Good day, ladies and gentlemen, and welcome to the Lands' End First Quarter Fiscal 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the call over to Bernie McCracken, Chief Accounting Officer. You may begin.

Good morning, and thank you for joining the Lands' End earnings call for our first quarter fiscal 2017 results, which we released this morning, and can be found on our Web site landsend.com. On the call today, you will hear from Jerome Griffith, our Chief Executive Officer; and Jim Gooch, our Chief Operating Officer and Chief Financial Officer. After the company's prepared remarks, we will conduct a question-and-answer session with our covering analysts. Please also note that the information we are about to discuss includes forward-looking statements. Such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed on this call. Factors that could contribute to such differences include, but are not limited to those items noted and included in the company's SEC filings, including our annual report on Form 10K and quarterly reports on Form 10Q. The forward-looking information that is provided by the company in this call represents the company's outlook as of today, and we do not undertake any obligation to update forward-looking statements made by us. Subsequent events and developments may cause the company's outlook to change. During this call, we will be referring to non-GAAP measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure can be found in our earnings release issued earlier today, a copy of which is posted in the Investor Relation section of our Web site at landsend.com. With that, I will now turn the call over to Jerome Griffith.

Thank you, Bernie, and thank you everyone for joining us this morning. Since joining Lands' End, I have been fully engaged in evaluating our business and charting our course forward. I'm pleased to say that during the first quarter we made progress on several fronts, including our efforts on product, marketing, and customer engagement. Our financial results were in line with our expectations, and importantly, we saw many positive signs from a number of key indicators in our business. We improved our buyer files, driving certain metrics to their best levels in several years. We also saw higher sell-through as a result of product enhancements that we have made, particularly in swimwear, knitwear, and home. In addition, trends in our U.S. direct business improved despite continued volatility in traffic, and we are pleased to have posted positive comps in both our Sears locations and our standalone stores. These are all signs that we are moving the business in the right direction, and are on the right course to driving improved overall operating results. Over the last two months, as part of my evaluation, I have taken an in-depth view into the business and assessed our competitive strength and weaknesses. I deeply believe that we have a strong brand and our loyal customers have a great affinity for the products, value, and service we have historically delivered to them. The senior management team and I are in the process of putting together a longer term strategic plan for Lands' End that will capitalize on our brand strength. As part of this, we are working to implement a comprehensive brand vision that is reflected consistently in every aspect of our business, our products, our e-commerce site, stores, catalogs, and our marketing messages. Now I want to provide some insights into our priorities.…

Thank you, Jerome, and good morning. Overall, we were pleased with the improved trends in the first quarter. Revenue for the quarter decreased 1.9% to 268.4 million compared to 273.4 million in the same period last year with churn improvement coming in both our direct and our retail segments. Sales in our direct segment decreased 1.7% to 228.3 million. And retail segment sales decreased 2.8% to 40 million. Sales in our outfitter business declined 7.5%, primarily resulting from a timing shift of a large national account shipment. Without the timing shift in outfitter, sales in our direct segment would have been slightly positive for the quarter. We continue to make strides in improving traffic and conversion which is attributable to a number of factors. First, we reallocated our marketing dollars to our most effective media channels, focusing on digital media and our catalog which helped drive traffic. Second, we continue to see a positive impact from the refinements we made within our catalog over the last several quarters. And third, we maintained a disciplined strategic approach to our promotions utilizing a test, learn, and react approach. We are also very pleased with the increase in buyer file trends. During the quarter, we realized growth among existing customers as well as double-digit increases both reactivation of lapsed buyers and new shoppers. We attribute this to a better product offering and enhanced responsive design website as well as continued optimization of our marketing spend based on utilizing data driven insights. In terms of our product, we saw strong sales in swimwear, tops, outerwear, and home offset by softness mainly in footwear and kids. Looking at our outfitter business, the launch of a major program for one of our national customers, shifted out the first quarter into Q2. This negative really impacted our…

Thank you. [Operator Instructions] Our first question comes from the line of Alex Fuhrman of Craig-Hallum Capital. Your line is now open.

Great. Thank you for taking my question. Would love to dig into some of those metrics you gave around the buyer file, if I heard correctly, it sounds like reactivated customers as well as new customers were both up double-digit. Can you give us a sense of what that means in terms of the total buyer file here versus last year? And with the new and reactivated customer file growing so much, just curious where some of the offsetting weakness might have been, was it average spend per customer, would be helpful to try to think about that. Thanks.

Well, good morning. Thanks for that question. If you go through those numbers and you see that active, which is the biggest bucket was relatively flat. We did see growth in the new and we did see growth in the lapsed. So, those are encouraging for us, because even though they are smaller buckets, those are our biggest decreases in prior years. So, we are really starting to see of our marketing specifically around some of the things we are doing in catalog and some of the things we are doing in digital that are very impactful to both of those buckets. Some of the offsets, yes, we did see some declines in average market basket that offset those customer trends, but as we said on prior calls, I think for the long-term health, we are pointing to that buyer file as just a requirement to start to see stabilization and growth, and this is clearly the best quarter that we've seen over the last several years.

That's helpful, thanks. And then, it sounds like you guys have a potentially a nice catalyst in the back half of the year with the Delta launch on the uniform side of the business, can you give us just a general sense of so far this year how the uniforms business has been trending relative to the rest of the direct business?

Well, we gave some of that with the negative 7.5 in the first quarter, and the biggest driver of that is this shift in the national account. So, if you think of the uniform business in the first quarter, the largest part of that uniform business is going to be our national account business. As we shift into the back half of Q2 and definitely into Q3, it shifts over to be more of a school business. And then in the fourth quarter, especially with the Delta launch, it will be a larger percentage to be the national account business. I think overall the national account business is strong. Absent of that shift as we get into these next two quarters, you'll start to see how the school business - the early indications are, it appears fairly solid, but still a early read with very small numbers. We'll have certainly a better sense of that on our next call as we get into the back half of Q2.

Great. That's very helpful. Thank you.

Thank you. Our next question comes from Steve Marotta of C.L. King & Associates. Your line is now open.

Good morning, Jerome and James.

Good morning.

As a reference to the test and react model, do you have enough experience with that model to positively affect fall sell-throughs, or is this a tactic that's going to begin to be utilized in fall?

Actually, we are beginning to utilize it already. The guys have started to look at different types of testing that we can do online. We've also started to look trying to move product a little bit faster than what we have been doing in the past so that we can get better reads on product. I think you'll see particularly the product testing starting now ramping up a bit in fall, but really much more for '18 because quite honestly our buys for holiday are already done. So what's done is done. And I can't jump in faster with newer product right now. But we are planning on doing that for spring '18 and a lot more back into the back half of '18.

You know, Steve, and I think we have talked about this in prior quarters before Jerome arrived and the test and learn was more about promotions and catalog and promotional pricing. And now what we are starting to put into place is more product and that's at the beginning stages which Jerome referenced, I think that's what we are very excited about as we go into fall.

Great. That's very helpful. And as it relates to the inventory composition, James, you mentioned that you're comfortable with it. Can you peel that onion back one more layer? Can you talk about I guess aged goods as a percent of the total versus last year, or in season versus out of season? If you can give a metric or two to offer on the security you feel with the current inventory composition?

Yes. If you look at overall, it's obviously fairly flat. And I would say across all those metric that you said, we feel very good with the exception of a couple of buckets. We are still sitting on a little bit of canvas inventory. We are sitting on a little bit of Leo with some of the timing on national accounts, but all that inventory is protected account by account. And then in a couple of categories that I highlighted that we are a little bit soft specifically footwear and in kids, we have a little bit of excess inventory, we are moving through some of that, and that's why I highlighted specifically those two categories as negatively impacting us from a gross margin rate. Outside of those four buckets, I would say everything else we feel very good about year-over-year across all those metrics.

Okay, that's very helpful. Thank you.

Thank you. And that is all the time we have for questions. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.