Good day, ladies and gentlemen and welcome to the Lands’ End’s First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to turn the conference over to Bernie McCracken. You may begin.

Good morning and thank you for joining the Lands’ End earnings call for our first quarter fiscal 2018 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 President; 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 10-K and quarterly report 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 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 measures 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. With that, I will turn the call over to Jerome Griffith.

Thank you, Bernie, and thank you everyone for joining us today. We are very pleased to be starting off the year on a strong note. We delivered our fourth straight quarter of top line growth and third quarter of profitability growth demonstrating the continued progress we have made across our strategic initiatives. Sales in the first quarter grew by approximately 12% largely driven by the Delta Air Lines launch as well as our growth in our key product categories. We saw growth in our U.S. consumer business and double-digit sales increases in our international businesses. Adjusted EBITDA increased to $9 million from $1.3 million a year ago. When I joined Lands’ End last year, our first priority was to get back to the classic American Heritage and embrace the innovation that made Lands’ End a great brand. We are accomplishing this through the execution of a number of strategic initiatives that are focused on four key areas: product, digitization, distribution, and infrastructure. In 2018, as we continue to make advances in these key areas, we will also increase the level of collaboration between them. Before providing an update on our strategic initiatives, I would like to call out some highlights from the quarter. First, our product continued to receive favorable response as we presented an assortment that offers quality, value, and relevance to our consumer. Strength in the business was driven by our swimwear products, particularly those styles that offer sun protection as well as increased sales of our knit-tops and bottoms categories. Second, we continued to build our customer file, driven by a double-digit increase in buyers who have purchased in consecutive years. Within our new customer segment, we are extremely pleased that they are purchasing our key items and re-buying at a higher rate than last year. Importantly,…

Good morning, everyone. As Jerome mentioned, we are pleased with the strong start to fiscal 2018 with double-digit revenue and significant adjusted EBITDA growth in the first quarter. For the quarter, revenue increased 11.7% to $299.8 million compared to $268.4 million last year. Sales in our direct segment grew 19.7% to $273.4 million and retail sales decreased 34% to $26.5 million. Excluding Delta and adjusting for closed Sears stores, total revenue increased 3.4% with the direct segment growing 6.5% partially offset by retail decreasing 18%. In terms of product, consumers continue to respond well to key items within their core categories. During the first quarter, growth was led by a strong swimwear business, specifically beach living in addition to our knits and our bottoms. As Jerome mentioned, we continue to see improvement in our buyer file metrics and are especially pleased in the momentum with our active buyers as our enhanced product assortment and targeted marketing efforts are driving improved loyalty and increasing repeat purchases. Within the direct segment, we saw strong growth in our Lands’ End outfitter business driven by the launch of Delta. As part of the launch, all personnel were required to be in uniform by May 29. We had shipped approximately 75% of the launch orders through the end of the first quarter which was comprised of approximately 25% shipped in the fourth quarter of 2017 and approximately 50% shipped in the first quarter of 2018. We expect to ship the remainder of the orders approximately 25% in the second quarter, which will essentially conclude the national launch. After the initial shipping period ends in the second quarter, we expect to see minimal revenue from Delta until the second quarter of 2019. We are also working closely with Delta to expand our product offering beyond the…

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 very much for taking my question and congratulations on a really nice quarter here. I would love to get a little bit more color on the new stores that have just been opened, how you are feeling about the initial productivity about that? Is there any consistent feedback you have been getting from the employees there or the customers and just any change in your thinking now that you have got a couple out there as far as how you want to approach that strategy over the next few years?

Thanks, Alex. Yes, no real change in strategy, at this point, we only have a couple of stores opened. The first one was Kildeer, which is in the new store concept and that’s right outside of Chicago. We are very pleased with what the early results are looking like, productivity is very much higher than what our existing stores are. We have a very small assortment in the store. We are carrying women’s swimwear and men’s that seems to be working relatively well for us. We have the availability to buy anything online in the store that you don’t see in the store that also seems to be working well for us. The way that we set the store up where it is in an open air shopping center, very convenient just to drive up, we have got a lot of good competitors in the area. We are near a Whole Foods, we are down the street from Apple, The Gap, it’s coming out great, and we are really pleased with it, but it’s kind of what we expected. We thought it would be a very productive store. We thought we will be doing very well with it. And so far I would say we are on track. We opened up a temp store in Burlington, Massachusetts and that was in response to one of our largest Sears locations closing, they had a store in Burlington and we opened up right outside where that store was. That’s still early days, but that’s going well as well. And we have got 3 or 4 more stores opening up towards the back part of the year, which we are looking forward to, but we think that we will be right on track to be where we said we would be in opening up our own stores and having them be part of our distribution strategy.

Great. That’s really helpful. Thank you. And then wanted to ask also just about the uniforms business, it sounds like the launch of the new uniforms at Delta went really well and had a nice impact here. On the quarter, just trying to understand a little bit about what the business might look like in a few years if uniforms continues to grow. It sounds like you have potentially a few other big accounts that could be added over the next year or two like Delta, and I think you mentioned just the lower gross margin for that business and how it impacted the quarter. Can you give us a sense of – if uniforms were to be growing double-digits for a couple of years, really become a bigger chunk of the business, what does that do to the overall margins? I mean, is it fair to assume that there is less marketing and SG&A associated with that business? Is it a similar EBITDA margin as your regular e-commerce business?

Yes, what we have said before Alex is the gross margins are lower, but the overall profitability is either at or slightly better than the average. Yes, you can see the benefit in what we gave you with the margin rate deterioration in the first quarter that the largest chunk of that was Delta. And just to correct a little bit, you probably misspoke, but what’s coming in next year of course is American Airlines, so we have Delta that will be through the launch. We don’t anticipate much business coming from Delta for the next year that’s when their employees will get another allocation. So the rest of this year will either be turnover or some of the Delta’s replacing -- current Delta employees replacing things that they already purchased, and then American Airlines should launch sometime towards the end of next year.

Great. That’s really helpful.

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

Good morning, Jerome and Jim. Congratulations on the first quarter. Jerome, a specific question about other income, was there a reclassification in the quarter which pulled a little bit out of SG&A into other income?

I think that’s a tax reclassification in there, Steve.

Okay. Is that a permanent reclassification or that was one-time?

Sure. And that’s also a write-down of receivable, that’s a one-time.

Okay, so all those were one-time in nature, okay. So they would not affect – that wouldn’t materially affect your long-term EBITDA percentages?

No.

That’s fair enough. From an Amazon standpoint, can you talk a little bit about your ability to see and market to those customers in the future?

Sure. We have only been with them in a meaningful way I think for about 3 months, 3.5 months right now. Results look great. We are extremely pleased with them. What’s interesting to us is as we are marketing online and this is no new news to you more than half of clothing searches online start in Amazon, and we have a small marketing program with them and seems to be going well. What’s interesting for us is that customer mix and what we are selling, we are selling our key items, so we have a big swimwear business globally, we have a great swimwear business at Amazon, we have a good bottoms business globally, we have a good bottoms business at Amazon. And the customers that are coming in are their new customers, so more than half of them have never shopped at Lands’ End, and a good 30% of them have been long-term lapsed customers, meaning they haven’t been a Lands’ End customer for well over a year. So, we are extremely pleased with the early results there and we think that our marketing efforts on Amazon are bearing fruit, and we are excited to see what happens with this going through the holiday season and into next year.

So the question is if Joe Smith from somewhere in the Midwest buys something on Amazon, you had never known Joe Smith, but you now have their information to send them a catalog for instance or to speak to them directly, is that accurate?

We are not fulfilling directly from our warehouse here at this point in time with the systems that we have available. We are fulfilling from Amazon. So Amazon is sending directly to them.

Okay, fair enough. And when you are talking about European growth, do you have a similar relationship or want a similar relationship with Amazon in Europe or are there other players that you could – other platforms you could potentially be on there?

We are exploring that at this point in time. The answer to that question would be yes and yes, we will be working with Amazon internationally and we plan to work with them internationally. And there are other players and big players in individual markets that we are in talks with as to how we can get product feeds to them and start to market on their websites. I think that’s – it’s a big opportunity for us. It’s early days, we are not used to selling through somebody else’s market size, but it’s something that we could do a much better job with. We have a very small business right now in England with one of the department stores there, Debenhams, I don’t know if you are familiar with it, but we do marketplace marketing online with them and we have a relatively robust business with them.

One more question, just as a reminder, as a percent of your direct sales, international is roughly 20% correct?

Yes. I think we have given that number before. That’s an approximate number, yes.

Thank you very much.

Thank you. And that does conclude the Q&A session today. Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s program. You may all disconnect. Everyone have a great day.