Good morning, ladies and gentlemen, thank you for joining the Lands' End fourth quarter and fiscal 2017 financial results conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. [Operator Instructions]. As a reminder, this conference call may be recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Bernie McCracken. Sir, you may begin.

Good morning and thank you for joining the Lands' End earnings call for our fourth quarter and fiscal 2017 results, which we released this morning and can be found on our website 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're 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 10-K and quarterly reports on Form 10-Q. 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 obligations to update forward-looking statements made by us. Subsequent events and developments may cause the company's outlook to change. During the 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 on our earnings release issued earlier today, a copy of which is posted in the Investor Relations section of our website at LandsEnd.com. In addition, note that the fourth quarter of fiscal 2017 had 14 weeks compared to 13 weeks in fiscal 2016 and that fiscal 2017 had 53 weeks compared to 52 weeks in fiscal 2016. For the purposes of this call, management will refer to the extra week in both the quarterly and annual discussions as the 53rd week. With that, I will turn the call over to Jerome Griffith.

Thank you, Bernie. And thank you everyone for joining us today. Overall, 2017 was a year of tremendous progress at Lands' End as we executed our numerous strategies to drive improved performance in our business. The fourth quarter represented the third consecutive quarter of sales growth, following 11 consecutive quarters of sales declines. Over the course of the year, we stabilized the brand by returning to our roots, growing our buyer file, reconnecting with our core customer, driving volume in key categories and delivering positive retail comps. We also secured contracts with two major airlines, which will create incremental revenue in 2018 and beyond. We had strengthened our market position by capitalizing on our authentic American Heritage, establishing an effective marketing strategy that resonates with our customer and putting in place improved business processes that will enable us to operate more effectively and efficiently as an organization. We have great momentum behind the business as we head into the new year. We experienced strong revenue growth in the fourth quarter, driven by our digital business and our standalone retail stores. We started the quarter with an exceptional November, a terrific Veterans' Day weekend up through a record-setting cyber week and continued to see strong momentum throughout the holiday season. We delivered double-digit growth in our buyer file during the quarter, with solid increases across new, existing and lapsed customers. In terms of product, we have continued to focus on key items and iconic styles, which drove performance during the quarter. We saw strength in our outerwear and knits categories, as well as accelerated momentum in our home, footwear and accessories businesses as customers look for quality and value in gift-giving. We're pleased with the continued progress we have seen as we remain focused on providing the great value proposition that…

Thank you, Jerome, and good morning. And as Jerome noted, we're pleased with the continued progress that we made in the business in the fourth quarter, with strong revenue growth and gross margin expansion which drove solid profitability increases. Importantly, we ended the year on a strong note and are well positioned heading into 2018. For the fourth quarter, revenue increased 11.3% to $510.6 million compared to $458.8 million last year. Sales in our direct segment grew 14.3% to $455.6 million and retail sales decreased 8.7% to $55.1 million. After you exclude both the 53rd week and the 42 Sears store closures since the end of last year, total revenue would have increased 8% for the quarter, with direct growing 8.2% and retail increasing 5%. In terms of product, we continue to see strong response as we focus on our key items within our iconic categories. Growth for the quarter was led by strength in outerwear, specifically down, fleece and our squall, bottom with starfish, women's corduroy and men's chino, knitwear in home with Supima towels and flannel sheets. We also continued to see positive momentum in buyer file with strong growth in active, lapsed and new buyers, resulting in double-digit growth in the overall file for the quarter. Customers are responding well to our refined product assortment and value proposition as well as our enhanced marketing efforts, helping to drive strong conversion rates throughout the quarter. The direct segment also benefited from the launch of Delta in our outfitter business. Approximately, 25% of the expected launch was recorded in the fourth quarter and we anticipate the remainder will be shipped in the first half of 2018. Turning to our retail business, same-store sales increased 5%, driven by growth in our standalone stores of 13%. As expected, our retail segment…

Thank you, sir. [Operator Instructions] And our first question will come from the line of Alex Fuhrman with Craig-Hallum Capital. Your line is now open.

Great, thank you very much for taking my question. And congratulations on a nice quarter. I wanted to ask about the performance of some of your key items. It certainly sounds like a lot of the outerwear did very well in the quarter. Can you comment on how some of the basics did as well? And as you look to the spring season, I think you mentioned that swimwear has been doing well also? Do you see the key seasonal categories that Lands' End has historically been more known for? Or those becoming a bigger piece of the business relative to what we saw in 2016 or 2017, if you could just talk about how kind of that evolution as well as the more basics are trending? Will be interested to hear that.

Good morning, Alex. Sure, it's no problem. Yeah, you're pretty right on track when it comes to basics at Lands' End. We've taken a stance in the last, let's say, 6 to 9 months, marketing our basics much more aggressively, whether it be how we show things online, whether it be how we're managing our search or our emails. And basics across the board are doing extremely well for us. Every area, outerwear was great. Knitwear was great. Our bottoms were great for the holiday season. And we see that trend continuing into spring. I think customers are reacting to some minor changes and upgrades that we've made on some of our basic items. We've introduced stretch into men's polo shirts and men's bottoms. Functionality continues to grow in our outerwear business. In fact, we continue to expand slightly seasonal products in basics and that seems to be resonating very well with the customers also. It also helps us in the long run to help cut down on SKUs and cut down on inventory, which is, I think, something that's going to really work well for us with profitability going forward.

Great. That's really helpful. Thanks. And then, just kind of some questions about your uniforms, outfitters business and some of the recent partnerships that you've had, can you give us a sense of how much of the initial sell-in for the Delta business did we see in Q4 versus how much is left to come in Q1 and it sounds like some of that's going to ship through Q2 as well? And then, as we think about the American Airlines partnership, I think you've said in the past that Delta is expected to become your biggest uniforms partner. Can you give us a sense of the scale of the American Airlines partnership? Will that be a major one for Lands' End as well? And when should we expect that to really hit?

So, I think as I said in my prepared remarks, 25% of the launch team came in in the fourth quarter of last year. The remaining 75% of the launch will come in in February through May of this year. We have a May in uniform date. From that time, the business will slow down a little bit with really just new hires for the next 12 months and then we'll get on a more normalized basis in 2019. We have said that Delta was going to be our largest account. American will only be – keep in mind that that will only be above the wing. So, we don't anticipate that being quite as large as Delta since we have both the above and below the wing business.

Okay, that's very helpful. Thank you very much for that. And then, just lastly, thinking about the longer-term target of getting to a high-single digit EBITDA margin, can you give us a sense of how much of that do you expect would come from gross margin versus leverage of some of your SG&A expenses?

Far more leverage from SG&A than from gross margin. We don't anticipate this promotional environment going away. So, we'd anticipate gross margin being flatter and more of that improvement to getting high-single digits, coming from leverage with growth of the topline.

Okay, that's great. Thank you very much.

Thank you. And our next question will come from the line of Steven Marotta with CL King & Associates. Your line is now open.

Good morning, Jerome and Jim. Jerome, I believe you just mentioned the decline in SKU count is one of the ways to improve efficiencies over the next 12 to 24 months. Can you quantify what the SKUs were, say, in 2017 and what you expect them to be in 2018?

We're looking to continue to reduce the SKU count year-on-year. It depends on the area quite honestly. In certain areas like home, we will continue to expand it. in other areas like women's, we will continue to reduce it. On average, we're looking for double-digit SKU counts over the next few quarters. And there's going to be more than just that when we're thinking about concentrating on product. There's lead times which I think we have opportunity there. There is taking better positions in just piece goods going forward because we're running a basics business, so we know more or less what's going to happen on a month-by-month basis. So, it's just really one of the areas where we're looking to maximize that KPI.

And you actually touched on my second question, which is supply chain efficiencies. Your goal had been to materially reduce the product development to delivery lead times. Can you talk a little bit about where you are in that process and how much you would expect that to shrink in the coming year?

Yeah. It's still early days. We implemented what's called True North, which is our name for that project for the fall 2018 delivery period. We haven't even written orders for our holiday. Well, we're just in the process of writing orders for holiday 2018 right now. And I think it's going to take somewhere between two and four quarters for that to really kick in. And what we were doing is looking to reduce our lead times by between 25% and 30%.

And could you please remind us how much swimwear is as a percent of sales in the first and second quarter.

I don't think we've given that exact percentage, but we have said that's our largest category in both quarters.

Okay. And my last question is, how much cash do you have overseas and does the into new tax law help you rethink cash allocation and could some of that be repatriated? And if so, what would be the uses?

It's not a significant amount. I don't have that exact number. We can discuss that later. But it's probably not as large as it might be with others. We are looking at that, but we don't look at that as a major opportunity.

Actually, one quick follow-up. The 30% guidance for the tax rate in the coming year, would you expect that to decline again in the following fiscal year? Or based on the current tax laws, it's going to 30% in perpetuity?

With the current information we have right now, we wouldn't expect it to reduce any further. We're putting that in at 30% going forward.

Great. Perfect. Thank you very much. Appreciate it.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session for today. We thank you for your participation on today's conference. And you may now disconnect. Everybody, have a wonderful day.