Investors Don’t Like View From Lands’ End

Shares of Lands’ End Inc. plunged more than 30% Thursday after the retailer warned that revenue over the next few quarters may be lower as it reduces its catalog mailings.

As part of its fiscal third-quarter earnings statement released Thursday, the Dodgeville, Wis.-based company reiterated previously announced plans to reduce its catalog circulation and the number of pages in its catalogs in an attempt to cut costs and eliminate unprofitable mailings. The company said that it therefore expects fourth-quarter sales to fall below year-ago levels and that the following two quarters may see a “similar but smaller” impact on sales.

Investors were not pleased by the news, pushing the stock down $27.19 to close at $56.13 on the New York Stock Exchange.

Kevin Silverman, an analyst with ABN Amro in Chicago, said he was surprised by the stock drop. “To anyone who’s been paying attention to the business,” the revenue warning “is not news.”

Silverman added that the company’s third-quarter performance was better than anticipated and that he expects the company to have a decent earnings performance for the fourth quarter.

Lands’ End stock had jumped almost fivefold in the year since David Dyer was named chief executive as the once mail-order-only retailer pushed onto the Internet. The company still relies heavily on catalogs, however, which were the source of 95% of last year’s $1.37 billion in sales.

For its third quarter ended Oct. 29, Lands’ End reported net income of $8.8 million, or 28 cents a share, including a foreign currency gain of $400,000, compared with a net income of $347,000 a year ago, including an after-tax loss of $3.4 million because of fluctuations in the Japanese yen.

Analysts had expected earnings of 25 cents a share, excluding gains, for the latest quarter. Sales grew just 1% to $326 million, but sales on the retailer’s Internet site were about 2 1/2 times greater than a year ago.

At a Glance

Other retail earnings, excluding one-time gains or charges unless noted:

* Gap Inc. said its fiscal third-quarter profit rose 32% to $315 million, or 35 cents a share, a penny better than estimates, as sales jumped 27% to $3.05 billion. Gains at its Old Navy and Banana Republic chains tempered sluggish sales at its Gap stores, which have focused on more traditional apparel rather than trendy fashions. Sales at all the company’s stores open at least a year, also known as same-store sales, grew 5%.

* Nordstrom Inc. reported a 3% increase in profit for its fiscal third quarter to $39.7 million, or 29 cents a share, as tighter inventory controls and lower costs helped offset weak sales. The results are 2 cents higher than the average estimate of analysts polled by First Call Corp. Sales crept up 1% to $1.11 billion, but same-store sales fell 2%.

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Bloomberg News was used in compiling this report.