Key Takeaways
- LE's stock price has improved, but still trailing its 52-week high hit in October.
- Lands' End is positioned for growth, driven by strategic inventory management and expanding market.
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Lands' End, Inc. LE recently broke above its 50-day moving average, a development that has caught the attention of investors looking for potential upside in retail stocks. This technical indicator often signals that the stock is entering a bullish phase. With the retail sector showing signs of resilience and the company's strategic initiatives aimed at capturing market share, it’s worth examining if now is the time to buy LE stock or whether investors should wait for more confirmation of a sustainable trend.
This Dodgeville, WI-based company closed the last trading session at $16.37, surpassing its 50-day moving average on Monday. This marks a significant development for the stock, currently trading near its 52-week high of $19.88, achieved on Oct. 17, 2024. Although LE has seen a slight pullback from this peak, potentially due to profit-taking or broader market volatility, its position near the high suggests that the stock is still in favorable territory.
Lands’ End Trades Above 50-Day Moving Averages
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With a clear focus on brand evolution, enhanced product offerings and supply-chain optimization, Lands' End is strategically positioned for continued growth in the competitive market of high-quality apparel and home products.
Over the past six months, Lands' End stock has risen by 15.6%. While this is slightly behind the industry’s growth of 17.1%, the company has managed to outperform the broader S&P 500, which gained 12.8%, and the Retail-Wholesale sector, which saw a 14.4% increase.
LE Stock’s Past Six-Month Performance
Image Source: Zacks Investment Research
Is LE Stock’s Momentum Sustainable?
Lands' End is well-positioned for sustained growth, driven by strategic inventory management, innovative product development and an expanding market presence. The company's emphasis on operational efficiency, appealing to younger customers, and exploring international growth opportunities lays a strong foundation. By adapting to the evolving retail landscape and leveraging both business-to-business and business-to-consumer channels, Lands' End has broadened its market reach.
The company has been taking active measures to optimize its supply chain and maintain inventory levels that meet demand without overstocking. This approach has allowed the company to avoid excessive markdowns, protecting its margins while offering timely and relevant product assortments. The company reduced its inventory by 21% year over year during the second quarter of fiscal 2024.
Lands' End’s focus on product innovation is proving to be a critical growth driver. The brand has been expanding its offerings in key categories, such as women’s apparel, where demand for products like denim has been strong. The company is successfully attracting a younger customer base. This demographic shift is evident as new customers are, on average, 10 years younger than the company’s existing clientele. This influx of younger shoppers has led to increased engagement with the brand, reflected in improved conversion rates and higher website traffic.
Lands' End is also capitalizing on its efforts to expand into international markets, particularly in regions like Europe. This international push is designed to increase the company’s footprint, tapping into new customer bases and diversifying revenue streams. The company’s expansion into third-party retail channels, such as Nordstrom’s online marketplace, is another avenue for increasing visibility and attracting new customers.
Another significant growth avenue for Lands’ End is its business-to-business segment. The company has made inroads into the corporate apparel sector, providing custom workwear for large enterprises. Licensing agreements have also created a consistent revenue stream, allowing the company to focus on core operations while diversifying its sources of income.
Lands' End foresees mid-to-high single-digit growth in Gross Merchandise Value in fiscal 2024. The company anticipates adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in the range of $90 million-$98 million. It envisions adjusted earnings between 29 cents and 48 cents a share.
What Could Derail Lands' End Stock Momentum?
Lands' End has demonstrated growth but some areas warrant investor attention. A significant concern is the 7.1% drop in sales within Lands' End Outfitters during the second quarter. This decline reflects broader macroeconomic challenges, including pricing resistance from smaller accounts and timing changes with some national accounts.
Lands' End’s international expansion, particularly in Europe, has also yielded mixed results. Although gross profit dollars from its European e-commerce business increased by 26%, overall sales growth was minimal, rising just 1%. Given the strategic importance of Europe for Lands' End’s direct-to-consumer channels, the lack of robust, consistent sales growth in this region could undermine the company’s long-term global expansion plans.
In a highly price-sensitive market, Lands' End faces increasing competition from rivals that quickly adapt their pricing strategies to attract customers. With competitors offering similar or superior products at more competitive prices, Lands' End may struggle to distinguish itself in the crowded marketplace.
How Do Estimates Measure Up for LE Stock?
Over the past 30 days, the Zacks Consensus Estimate for the current and the next fiscal year has been stable at 37 cents and 58 cents, respectively. The estimates suggest year-over-year increases of 346.7% and 56.8%, respectively.
See the Zacks Earnings Calendar to stay ahead of market-making news.
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LE Stock Looks Attractive From a Valuation Standpoint
Lands' End is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 30.56X, which positions it at a slight discount compared to the industry’s average of 30.95X. The stock is also trading below its median P/E level of 53.6, observed over the past year. This suggests that LE stock is priced attractively relative to its peers and historical levels, positioning it as a potential bargain.
Image Source: Zacks Investment Research
Buy, Hold or Sell LE Stock?
Lands' End’s growth initiatives, such as efficient inventory management, product innovation, and international market expansion, position it for sustained progress. However, the company faces challenges that could weigh on its stock momentum, including recent declines in its Outfitters segment and rising competition within the price-sensitive apparel market from players like Zumiez ZUMZ, The Gap GAP, and Abercrombie & Fitch ANF. While Lands' End’s appeal to younger customers and expansion into new retail channels may enhance its market reach, effectively addressing hurdles is essential for growth. Currently, Lands' End carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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