digital infrastructure and an ~~increase~~increased number of ~~$1.5 million or 23.6%, compared with $6.2~~U.S. Company Operated stores.

Other Operating Expense

Other operating expense, net was $4.3 million in First Quarter ~~2018, primarily attributable~~2020 and was insignificant in First Quarter 2019. This increase was due to ~~an increase in depreciation associated with our multi-year ERP system implementation and continued investment in our digital infrastructure.~~

~~Other~~ the $3.3 million impairment of goodwill.

Operating ~~(Income) Expense, Net~~

~~Other operating expense~~Loss

Operating loss was ~~$0.1~~$24.7 million in First Quarter ~~2019~~2020 compared to ~~other operating expense of $0.3 million in First Quarter 2018.~~

~~Operating Income (Loss)~~

Operating loss ~~was~~of $4.7 million in First Quarter ~~2019 compared~~2019. This increase in loss was due to ~~$2.5~~the impact of the COVID-19 pandemic on the Company’s business.

Interest Expense

Interest expense was $5.3 million in First Quarter ~~2018 primarily due~~2020 compared to ~~a decline in revenue and cost leverage from the Delta Air Lines launch partially offset by the growth in the eCommerce business.~~

~~Interest Expense~~

~~Interest expense was~~ $7.8 million in First Quarter 2019, ~~compared to $6.9~~reflective of the $100 million voluntary prepayment on the term loan in First Quarter 2019 and lower interest rates during First Quarter 2020, partially offset by increased borrowings under the ABL Facility in the First Quarter 2020.

Other Income

Other income was $0.2 million in First Quarter ~~2018, reflective~~2020 compared to Other income of ~~a rising interest rate environment.~~

~~Other Expense (Income), Net~~

~~Other expense, net was~~ $0.9 million in First Quarter ~~2019 compared to other income, net~~2019.

Income Tax Expense

We recorded a tax benefit at an overall effective tax rate of ~~$3.9 million in~~30.8% for First Quarter ~~2018.~~2020. The ~~lower expense was driven by~~First Quarter 2020 rate reflects the ~~prior year impact for~~estimated tax benefits as a result of the ~~reversal of UTBs and related accrued interest resulting from favorable state tax audit settlements.~~

~~Income Tax Benefit~~

~~The Company~~CARES Act. We recorded a tax benefit at an overall effective tax rate of 41.7% ~~and 68.1%~~ for First Quarter ~~2019 and First Quarter 2018, respectively.~~2019. The ~~tax rate for~~ First Quarter 2019 ~~is the result of the Company’s election to treat certain foreign entities as a U.S. branch. The tax~~ rate ~~for First Quarter 2018~~ reflects the ~~reversal~~tax benefits resulting from the change in status of ~~UTBs due to favorable state tax audit settlements for periods prior to the Separation.~~

various foreign jurisdictions.

Net ~~Income (Loss)~~

Loss

As a result of the above factors, Net loss was $20.6 million and diluted loss per share was $0.64 in First Quarter 2020 compared with a Net loss of $6.8 million and diluted loss per share ~~was~~of $0.21 in First Quarter ~~2019 compared with a Net loss of $2.6 million and diluted loss per share of $0.08 in First Quarter 2018.~~

~~Table of Contents~~

2019.

Adjusted EBITDA

As a result of the above factors, Adjusted EBITDA was a loss of $11.6 million in First Quarter 2020 as compared to $3.0 million in First Quarter ~~2019 as compared to $9.0 million in First Quarter 2018.~~

2019.

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 ABL Facility serve as sources of liquidity for short-term working capital needs and general corporate purposes. ~~We expect that our cash~~As of May 1, 2020 we had borrowings of $75.0 million on ~~hand and cash flows from operations, along with our~~the ABL Facility, ~~will be adequate to meet our capital requirements and operational needs for at least~~all of which was repaid by the ~~next 12 months.~~end of June 2020. Cash generated from our net revenue and profitability, and ~~somewhat~~ 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.

Table of Contents

Pursuant to ASC 205, Presentation of Financial Statements, the Company is required to and does evaluate at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company’s Term Loan Facility matures on April 4, 2021, which is within one year after the date of the Condensed Consolidated Financial Statements issued with this Quarterly Report on Form 10-Q. As of May 1, 2020, the remaining balance outstanding under the Term Loan Facility was $384.1 million. Given the amount currently outstanding under the Term Loan Facility and its maturity date of April 4, 2021, and based on the definitions in the relevant accounting standards, management has determined that this condition raises substantial doubt about the Company’s ability to continue as a going concern. This evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt is deemed to exist, management may evaluate the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

Description of Material Indebtedness

Debt Arrangements

On November 16, 2017, the Company entered into the ABL Facility, which provides for maximum borrowings of $175.0 million for the Company, subject to a borrowing base. During First Quarter 2020, the Company increased capacity under the ABL Facility by $25.0 million, so that maximum borrowings are $200.0 million. The ABL Facility has a letter of credit sub-limit of $70.0 million. The ABL Facility is available for working capital and other general corporate ~~purposes and, as~~purposes. As of May ~~3, 2019, was undrawn other than for $11.2~~1, 2020, the Company had outstanding borrowings of $75.0 million, in outstanding letters of ~~credit.~~credit of $8.7 million and $116.3 million in availability under the ABL Facility. Upon entering into the ABL Facility, the Company incurred $1.5 million in debt origination fees. The fees were capitalized as debt issuance costs and are being amortized as an adjustment to Interest expense over the remaining life of the Debt Facilities.

On April 4, 2014, Lands’ End entered into the Term Loan Facility of $515.0 million, the proceeds of which 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 at that time of approximately $11.4 million, with the remaining proceeds used for general corporate purposes. ~~In First Quarter 2019, Lands’ End made a $100 million voluntary prepayment on the Term Loan from excess cash on hand.~~ The fees were capitalized as debt issuance costs and are being amortized as an adjustment to Interest expense over the remaining life of the Debt Facilities.

In First Quarter 2019, Lands’ End made a $100 million voluntary prepayment on the Term Loan from excess cash on hand.

Maturity; Amortization and Prepayments

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

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

2022, however in the event the Term Loan Facility debt is not extended, repaid or otherwise refinanced at least six months before its maturity date, the ABL

Table of Contents

Facility would mature on January 4, 2021. The Company is in the process of seeking to refinance the Term Loan Facility. See Item IA, Risk Factors, included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2020, and the Risk Factors included in the Company’s Current Report on Form 8-K dated June 2, 2020.

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 wholly-owned domestic 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 Term Loan Facility is secured by a second priority security interest in the same collateral, with certain exceptions.

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

Interest; Fees

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

Representations and Warranties; Covenants

Subject to specified exceptions, the Debt Facilities contain various representations and warranties and restrictive covenants that, among other things, restrict the ability of Lands’ End and its subsidiaries to incur indebtedness (including guarantees), grant liens, make investments, make dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers or change the nature of their business. In addition, if excess availability under the ABL Facility falls below the greater of 10% of the loan cap amount or $15.0 million, Lands’ End will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0. The Debt Facilities do not otherwise contain financial maintenance covenants. The Company was in compliance with all financial covenants related to the Debt Facilities as of May ~~3, 2019.~~

1, 2020.

Events of Default

The Term Loan Facility matures on April 4, 2021. The ABL Facility matures on November 16, 2022, however, in the event the Term Loan Facility debt is not extended, repaid or otherwise refinanced at least six months before its maturity date, the ABL Facility would mature on January 4, 2021. The Company is in the process of seeking to refinance the Term Loan Facility however the timeline for this process has been increased due to the impact of the COVID-19 pandemic on the financial markets.

Cash Flows from Operating Activities

Net cash used in operating activities ~~decreased~~increased to $80.2 million in Year-to-Date 2020 from $36.3 million in ~~the~~ Year-to-Date 2019, ~~from a net cash use of $41.2 million in the Year-to-Date 2018,~~ primarily driven by ~~improved working capital.~~

a reduction in inventory related payables.

Table of Contents

Cash Flows from Investing Activities

Net cash used in investing activities was ~~$15.0~~$10.8 million and ~~$10.7~~$15.0 million for Year-to-Date ~~2019~~2020 and Year-to-Date ~~2018,~~2019, respectively. Cash used in investing activities for both periods was primarily used for investments to update our information technology infrastructure and property and equipment.

~~Table of Contents~~

For Fiscal 2019, we plan to invest a total of approximately $40.0 million in capital expenditures for strategic investments and infrastructure, primarily associated with our ERP investment, other technology investments and general corporate needs.

~~Cash~~

Cash Flows from Financing Activities

Net cash provided by financing activities was $73.3 million for Year-to-Date 2020, primarily resulting from $75.0 million of borrowings from the ABL. Net cash used in financing activities ~~was $102.0 million and $1.9 million~~ for Year-to-Date 2019 ~~and Year-to-Date 2018, respectively,~~was $102.0 million consisting primarily of a $100 million voluntary prepayment of our Term Loan Facility ~~as well as quarterly scheduled payments.~~

in First Quarter 2019.

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 ~~February 1, 2019. During First Quarter 2019, Lands' End made a $100 million voluntary prepayment on the Term Loan Facility, from excess cash on hand.~~

January 31, 2020.

Financial Instruments with Off-Balance-Sheet Risk

On November 16, 2017, the Company entered into the ABL Facility, which ~~provides~~initially provided for maximum borrowings of $175.0 million for the Company, subject to a borrowing base. During First Quarter 2020, the Company increased capacity under the ABL Facility by $25.0 million, so that maximum borrowings are $200.0 million. The ABL Facility has a letter of credit sub-limit of $70.0 ~~million and will mature no later than~~million. The ABL Facility matures on November 16, 2022, ~~subject to customary extension provisions provided for therein.~~however, in the event the Term Loan Facility debt is not extended, repaid, or otherwise refinanced at least six months before its maturity date, the ABL Facility would mature on January 4, 2021. The ABL Facility is available for working capital and other general corporate ~~purposes and was undrawn at~~ purposes. As of May ~~3, 2019, other than for $11.2~~1, 2020, the Company had outstanding borrowings of $75.0 million, in outstanding letters of ~~credit.~~

credit of $8.7 million and $116.3 million in availability under the ABL Facility.

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.

Goodwill and Trade Name Impairment Analysis

We considered the COVID-19 pandemic to be a triggering event in First Quarter 2020 for the 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 interim tests employed the assumption that revenue in the Outfitters and Japan eCommerce reporting units will return to Fiscal 2019 levels by Fiscal 2023 (the 53 weeks ending February 2, 2024). The testing resulted in no impairment of the Outfitters reporting unit and full impairment of the $3.3 million of goodwill allocated to Japan eCommerce reporting unit.

Goodwill impairment assessments

The Company tests goodwill for impairment using a one-step quantitative test. The quantitative test compares the reporting unit's fair value to its carrying value. An impairment is recorded for any excess carrying value above the reporting unit's fair value, not to exceed the amount of goodwill. The Company estimates fair value using a discounted cash flow model, commonly referred to as the income approach. The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted average cost of capital that reflects current market conditions appropriate to the Company's reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements.

The Outfitters and Japan eCommerce reporting units have been negatively impacted by decreased demand during First Quarter 2020 due to the impacts of the COVID-19 pandemic on its customers. Accordingly, the Company has performed an interim impairment test for these reporting units using scenarios that factor in different durations of the pandemic, the possibility of future declines in revenue and assumptions of the business returning to normal levels of operations in future years. Based on the weighted evaluation of these different scenarios, which included adjusted risk profiles, the Company believes that the fair value of the Outfitters reporting unit is greater than the carrying value resulting in no impairment of the Outfitters reporting unit. Based on the weighted evaluation of these different scenarios, the Company believes that the fair value of the Japan eCommerce reporting unit is less than the carrying value and therefore, the entirety of the goodwill allocated to Japan is impaired. Accordingly, in First Quarter 2020 the

Table of Contents

Company recorded a non-cash pretax trade name impairment charge to the Japan eCommerce reporting unit of approximately $3.3 million. This charge is recorded in the Other operating expense, net line in the Condensed Consolidated Statements of Operations.

Indefinite-lived intangible asset impairment assessments

The Company concluded that recent events did not result in a triggering event for trade name and therefore did not complete testing of the trade name for impairment. As such, no trade name impairment charges were recorded in First Quarter 2020.

As the pandemic continues, Lands’ End will continue to evaluate goodwill and trade name indefinite-lived intangible asset for impairment. A prolonged pandemic could impact the results of operations and thus alter assumptions utilized in the determination of the estimated fair values of the reporting units that are significant enough to trigger an impairment.

For a complete discussion of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended ~~February 1, 2019, and Note 2,~~ ~~Recent Accounting Pronouncements~~.January 31, 2020. There have been no significant changes in our critical accounting policies or their application since ~~February 1, 2019.~~

January 31, 2020.

Recent Accounting Pronouncements

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This document contains forward-looking statements. Forward-looking statements 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, impairments, expenditures, growth, strategies, plans, achievements, dividends, capital structure, organizational structure, future store openings, financing activities, liquidity, the impact of the COVID-19 pandemic, market opportunities and general market and industry conditions. We generally identify forward-looking statements by words such as "anticipate," "estimate," "expect," "intend," "project," "plan," "predict," "believe," "seek," "continue," "outlook," "may," "might," "will," "should," "can have," "likely" or the negative version of these words or comparable words. Forward-looking statements are based on beliefs and 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

~~Table of Contents~~

uncertainties materialize, or if management’s underlying beliefs and assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. These risks and uncertainties include those risks, uncertainties and factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended ~~February 1, 2019,~~January 31, 2020, as supplemented by the risk factors contained in the Company’s Current Report on Form 8-K dated June 2, 2020 and as modified by "Part II, Item 1A Risk Factors" of this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date on which they are made. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable securities laws and regulations.

Table of Contents

ITEM 3. QUANTITATIVE AND ~~QUALITATIVE~~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 May ~~3, 2019,~~1, 2020, we had ~~$12.6~~$8.4 million of cash denominated in foreign currencies, principally in British Pound Sterling, Euros, Yen and ~~Yen.~~Hong Kong Dollars. 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 Term Loan Facility and the ABL Facility, as both require the Company to pay interest on outstanding borrowings at variable rates. Each one percentage point change in interest rates associated with the Term Loan Facility would result in a ~~$3.9~~$3.8 million change in our annual cash interest expenses. Assuming our ABL Facility was fully drawn to a principal amount equal to ~~$175.0~~$200.0 million, each one percentage point change in interest rates would result in a ~~$1.8~~$2.0 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 May ~~3, 2019,~~1, 2020, 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

There have been no changes in the Company's internal controls over financial reporting identified in connection with the evaluation required by Rules 13a-15 under the Exchange Act during the First Fiscal Quarter Ended May ~~3, 2019~~1, 2020 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.~~

~~Index~~position taken as a whole.

For a description of ~~Exhibits~~

our legal proceedings, see Note 9, Commitments and Contingencies in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

~~There~~

Other than as set forth in the Company’s Current Report on Form 8-K dated June 2, 2020, 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 ~~February 1, 2019, which was~~January 31, 2020, filed with the SEC on March ~~28, 2019.~~

23, 2020.

~~Index~~Table of ~~Exhibits~~

Contents

ITEM 6. EXHIBITS

The following documents are filed as exhibits to this report:



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

~~10.1~~		~~Lands' End, Inc. Amended and Restated 2017 Stock Plan (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Lands' End, Inc. on May 13, 2019 (File No. 001-09769)).~~

~~10.2~~		Executive Severance Agreement dated and effective as of January 27, 2016 between Lands' End, Inc. and its affiliates and subsidiaries and James Gooch.*

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

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

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

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

*
*	Filed herewith.

**	~~Furnished herewith.~~

**	Furnished herewith.

Table of Contents

~~SIGNATURES~~

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: ~~June 4, 2019~~

July 22, 2020


By:
~~By:~~	/s/ James F. Gooch
	James F. Gooch
	Executive Vice President, Chief Operating Officer, 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)



~~Securities registered pursuant to Section 12(b) of the Act:~~
Title of each class		Trading ~~Symbol~~Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	LE	LE	The NASDAQ Stock Market LLC



Large accelerated filer	☐	¨	Accelerated filer	x ☒

Non-accelerated filer	☐	¨	Smaller reporting company	¨ ☐

Emerging growth company	☐	¨

			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		6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		18 17

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		28 27

Item 4.		Controls and Procedures		29 28

		PART II OTHER INFORMATION		29

Item 1.	Legal Proceedings	~~LegalProceedings~~		30 29

Item 1A.		Risk Factors		30 29

Item 6.	Exhibits	~~Exhibits~~		31 30

	Signatures	~~Signatures~~		33 31


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


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



(in thousands, except share data)	May 3, 2019			May 4, 2018			February 1, 2019
ASSETS
Current assets
Cash and cash equivalents	$	40,221		$	141,616		$	193,405
Restricted cash	1,821			2,081			1,948
Accounts receivable, net	27,510			48,610			34,549
Inventories, net	319,319			304,543			321,905
Prepaid expenses and other current assets	35,304			41,595			36,574
Total current assets	424,175			538,445			588,381
Property and equipment, net	152,405			138,495			149,894
Operating lease right-of-use asset	29,327			0			0
Goodwill	110,000			110,000			110,000
Intangible asset, net	257,000			257,000			257,000
Other assets	5,473			8,557			5,636
TOTAL ASSETS	$	978,380		$	1,052,497		$	1,110,911
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	98,623		$	97,405		$	123,827
Lease liability - current	8,786			0			0
Other current liabilities	89,322			95,550			117,424
Total current liabilities	196,731			192,955			241,251
Long-term debt, net	381,504			485,299			482,453
Lease liability - long-term	24,772			0			0
Long-term deferred tax liabilities	56,108			58,708			58,670
Other liabilities	4,060			10,681			5,826
TOTAL LIABILITIES	663,175			747,643			788,200
Commitments and contingencies (Note 9)
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000,000 shares; issued and outstanding: 32,363,220, 32,208,118 and 32,220,080, respectively	324			320			320
Additional paid-in capital	354,016			348,142			352,733
Accumulated deficit	(25,718		)	(31,380		)	(17,159		)
Accumulated other comprehensive loss	(13,417		)	(12,228		)	(13,183		)
Total stockholders’ equity	315,205			304,854			322,711
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	978,380		$	1,052,497		$	1,110,911



	Common Stock Issued				Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
(in thousands except share data)	Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
Balance at February 2, 2018	32,101,793		$	320	$	347,175		$	(29,810	)	$	(10,592	)	$	307,093
Net loss	—		—		—			(2,630		)	—			(2,630		)
Cumulative translation adjustment, net of tax	—		—		—			—			(1,636		)	(1,636		)
Change in accounting principle related to revenue recognition	—		—		—			1,060			—			1,060
Stock-based compensation expense	—		—		967			—			—			967
Vesting of restricted shares	132,620		—		—			—			—			—
Restricted stock shares surrendered for taxes	(26,295	)	—					—			—			—
Balance at May 4, 2018	32,208,118		320		348,142			(31,380		)	(12,228		)	304,854

Balance at February 1, 2019	32,220,080		320		352,733			(17,159		)	(13,183		)	322,711
Net loss	—		—		—			(6,818		)	—			(6,818		)
Cumulative translation adjustment, net of tax	—		—		—			—			(234		)	(234		)
Change in accounting principle related to lease accounting	—		—		—			(1,741		)	—			(1,741		)
Stock-based compensation expense	—		—		1,974			—			—			1,974
Vesting of restricted shares	185,052		4		(4		)	—			—			—
Restricted stock shares surrendered for taxes	(41,912	)	—		(687		)	—			—			(687		)
Balance at May 3, 2019	32,363,220		$	324	$	354,016		$	(25,718	)	$	(13,417	)	$	315,205



(in thousands)	February 1, 2019 (As reported)			Impact of Adoption				February 2, 2019
Assets:
Operating lease right-of-use asset	$	—		$	27,494			$	27,494

Liabilities:
Lease liability - current	—			9,892				9,892
Lease liability - long-term	—			21,700				21,700

Stockholders' Equity:
Accumulated deficit	(17,159		)	(1,741		)	⁽¹⁾	(18,900		)



	Deferred Awards
(in thousands, except per share amounts)	Number of Shares		Weighted Average Grant Date Fair Value per Share
Unvested as of February 1, 2019	594		$	21.96
Granted	410		15.73
Vested	(184	)	22.41
Forfeited or expired	(23	)	18.40
Unvested as of May 3, 2019	797		18.61



	13 Weeks Ended
(in thousands, except for number of stores)	May 3, 2019		May 4, 2018
Rent, CAM and occupancy costs	$	1,106	$	4,494
Retail services, store labor	988		4,129
Financial services and payment processing	68		389
Supply chain costs	78		130
Total expenses	$	2,240	$	9,142
Number of Lands’ End Shops at Sears at period end	39		159



2019, excluding the quarter ended May 3, 2019	$	8,477
2020	6,339
2021	5,139
2022	4,397
2023	3,618
Thereafter	14,519
Total operating lease payments	$	42,489
Less imputed interest	8,931
Present value of lease liabilities	$	33,558



2019	$	10,851
2020	6,338
2021	4,873
2022	3,828
2023	2,839
Thereafter	10,590
Total minimum payments required	$	39,319