ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the Consolidated Financial Statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Information” below and Item 1A, Risk Factors, in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.
This section discusses our results of operations for the year ended January 30, 2026 as compared to the year ended January 31, 2025. For a discussion and analysis of the year ended January 31, 2025 compared to February 2, 2024, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2025, filed with the SEC on March 27, 2025.
As used in this Annual Report on Form 10-K, references to the “Company”, “Lands’ End”, “we”, “us”, “our” and similar terms refer to Lands’ End, Inc. and its subsidiaries. Our fiscal year ends on the Friday preceding the Saturday closest to January 31.
Executive Overview
Description of the Company
Lands’ End, Inc. is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms. We offer products online at www.landsend.com , through third-party distribution channels, our own Company Operated stores and third-party license agreements. We also offer products to businesses and schools, for their employees and students, through the Outfitters distribution channel. We are a classic American lifestyle brand that creates solutions for life’s every journey.
Lands’ End was founded in 1963 by Gary Comer and his partners to sell sailboat hardware and equipment by catalog. While our product focus has shifted significantly over the years, we have continued to adhere to our founder’s motto as one of our guiding principles: “Take care of the customer, take care of the employee and the rest will take care of itself.”
Segment Reporting
We identify our operating segments according to how our business activities are managed and evaluated. Our operating segments consisted of: U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing and Retail.
We have determined that the U.S. eCommerce, Outfitters and Third Party operating segments share similar economic and other qualitative characteristics, and therefore, the results of these operating segments are aggregated into the U.S. Digital segment. The Europe eCommerce, Licensing and Retail operating segments are not quantitatively significant to be separately reported. See Note 13, Segment Reporting .
Distribution Channels
We identify six separate distribution channels for revenue reporting purposes.
U.S. eCommerce offers products through our eCommerce website.
Europe eCommerce offers products primarily direct to consumers located in Europe through eCommerce international websites as well as third-party marketplace websites.
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Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S.
Third Party sells products direct to consumers through third-party marketplace websites.
Licensing earns royalties on the use of our trademark and any fulfillment fees for fulfillment services provided by us.
Retail sells products through Company Operated stores, located in the U.S.
Pending WHP Transaction
On January 26, 2026, we announced the Pending WHP Transaction and entered into a Membership Interest Purchase Agreement (the “MIPA”), by and among the Company, Lands’ End Direct Merchants, Inc., a wholly owned subsidiary of Lands’ End, WH Borrower, LLC, WH Topco, L.P. (d/b/a WHP Global) (“WHP Global”), and LEWHP LLC (“WHP”).
Upon the terms and subject to the conditions set forth in the MIPA, at closing (i) we will contribute all of our intellectual property and related assets associated with the “Lands’ End” brand, including all of the license agreements entered into in connection with Lands’ End’s licensing business to a newly formed Delaware limited liability company and wholly owned subsidiary of Lands’ End (“IPCo”), and (ii) immediately thereafter, we will sell a 50% controlling ownership stake in IPCo, to WHP for an aggregate purchase price of $300 million in cash. The closing of the Pending WHP Transaction (the “Closing”) is subject to certain customary closing conditions. The MIPA contains certain termination rights for both Lands’ End and WHP, including, the right to terminate the MIPA if the Closing has not occurred prior to October 26, 2026.
In connection with the Closing, we will enter into voting agreements with WHP Topco and certain stockholders of Lands’ End (consisting of our controlling stockholder, Edward S. Lampert, and related funds) pursuant to which those stockholders will vote all of their shares of Common Stock in favor of a WHP Global monetization event (described below).
Limited Liability Company Agreement
At the Closing, Lands’ End, IPCo, WHP and WHP Topco will enter into the amended and restated limited liability company agreement of IPCo (the “LLCA”), pursuant to which IPCo will have a single class of membership interests consisting of Class A units (the “IPCo Units”), with Lands’ End owning 50% of the IPCo Units and WHP owning 50% of the IPCo Units. IPCo will be governed by a board of managers consisting of four managers, with two managers appointed by each of WHP and Lands’ End. The managers appointed by WHP will collectively have an extra vote permitting WHP to control decisions of the IPCo board of managers, which may change in the future based on the relative ownership percentages of WHP and Lands’ End in IPCo.
Lands’ End’s IPCo Units may be exchanged for equity of WHP Topco (“WHP Topco Units” as defined in the LLCA) in connection with the following WHP Topco monetization events: (i) in an initial public offering, direct listing or de-SPAC of WHP Topco, where WHP’s enterprise value-to-EBITDA multiple (the “Exchange Reference Multiple”), when calculated based on the WHP listing price, is equal to or greater than 13, then we can elect to exchange Company’s IPCo Units for WHP Topco Units or WHP can force Lands’ End IPCo Units to be exchanged for WHP Topco Units. If the Exchange Reference Multiple is less than 13, then we can elect to exchange our IPCo Units for WHP Topco Units; (ii) in a change of control of WHP Topco, where WHP’s Exchange Reference Multiple (counting only cash, public securities or other specified consideration) implied by the transaction is equal to or greater than the Minimum Multiple (as defined below), then we are required to exchange our IPCo Units for WHP Topco Units; and (iii) in a significant asset sale by WHP Topco of 50% or more of its EBITDA, where the Exchange Reference Multiple implied by such asset sale (counting only cash, public securities and other specified consideration) is greater than or equal to the Minimum Multiple, we are required to exchange our IPCo Units for WHP Topco
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Units. In the event of such an exchange, our stake in IPCo would be valued at the EBITDA multiple implied by WHP Topco’s monetization event.
The minimum multiple will initially be set at 13x, and we may reset such multiple one time per calendar year with WHP’s consent, not to be unreasonably withheld, conditioned or delayed (the “Minimum Multiple”). Our right to exchange in a WHP Topco monetization event terminates on the occurrence of any of the aforementioned monetization events, whether or not our interests in IPCo were exchanged.
Pursuant to the LLCA, WHP and Lands’ End generally may not transfer their IPCo Units prior to the third anniversary of Closing (other than to permitted transferees or a third party purchaser of WHP). After the third anniversary of the Closing, each party may transfer its respective IPCo Units but subject to tag along rights and a right of first offer in favor of the other parties. In addition, following the third anniversary of Closing, if either Lands’ End or WHP receives a third party acquisition offer for 100% of IPCo reflecting an IPCo’s enterprise value / LTM EBITDA multiple at or above 10, the party receiving the offer has a right to “drag” the other party into such sale, subject to an ownership threshold and the achievement of certain economic thresholds. The dragged party has the option to be dragged in such sale or, instead, buy out the other party’s stake at the purchase price proposed by the third party.
Pursuant to the LLCA, any excess cash above $5.0 million at IPCo (or $7.5 million, if, as of the end of any fiscal quarter, the revenue of IPCo and its subsidiaries with respect to the last 12 months ending on the most recent date for which financial statements are available is greater than $150.0 million) will be distributed to WHP and Lands’ End on a quarterly basis and based on ownership split.
License Agreement
At the Closing, Lands’ End and IPCo will enter into a License Agreement (the “License Agreement”), pursuant to which IPCo will grant us a license to design, manufacture, sell and promote certain categories of products (including the types of products that we design, manufacture and sell currently) (collectively, “Licensed Products”) in the United States, Canada, the United Kingdom, Germany, Austria and France (the “Territory”), with limitations to certain channels of sale. The license is exclusive within the Territory and specified trade channels with respect to certain core products, and non-exclusive with respect to other categories of Licensed Products. The license is royalty-bearing and subject to a guaranteed minimum royalty (“GMR”), with different royalty rates due, depending on the channel under which Licensed Products are sold. The GMR will be $50,000,000 per year (calculated pro rata based on an amount of $50,000,000 for a twelve (12) month period for the first contract year) through the end of the contract year 11, will increase one percent per year for contract years 12-21, and will be $55,231,106 for each contract year thereafter. In addition, we will be eligible to receive an adjustment to our royalties, which adjustment will be paid by IPCo on a quarterly basis, based on total royalties received by IPCo (including from other licensees) above a specified threshold.
The initial term of the License Agreement is 10 years following the conclusion of the first contract year, and the License Agreement automatically renews for up to 12 successive renewal terms of 7 years each, unless we provide notice of non-renewal at least 24 months prior to the end of the initial or applicable renewal term. The License Agreement is only terminable by IPCo if we breach our obligation to make our required guaranteed minimum payments, or to make undisputed royalty payments, in each case subject to an opportunity to cure such non-payment within a certain period of time.
In addition, pursuant to the MIPA, and subject to the terms and conditions set forth therein, WHP commenced a tender offer (the “Tender Offer”) to purchase up to 2,222,222 shares of our common stock (the “Common Stock”), par value $0.01 per share, at a price of $45.00 per share in cash, without interest and subject to any applicable withholding taxes, representing an aggregate value of up to approximately $100 million, which tender offer is intended to close substantially concurrently with the Membership Interests Purchase. The tender offer will be subject to pro-ration should it be oversubscribed. As a result of the tender offer, WHP is expected to own up to approximately 7% of our outstanding shares of common stock.
Macroeconomic Challenges
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Macroeconomic issues which impact consumer discretionary spending, such as realized inflation-based price increases and high interest rates have continued to have an impact on our business. Apparel purchases historically have been influenced by domestic and global economic conditions, which may negatively impact customer demand and may require higher levels of promotion in order to attract and retain customers. Additionally, the variable interest rates associated with our Debt Facilities are negatively affected by higher interest rate environments. Macroeconomic challenges may lead to increased cost of raw materials, packaging materials, labor, energy, fuel, debt and other inputs necessary for the production and distribution of our products. Moreover, uncertainty with respect to trade policy and tariffs, including increased tariffs applicable to countries where our vendors manufacture our product, may result in an increase in the cost of our products.
In addition, conflict‑related disruptions in global energy markets and shipping lanes in early 2026 have contributed to heightened volatility in crude oil and refined‑product prices and interruptions to certain maritime routes, which may result in higher freight and delivery costs, carrier surcharges, longer transit times, and inventory delays.
Restructuring and Other
During Fiscal 2025, we incurred ongoing costs related to exploring strategic alternatives to maximize shareholder value and have included those costs as part of restructuring and other. Additionally, we reduced approximately 6% of our corporate office positions and incurred restructuring charges, primarily severance and benefit and other costs related to cost optimization of business operations. During Fiscal 2024, we reduced approximately 10% of our corporate office positions and incurred restructuring charges, primarily severance and benefit and other related costs. The reductions in the corporate office positions were made to better align with the evolving needs of the business and to invest in key growth areas.
We incurred $13.9 million and $5.6 million of restructuring and other costs in Fiscal 2025 and Fiscal 2024, respectively.
Basis of Presentation
The Consolidated Financial Statements have been prepared in accordance with GAAP and include the accounts of Lands’ End, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated.
Seasonality
We experience seasonal fluctuations in our Net revenue and operating results and historically have realized a significant portion of our yearly net revenue and earnings during our fourth fiscal quarter. We generated approximately 34.0% of our yearly net revenue in the fourth quarters of Fiscal 2025 and Fiscal 2024. Thus, lower than expected fourth quarter net revenue may have an adverse impact on our annual operating results.
Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak selling periods and typically decrease during the fourth quarter of the fiscal year as inventory is sold. Cash provided by operating activities is typically higher in the fourth quarter of the fiscal year due to reduced working capital requirements during that period.
Results of Operations
Fiscal Year. Our fiscal year end is on the Friday preceding the Saturday closest to January 31 each year. The fiscal periods in this report are presented as follows, unless the context otherwise requires:
Fiscal Year
Ended
Weeks
January 30, 2026
January 31, 2025
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The following table sets forth, for the periods indicated, selected income statement data:
Fiscal 2025
Fiscal 2024
(in thousands)
% of Net
Revenue
% of Net
Revenue
Net revenue
Cost of sales (excluding depreciation
and amortization)
Gross profit
Selling and administrative
Depreciation and amortization
Other operating expense, net
Operating income
Interest expense
Other (income) expense, net
Income before income taxes
Income tax expense
Net income
Depreciation and amortization are not included in our cost of sales because we are a reseller of inventory and do not believe that including depreciation and amortization is meaningful. As a result, our gross margins may not be comparable to other entities that include depreciation and amortization related to the sale of their product in their gross margin measure.
Definitions, Reconciliations and Uses of Non-GAAP Financial Measures
In addition to our Net income determined in accordance with GAAP, for purposes of evaluating operating performance, we report the following non-GAAP measures: Adjusted net income and Adjusted EBITDA. Adjusted net income is also expressed on a diluted per share basis.
We believe presenting non-GAAP financial measures provides useful information to investors, allowing them to assess how the business performed excluding the effects of significant non-recurring or non-operational amounts. We believe the use of the non-GAAP financial measures facilitates comparing the results being reported against past and future results by eliminating amounts that we believe are not comparable between periods and assists investors in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s own methods for evaluating business performance.
Our management uses Adjusted net income and Adjusted EBITDA to evaluate the operating performance of our business for comparable periods and to discuss our business with our Board of Directors, institutional investors and other market participants. Adjusted EBITDA is also used as the basis for a performance measure used in executive incentive compensation.
The methods we use to calculate our non-GAAP financial measures may differ significantly from methods other companies use to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. Adjusted net income and Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as these measures may exclude a number of important cash and non-cash recurring items.
Adjusted net income is defined as net income excluding significant non-recurring or non-operational items as set forth below. Adjusted net income is also presented on an adjusted diluted per share basis. While Adjusted net
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income is a non-GAAP measurement, management believes that it is an important indicator of operating performance and useful to investors.
Other significant non-recurring or non-operational items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results and are described below:
Corporate restructuring and other – composed of costs related to the strategic alternative exploration as well as severance and benefit costs for Fiscal 2025 and primarily severance and benefit costs for Fiscal 2024.
Unmitigated tariff costs – unmitigated incremental product costs, net of the impact of vendor negotiations, incurred pursuant to International Emergency Economic Powers Act (“IEEPA”) tariffs that were subsequently ruled unlawful by the Supreme Court of the United States on February 20, 2026 for Fiscal 2025.
Long-lived asset impairment – charges associated with the non-cash write down of certain long-lived assets for Fiscal 2025 and Fiscal 2024, respectively.
Exit costs – charges associated to exit the kids and footwear lines of business including inventory excess and obsolescence reserves, inventory discounts and operational charges recorded in Fiscal 2025 and Fiscal 2024, respectively, in conjunction with our licensing arrangements commencing in Fiscal 2024.
Loss (gain) on disposal of property and equipment – disposal of property and equipment in Fiscal 2025 and Fiscal 2024.
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The following table sets forth, for the periods indicated, a reconciliation of Net income to Adjusted net income and Adjusted diluted net earnings per share:
(in thousands, except per share amounts)
Fiscal 2025
Fiscal 2024
Net income
Corporate restructuring and other
Unmitigated tariff costs
Long-lived asset impairment
Exit costs
Loss (gain) on disposal of property and equipment
Tax effects on adjustments (1)
ADJUSTED NET INCOME
ADJUSTED DILUTED NET EARNINGS PER SHARE
Diluted weighted average common shares outstanding
The tax impact of adjustments is calculated at the applicable U.S. and non-U.S. Federal and State statutory rates.
While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and useful to investors because EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax.
Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results and are described below:
Corporate restructuring and other – composed of costs related to the strategic alternative exploration as well as severance and benefit costs for Fiscal 2025 and primarily severance and benefit costs for Fiscal 2024.
Unmitigated tariff costs – unmitigated incremental product costs, net of the impact of vendor negotiations, incurred pursuant to International Emergency Economic Powers Act (“IEEPA”) tariffs that were subsequently ruled unlawful by the Supreme Court of the United States on February 20, 2026 for Fiscal 2025.
Long-lived asset impairment – charges associated with the non-cash write down of certain long-lived assets in Fiscal 2025 and Fiscal 2024.
Exit costs – charges associated to exit the kids and footwear lines of business including inventory excess and obsolescence reserves, inventory discounts and operational charges recorded in Fiscal 2025 and Fiscal 2024, respectively, in conjunction with our licensing arrangements commencing in Fiscal 2024.
Loss (gain) on disposal of property and equipment – disposal of property and equipment in Fiscal 2025 and Fiscal 2024.
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The following table sets forth, for the periods indicated, selected income statement data, both in dollars and as a percentage of Net revenue and a reconciliation of Net income to Adjusted EBITDA:
(in thousands)
Fiscal 2025
Fiscal 2024
Net income
Income tax expense
Interest expense
Other (income) expense, net
Operating income
Depreciation and amortization
Corporate restructuring and other
Unmitigated tariff costs
Long-lived asset impairment
Exit costs
Loss (gain) on disposal of property and equipment
Adjusted EBITDA
In assessing the operational performance of our business, we consider a variety of financial measures. We operate in six separate distribution channels for revenue reporting purposes: U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing and Retail. A key measure in the evaluation of our business is revenue performance by distribution channel as well as consolidated Gross margin. We manage and assess the performance of each of our operating segments using variable profit, which is defined as Net revenue minus cost of sales and variable selling expenses. This segment measure excludes fixed personnel costs, incentive compensation, office occupancy, information technology, professional fees and depreciation and amortization. See Note 13, Segment Reporting for more information regarding variable profit, which is a non-GAAP measure, as well as a reconciliation of variable profit to Income (loss) before income taxes.
We use Net revenue to evaluate revenue performance for the U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Retail and Licensing distribution channels. We currently use GMV, which equals total order value of all Lands’ End branded merchandise sold to customers through business-to-consumer and business-to-business channels, as well as the estimated retail value of the merchandise sold through third party distribution channels, as an important indicator of the performance of the comparable growth of the total brand.
Discussion and Analysis
Fiscal 2025 Compared to Fiscal 2024
Gross Merchandise Value
Gross Merchandise Value (“GMV”) increased low-single digits compared to Fiscal 2024.
Net Revenue
Total Net revenue was $1.34 billion in Fiscal 2025, a decrease of $27.8 million or 2.0% from $1.36 billion in Fiscal 2024.
U.S. Digital Segment Net revenue was $1.16 billion in Fiscal 2025, an increase of $8.3 million or 0.7% from $1.15 billion in Fiscal 2024.
U.S. eCommerce Net revenue was $829.8 million for Fiscal 2025, a decrease of $13.0 million or 1.5% from $842.8 million in Fiscal 2024. Fiscal 2025 benefited from strong performance in our key product franchises, resulting in gross margin expansion and partially offsetting the overall decrease. The decline primarily reflects the transition of certain products to a licensing model.
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Outfitters Net revenue was $241.8 million for Fiscal 2025, an increase of $13.6 million or 6.0% from $228.2 million in Fiscal 2024. The school uniform channel increased primarily due to a strong back-to-school season driven by an influx of new customers. The business uniform channel slightly increased due to strength in select enterprise accounts.
Third Party Net revenue was $91.2 million for Fiscal 2025, an increase of $7.7 million or 9.2%, from $83.5 million in Fiscal 2024. The increase was primarily due to curated product assortments across all marketplaces.
Europe eCommerce Net revenue was $90.2 million in Fiscal 2025, a decrease of $12.9 million or 12.5% from $103.1 million in Fiscal 2024. The decrease was primarily driven by new leadership using the first half to relaunch as a more premium brand and continued macroeconomic pressures.
Licensing and Retail Net revenue was $82.2 million in Fiscal 2025, a decrease of $23.2 million or 22.0% from $105.4 million in Fiscal 2024. The decrease reflects the planned transition of certain wholesale accounts to a licensing arrangement in 2024 and the performance of U.S. Company Operated stores partially offset by licensing revenue increasing by over 20%.
Gross Profit
In Fiscal 2025, total Gross profit decreased 0.5% to $650.2 million compared to $653.3 million for Fiscal 2024. Gross margin increased 80 basis points to 48.7% in Fiscal 2025 compared to 47.9% in Fiscal 2024. The gross margin improvement was primarily driven by continued strength across key categories and expansion of the licensing business, partially offset by tariffs. When excluding the impact of the unmitigated IEEPA tariffs of $13.0 million, gross margin would have increased by approximately 180 basis points to 49.7% compared to the prior year.
Selling and Administrative Expenses
Selling and administrative expenses were $561.2 million, or 42.0% of total Net revenue in Fiscal 2025, compared to $561.8 million, or 41.2% of total Net revenue in Fiscal 2024. The approximately 80 basis points increase was driven by deleveraging from lower revenues and higher digital marketing spend focused on new customer acquisition partially offset by operational efficiencies and strong cost controls across the entire business.
Depreciation and Amortization
Depreciation and amortization were $30.2 million in Fiscal 2025, a decrease of $3.6 million or 10.7%, compared to $33.8 million in Fiscal 2024. The decrease in depreciation and amortization is primarily driven by lower software depreciation in Fiscal 2025 as a result of major projects becoming fully depreciated.
Other Operating Expense, Net
Other operating expense, net was $14.6 million in Fiscal 2025 compared to $6.8 million in Fiscal 2024. The increase was primarily driven by expenses related to the strategic alternatives exploration and restructuring costs. See Note 1. Background and Basis of Presentation .
Operating Income
As a result of the above factors, Operating income was $44.3 million in Fiscal 2025, compared to $51.0 million in Fiscal 2024.
Interest Expense
Interest expense was $36.7 million in Fiscal 2025, compared to $40.4 million in Fiscal 2024. The $3.7 million decrease was primarily driven by lower ABL Facility interest related to lower average outstanding balances and lower applicable interest rates under the Term Loan Facility.
Other (Income) Expense
Other income was insignificant in both Fiscal 2025 and Fiscal 2024.
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Income Tax Expense (Benefit)
Income tax expense of $2.2 million was recorded for Fiscal 2025 which resulted in an effective tax rate of 28.9%. This compared to Income tax expense of $4.3 million in Fiscal 2024 which resulted in an effective tax rate of 40.6%. The Fiscal 2025 tax rate was lower than in Fiscal 2024 primarily due to the release of certain state valuation allowances in Fiscal 2025.
Net Income
As a result of the above factors, Net income was $5.5 million, or diluted earnings per share of $0.18 in Fiscal 2025 compared to Net income of $6.2 million, or diluted earnings per share of $0.20 in Fiscal 2024.
Adjusted Net Income
As a result of the above factors, Adjusted net income was $26.8 million and Adjusted diluted earnings per share was $0.86 in Fiscal 2025 compared to Adjusted net income of $12.6 million and Adjusted diluted net earnings per share of $0.40 in Fiscal 2024, representing an increase of $14.3 million, or $0.46 per diluted share.
Adjusted EBITDA
As a result of the above factors, Adjusted EBITDA was $102.3 million in Fiscal 2025, compared to $92.6 million in Fiscal 2024.
U.S. Digital Segment Results of Operations
Variable Profit
U.S. Digital Segment Variable profit was $269.6 million in Fiscal 2025, an increase of $4.2 million compared to $265.4 million in Fiscal 2024. U.S. Digital Segment Variable profit was 23.2% of U.S. Digital Segment Net revenue in Fiscal 2025, which is an increase of 20 basis points compared to 23.0% of U.S. Digital Segment Net revenue in Fiscal 2024. The increase in variable profit as a percentage of U.S. Digital Segment Net revenue was driven by product solutions and newness across the assortment, improvements in supply chain costs and cost controls across the entire business partially offset by deleverage from lower revenues and channel mix.
Product cost of goods sold was $450.9 million or 38.8% of U.S. Digital Segment Net revenue in Fiscal 2025 compared to $444.1 million or 38.5% of U.S. Digital Segment Net revenue in Fiscal 2024. Shipping cost of goods sold was $155.6 million or 13.4% of U.S. Digital Segment Net revenue in Fiscal 2025 compared to $157.6 million or 13.7% of U.S. Digital Segment Net revenue in Fiscal 2024. The increase in Product and Shipping costs of goods sold as a percentage of U.S. Digital Segment Net revenue was primarily due to tariffs partially offset by improvements in supply chain costs and product assortment mix. Marketing expenses were $188.0 million or 16.2% of U.S. Digital Segment Net revenue in Fiscal 2025 compared to $179.5 million or 15.5% of U.S. Digital Segment Net revenue in Fiscal 2024. The increase in Marketing expenses was primarily due to higher digital spend focused on new customer acquisition.
Liquidity and Capital Resources
Liquidity
Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, debt service and for general corporate purposes. Our cash and cash equivalents and the ABL Facility serve as sources of liquidity for short-term working capital needs and general corporate purposes. The ABL Facility had no balance outstanding as of January 30, 2026, other than letters of credit. Cash generated from our net revenue and profitability, and to a lesser extent our changes in working capital, are driven by the seasonality of our business, with a significant amount of net revenue and operating cash flows generally occurring in the fourth fiscal quarter of each year. We expect that our cash on hand and cash flows from operations, along with revolving on the ABL Facility, will be adequate to meet our capital requirements and operational needs for at least the next 12 months. In addition, upon
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closing of the Pending WHP Transaction, we intend to fully repay the Term Loan Facility described below under Long-Term Debt .
ABL Facility
Our $225.0 million committed revolving ABL Facility, as amended to date, includes a $35.0 million sublimit for letters of credit and is available for working capital and other general corporate liquidity needs. The amount available to borrow is the lesser of (1) the Aggregate Commitments of $225.0 million or (2) the Borrowing Base or Loan Cap which is calculated from Eligible Inventory, Trade Receivables and Credit Card Receivables, all foregoing capitalized terms not defined herein are as defined in the ABL Facility.
Effective with the Fifth Amendment to the ABL Facility, dated March 28, 2025 (the “Fifth Amendment”), a 0.10% adjustment to the SOFR benchmark interest rate was eliminated and the benchmark rates under the ABL Credit Agreement are, at our election, either: (1) Term SOFR (which is a forward looking term rate based on the secured overnight financing rate), or (2) a Base Rate (which is the greatest of (a) 0% per annum, (b) the federal funds rate plus 0.50%, (c) the one-month Term SOFR rate plus 1.00%, or (d) the Wells Fargo “prime rate”). The borrowing margin for SOFR Rate loans is (i) where the average daily total outstanding for the previous quarter is less than $95.0 million, 1.50%, and (ii) where the average daily total outstanding for the previous quarter is equal to or greater than $95.0 million, 1.75%. For Base Rate loans, the borrowing margin is (i) where the average daily total outstanding for the previous quarter is less than $95.0 million, 0.75%, and (ii) where the average daily total outstanding for the previous quarter is equal to or greater than $95.0 million, 1.00% (“Applicable Borrowing Margin”). The Applicable Borrowing Margin for all loans is based upon the average daily total loans outstanding for the previous quarter. The Fifth Amendment reduced aggregate commitments from $275 million to $225 million, and reduced the letter of credit sublimit from $70 million to $35 million, in line with our lower inventory levels and expected letter of credit capacity, and had no material interest rate impact.
The ABL Facility fees include (i) commitment fees of 0.20% or 0.30% based upon the average daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter, (ii) customary letter of credit fees and (iii) customary annual agent fees. The Fifth Amendment extended the maturity date of the ABL Facility to the earlier of (a) March 28, 2030 and (b) September 29, 2028 if, on or prior to such date, the Term Loan Facility has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness. Under applicable accounting guidance, certain unamortized debt issuance costs originating from the ABL Facility are deferred and amortized over the extended term of the ABL Facility, and certain unamortized debt issuance costs have been written off.
There was no balance outstanding under the ABL Facility as of January 30, 2026 and January 31, 2025. The balance of outstanding letters of credit was $11.0 million and $10.9 million as of January 30, 2026 and January 31, 2025, respectively. The borrowing availability under the ABL Facility was $122.6 million and $129.3 million as of January 30, 2026 and January 31, 2025, respectively
Long-Term Debt
The Term Loan Facility will mature on December 29, 2028, and amortizes at a rate equal to 1.25% per quarter. Depending upon our Total Leverage Ratio, as defined in the Term Loan Facility, mandatory prepayments in an amount equal to a percentage of our excess cash flows in each fiscal year, ranging from 0% to 75% are required. The Term Loan Facility also has typical prepayment requirements for the proceeds of certain asset sales, casualty events and extraordinary receipts. Voluntary prepayment and certain mandatory prepayments made (i) between December 30, 2025 and December 29, 2026, would result in a prepayment premium equal to 1% of the principal amount of the loan prepaid, (ii) between December 30, 2026 and December 29, 2027, would result in a prepayment premium equal to 0.5% of the principal amount of the loan prepaid and (iii) thereafter no prepayment premium is due.
The interest rates per annum applicable to the loans under the Term Loan Facility are based on a fluctuating rate of interest equal to, at our election, either (1) Term Loan Adjusted SOFR loan (subject to a 2% floor) plus an applicable
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margin, or (2) an alternative base rate loan plus an applicable margin. The applicable margin is based on our net leverage and will be, (i) for Term Loan Adjusted SOFR loans, 8.25% per annum if the total leverage ratio is greater than or equal to 2.75:1.00, 8.00% per annum if the total leverage ratio is less than 2.75:1.00 but greater than or equal to 2.25:1.00, and 7.75% per annum if the total leverage ratio is less than 2.25:1.00 and (ii) for base rate loans, 7.25% per annum if the total leverage ratio is greater than or equal to 2.75:1.00, 7.00% per annum if the total leverage ratio is less than 2.75:1.00 but greater than or equal to 2.25:1.00, and 6.75% per annum if the total leverage ratio is less than 2.25:1.00. In each case, the net leverage is determined as of the last day of each applicable measurement period.
The Term Loan Facility contains customary agency fees.
Debt Facilities
Guarantees; Security
All obligations under the Debt Facilities are unconditionally guaranteed by Lands’ End, Inc. and, subject to certain exceptions, each of its existing and future direct and indirect subsidiaries. The ABL Facility is secured by a first priority security interest in certain working capital of the borrowers and guarantors consisting primarily of accounts receivable and inventory. The Term Loan Facility is also secured by a second priority security interest in the same collateral, with certain exceptions.
The Term Loan Facility is also secured by a first priority security interest in certain property and assets, including certain fixed assets such as real estate, stock of subsidiaries and intellectual property, in each case, subject to certain exceptions. The ABL Facility is also secured by a second priority interest in the same collateral, with certain exceptions.
Representations and Warranties; Covenants
Subject to specified exceptions, the Debt Facilities contain various representations and warranties and restrictive covenants that, among other things, restrict Lands’ End, Inc.’s and its subsidiaries’ ability to incur indebtedness (including guarantees), grant liens, make investments, make dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers or change the nature of their business.
The Term Loan Facility contains financial covenants, including a quarterly maximum total leverage ratio test and a monthly minimum liquidity test.
Under the ABL Facility, if excess availability falls below the greater of 10% of the Loan Cap amount or $12.0 million, we will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0.
The Debt Facilities contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances.
As of January 30, 2026, we were in compliance with our financial covenants in the Debt Facilities.
Events of Default
The Debt Facilities include customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross defaults related to certain other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control.
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Cash Flows from Operating Activities
Net cash provided by operating activities was $49.6 million during Fiscal 2025 compared to $53.1 during Fiscal 2024. The decrease in net cash provided by operating activities was primarily due to tariffs, partially offset by operating income.
Cash Flows from Investing Activities
Net cash used in investing activities was $29.2 million and $35.0 million during Fiscal 2025 and Fiscal 2024, respectively. Cash used in investing activities for both years was primarily used for investments to update our digital information technology infrastructure.
Cash Flows from Financing Activities
Net cash used in financing activities was $20.1 million and $26.6 million during Fiscal 2025 and Fiscal 2024, respectively. The decrease in net cash used in financing activities is primarily due to improved inventory productivity and lower share repurchases.
Contractual Obligations and Off-Balance-Sheet Arrangements
We have no material off-balance-sheet arrangements other than the guarantees and contractual obligations that are discussed below.
Information concerning our obligations and commitments to make future payments under contracts such as lease agreements and other contingent commitments, as of January 30, 2026, is aggregated in the following table:
Payments Due by Period
(in thousands)
Total
1 Year
or less
Years
Years
After 5
years
Operating leases (1)
Principal payments on
long-term debt
Interest on Term Loan
Facility and ABL Facility
fees
Purchase obligations (2)
Total contractual obligations
Operating lease obligations consist primarily of future minimum lease commitments related to our operating leases (refer to Note 4, Leases , of the Consolidated Financial Statements for further details).
Purchase obligations primarily represent open purchase orders for inventory.
Financial Instruments with Off-Balance-Sheet Risk
The ABL Facility is available for working capital and other general corporate liquidity needs. There was no balance outstanding as of January 30, 2026 and January 31, 2025. The balance of outstanding letters of credit was $11.0 million and $10.9 million as of January 30, 2026 and January 31, 2025, respectively.
Application of Critical Accounting Estimates
Our Consolidated Financial Statements have been prepared in accordance with GAAP, which requires management to make estimates and judgments that affect amounts reported in the Consolidated Financial Statements and accompanying notes. While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from our estimates and assumptions. Our estimation processes contain uncertainties because they require management to make assumptions and apply judgment to make these estimates. Should actual results be different than our estimates, we could be exposed to gains or losses from differences that may be material.
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Inventory Valuation
Our inventories consist of merchandise purchased for resale. The nature of our business requires that we make a significant amount of our merchandising decisions and corresponding inventory purchase commitments with vendors several months in advance of the time in which a particular merchandise item is intended to be included in the merchandise offerings. These decisions and commitments are based upon, among other possible considerations, historical sales with identical or similar merchandise, our understanding of then-prevailing trends and influences, and an assessment of likely economic conditions and various competitive factors.
For financial reporting and tax purposes, our United States inventory, primarily merchandise held for sale, is accounted for using the last-in, first-out (“LIFO”) method, with these inventories valued at the lower of LIFO cost or market. We account for our non-United States inventory on the first-in, first-out (“FIFO”) method, which is valued at the lower of cost or net realizable value. The United States inventory accounted for using the LIFO method as of percentage of the total inventory was 89% and 93% at January 30, 2026 and January 31, 2025, respectively.
We continually make assessments as to whether the carrying cost of inventory exceeds its market value and, if so, by what dollar amount. Excess inventories may be disposed of through our normal course of business. Based on historical results experienced through various methods of disposition, we will write down the carrying value of inventories that are not expected to be sold at or above cost. The excess and obsolete reserve balances were $7.3 million and $11.7 million as of January 30, 2026, and January 31, 2025, respectively. The decrease in the excess and obsolete reserve balance is primarily due to reduction in kids and footwear inventory in conjunction with our licensing arrangements. For the inventory marked down to net realizable value, a one percentage point increase in our assumed recovery rates at January 30, 2026, would have had an immaterial impact on our Consolidated Financial Statements.
Indefinite-lived Intangible Asset Impairment Assessments
Our indefinite-lived intangible asset is the Lands’ End trade name. The indefinite-lived trade name intangible asset is tested separately for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment assessments contain multiple uncertainties because the calculation requires management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. If actual results fall short of our estimates and assumptions used in estimating future cash flows and asset fair values, we may incur future impairment charges that could be material.
We review the trade name for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. For Fiscal 2025, we performed a qualitative impairment assessment. The qualitative impairment assessment involves three steps: (1) identify relevant inputs and assumptions that affect fair value, (2) identify relevant events and circumstances that may have an impact on those inputs and assumptions and (3) evaluate, both individually and in the aggregate, the impact of events and circumstances on the inputs and assumptions related to determining whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. For Fiscal 2024 and Fiscal 2023, the fair value of the trade name indefinite-lived intangible asset was estimated using the relief from royalty method. The relief from royalty method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a forecasted net revenue stream and discounting the resulting cash flows to determine a present value. We multiplied the selected royalty rate by the forecasted net revenue stream to calculate the cost savings (relief from royalty payment) associated with the asset. The cash flows are then discounted to present value using the selected discount rate and compared to the carrying value of the asset.
In Fiscal 2025, Fiscal 2024 and Fiscal 2023, we tested the indefinite-lived intangible asset for impairment. In Fiscal 2025, we concluded that it was not more likely than not that the fair value was below the carrying value. In Fiscal 2024, the fair value was substantially in excess of the carrying value. In Fiscal 2023, fair value exceeded the
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carrying value by less than 15%. As such, no trade name impairment charges were recorded in any of the periods presented.
Provision for Income Taxes
We record a valuation allowance against our deferred tax assets when it is more likely than not that some portion or all of such deferred tax assets will not be realized. In determining the need for a valuation allowance, management is required to make assumptions and to apply judgment, including forecasting future income, taxable income and the mix of income or losses in the jurisdictions in which we operate. Our effective tax rate in a given financial statement period may also be materially impacted by changes in the mix and level of income or losses, changes in the expected outcome of audits, or changes in the deferred tax valuation allowance.
At any point in time, many tax years are subject to or in the process of being audited by various taxing authorities. To the extent our estimates of settlements change, or the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made. Our income tax expense includes changes in our estimated liability for exposures associated with our various tax filing positions. Determining the income tax expense for these potential assessments requires management to make assumptions that are subject to factors such as proposed assessments by tax authorities, changes in facts and circumstances, issuance of new regulations, and resolution of tax audits. We performed an evaluation over our deferred tax assets and determined that a valuation allowance is considered necessary. See Note 11, Income Taxes, for further details on the valuation allowance.
We believe the judgments and estimates discussed above are reasonable. However, if actual results fall short of our estimates or assumptions, we may be exposed to losses or gains that could be material.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains forward-looking statements. Forward-looking statements reflect our current views with respect to, among other things, future events and performance. These statements may discuss, among other things, the Pending WHP Transaction, our net sales, gross merchandise value (GMV), gross margin, operating expenses, operating income, net income, adjusted net income, Adjusted EBITDA, cash flow, financial condition, financings, impairments, expenditures, growth, strategies, plans, achievements, dividends, capital structure, organizational structure, future store openings, market opportunities and general market and industry conditions. We generally identify forward-looking statements by words such as “anticipate,” “estimate,” “expect,” “intend,” “project,” “plan,” “predict,” “believe,” “seek,” “continue,” “outlook,” “may,” “might,” “will,” “should,” “can have,” “likely,” “targeting” or the negative version of these words or comparable words. Forward-looking statements are based on beliefs and assumptions made by management using currently available information. These statements are only predictions and are not guarantees of future performance, actions or events. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management’s underlying beliefs and assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. These risks and uncertainties include those set forth under Item 1A, Risk Factors , in this Annual Report on Form 10-K. Forward-looking statements speak only as of the date on which they are made. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable securities laws and regulations.
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ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
The Company’s international subsidiaries operate with functional currencies other than the U.S. dollar. Since the Company’s Consolidated Financial Statements are presented in U.S. dollars, the Company must translate all components of these financial statements from the functional currencies into U.S. dollars at exchange rates in effect during or at the end of the reporting period. Net revenue generated from the Europe eCommerce distribution channel represented 6.8% of our total net revenue in Fiscal 2025. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of net revenues, expenses, assets and liabilities. Assuming a 10% change in foreign currency exchange rates, Fiscal 2025 net revenue would have increased or decreased by approximately $9.0 million. Translation gains or losses, which are recorded in other comprehensive income or loss, result from translation of the assets and liabilities of our international subsidiaries into U.S. dollars. Foreign currency translation gains, net, for Fiscal 2025 totaled approximately $0.1 million related to our international subsidiaries in United Kingdom and Germany. Additionally, the Company has foreign currency denominated intercompany receivables and payables that when settled result in a transaction gain or loss. A 10% change in foreign currency exchanges rates would not result in a significant transaction gain or loss in earnings. The Company does not utilize financial instruments for trading purposes or hedging and have not used any derivative financial instruments to limit foreign currency exchange rate exposures. The Company does not consider our foreign earnings to be permanently reinvested.
As of January 30, 2026, the Company had $9.1 million of cash and cash equivalents denominated in foreign currency, principally in British pound sterling, euro and Hong Kong dollar.
Interest Rate Risk
The Company is subject to interest rate risk with the Term Loan Facility and the ABL Facility, as both require the Company to pay interest on outstanding borrowings at variable rates. Each one percentage point change in interest rates (above the 2% SOFR floor) associated with the Term Loan Facility would result in a $2.3 million change in our annual cash interest expenses. Assuming our ABL Facility was fully drawn to a principal amount equal to $225.0 million, each one percentage point change in interest rates would result in a $2.3 million change in our annual cash interest expense.
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ITEM 8. FI NANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
Consolidated Statements of Comprehensive Operations for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
Consolidated Balance Sheets at January 30, 2026 and January 31, 2025
Consolidated Statements of Cash Flows for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
Consolidated Statements of Changes in Stockholders’ Equity for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
Notes to Consolidated Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Lands’ End, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Lands’ End, Inc. and subsidiaries (the "Company") as of January 30, 2026 and January 31, 2025, the related consolidated statements of operations, comprehensive operations, cash flows, and changes in stockholders’ equity, for each of the three fiscal years in the period ended January 30, 2026, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of January 30, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 30, 2026 and January 31, 2025, and the results of its operations and its cash flows for each of the three years in the period ended January 30, 2026, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 30, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
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with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventories – Refer to Note 2 of the Financial Statements
Critical Audit Matter Description
The Company values its United States inventory, primarily merchandise held for sale, using the last-in, first-out (“LIFO”) method, with these inventories valued at the lower of LIFO cost or market. The Company regularly reviews inventories and records a reserve for excess and obsolete inventory to reduce the carrying value to the lower of LIFO cost or market. Recording the reserve requires management to make assumptions and apply judgement related to liquidation and disposal of identified inventory.
Given the judgments made by management to estimate the reserves for excess and obsolete inventory, auditing the reserve involved a higher degree of auditor judgment and the involvement of more senior members of the engagement team in executing, supervising, and reviewing the results of the procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the reserves for excess and obsolete United States inventory included the following, among others:
We tested the effectiveness of controls over the review of excess and obsolete inventory and the required reserve to value inventory at the lower of cost or market.
We evaluated the appropriateness and consistency of management’s methods and assumptions used in developing its estimate of the inventory reserve calculation.
We have tested the completeness and accuracy of certain inputs supporting management’s reserve, including the age of its inventory, historical margins, and sell through rates.
We compared actual inventory sold below cost in the current fiscal year to the reserve estimated by the Company in the prior fiscal year to evaluate management's ability to accurately estimate the reserve.
We tested the mathematical accuracy of the Company’s reserve calculation.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 26, 2026
We have served as the Company’s auditor since 2024.
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LANDS’ END, INC.
Consolidated Statem ents of Operations
for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
(in thousands except per share data)
REVENUES
Net revenue
Cost of sales (excluding depreciation and amortization)
Gross profit
Selling and administrative
Depreciation and amortization
Goodwill impairment
Other operating expense, net
Total costs and expenses
Operating income (loss)
Interest expense
Loss on extinguishment of debt
Other (income) expense, net
Income (loss) before income taxes
Income tax expense (benefit)
NET INCOME (LOSS)
NET EARNINGS (LOSS) PER COMMON SHARE
ATTRIBUTABLE TO STOCKHOLDERS
Basic:
Diluted:
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
See accompanying Notes to Consolidated Financial Statements.
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LANDS’ END, INC.
Consolidated Statements of Comprehensive Operations
for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
(in thousands)
NET INCOME (LOSS)
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss)
Reclassification of foreign currency translation gain to income
COMPREHENSIVE INCOME (LOSS)
See accompanying Notes to Consolidated Financial Statements.
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LANDS’ END, INC.
Consolidated B alance Sheets
(in thousands except per share data)
January 30, 2026
January 31, 2025
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventories
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use asset
Intangible asset, net
Asset held for sale
Other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt
Accounts payable
Lease liability – current
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt, net
Lease liability – long-term
Deferred tax liabilities
Other liabilities
TOTAL LIABILITIES
STOCKHOLDERS’ EQUITY
Common stock, par value $ 0.01 - authorized: 480,000 shares; issued
and outstanding: 30,575 and 30,843 , respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
TOTAL STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See accompanying Notes to Consolidated Financial Statements.
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LANDS’ END, INC.
Consolidated Statem ents of Cash Flows
for Fiscal Years Ended January 30, 2026, January 31, 2025 and February 2, 2024
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
Amortization of debt issuance costs
Loss (gain) on disposal of property and equipment
Stock-based compensation
Deferred income taxes
Goodwill and long-lived asset impairment
Loss on extinguishment of debt
Other
Change in operating assets and liabilities:
Accounts receivable, net
Inventories
Accounts payable
Other operating assets
Other operating liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of property and equipment
Purchases of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under ABL Facility
Payments of borrowings under ABL Facility
Proceeds from issuance on long-term debt, net of discount
Payments on term loan
Payments of debt extinguishment costs
Payments of debt issuance costs
Proceeds from exercise of stock options
Payments for taxes and exercise costs related to net share
settlement of equity awards
Purchases and retirement of common stock
Net cash used in financing activities
Effects of exchange rate changes on cash, cash equivalents
and restricted cash
NET DECREASE IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
BEGINNING OF YEAR
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
END OF YEAR
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment
Income taxes paid, net of refunds
Interest paid
See accompanying Notes to Consolidated Financial Statements.
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LANDS’ END, INC.
Consolidated Statements of Ch anges in Stockholders’ Equity
(Accumulated
Accumulated
Additional
Deficit)
Other
Total
Common Stock Issued
Paid-in
Retained
Comprehensive
Stockholders’
(in thousands)
Shares
Amount
Capital
Earnings
Loss
Equity
Balance at January 27, 2023
Net loss
Cumulative translation adjustment,
net of tax
Stock-based compensation expense
Vesting of restricted shares
Common stock withheld related to net
share settlement of equity awards
Purchases and retirement of common stock, including excise taxes
Balance at February 2, 2024
Net income
Cumulative translation adjustment,
net of tax
Stock-based compensation expense
Vesting of restricted shares
Common stock withheld related to net
share settlement of equity awards
Purchases and retirement of common stock, including excise taxes
Balance at January 31, 2025
Net income
Cumulative translation adjustment,
net of tax
Stock-based compensation expense
Exercise of stock options
Vesting of restricted shares
Common stock withheld related to net
share settlement of equity awards
Purchases and retirement of common stock, including excise taxes
Balance at January 30, 2026
See accompanying Notes to Consolidated Financial Statements.
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LANDS’ END, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BACKGROUND AND BASIS OF PRESENTATION
Description of Business
Lands’ End, Inc. (“Lands’ End” or the “Company”) is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms. Lands’ End offers products online at www.landsend.com, through third-party distribution channels and Company Operated stores. The Company also offers products to businesses and schools, for their employees and students, through the Outfitters distribution channel.
Terms that are commonly used in the Company’s Notes to the Consolidated Financial Statements are defined as follows:
ABL Facility – Asset-based senior secured credit agreement, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders, as amended to date
ASC – Financial Accounting Standards Board Accounting Standards Codification, which serves as the source for authoritative GAAP, as supplemented by rules and interpretive releases by the SEC which are also sources of authoritative GAAP for SEC registrants
Company Operated stores – Lands’ End retail stores in the Retail distribution channel
Debt Facilities – Collectively, the Term Loan Facility and ABL Facility
Deferred Awards – Time vesting stock awards
EPS – Earnings per share
FASB – Financial Accounting Standards Board
First Quarter 2024 – The 13 weeks ended May 3, 2024
First Quarter 2026 – The 13 weeks ending May 1, 2026
Fiscal 2025 – The 52 weeks ended January 30, 2026
Fiscal 2024 – The 52 weeks ended January 31, 2025
Fiscal 2023 – The 53 weeks ended February 2, 2024
Fiscal 2022 – The 52 weeks ended January 27, 2023
GAAP – Accounting principles generally accepted in the United States
Option Awards – Stock option awards
Performance Awards – Performance-based stock awards
SEC – United States Securities and Exchange Commission
Second Quarter 2024 – The 13 weeks ended August 2, 2024
SOFR – Secured Overnight Funding Rate
Target Shares – Number of restricted stock units awarded to a recipient which reflects the number of shares to be delivered based on achievement of target performance goals
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Term Loan Adjusted SOFR – SOFR plus adjustments of either (a) 0.11448 % for a one-month interest period, (b) 0.26161 % for a three-month interest period, or (c) 0.42826 % for a six-month interest period
Term Loan Facility – Term loan credit agreement, dated as of December 29, 2023, among the Company, Blue Torch Capital, as Administrative Agent and Collateral Agent, and the lenders party thereto
Basis of Presentation
The Consolidated Financial Statements include the accounts of Lands’ End, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated.
The accompanying Consolidated Financial Statements have been prepared in accordance with GAAP. In the opinion of management, all material adjustments of a normal and recurring nature necessary for a fair presentation of the results have been reflected for the periods presented. Dollar amounts are reported in thousands, except per share data, unless otherwise noted.
Macroeconomic Challenges
Macroeconomic issues which impact consumer discretionary spending, such as realized inflation-based price increases and high interest rates have continued to have an impact on the Company’s business. Apparel purchases historically have been influenced by domestic and global economic conditions, which may negatively impact customer demand and may require higher levels of promotion in order to attract and retain customers. Additionally, the variable interest rates associated with the Company’s Debt Facilities are negatively affected by higher interest rate environments. Macroeconomic challenges may lead to increased cost of raw materials, packaging materials, labor, energy, fuel, debt and other inputs necessary for the production and distribution of the Company’s products. Moreover, uncertainty with respect to trade policy and tariffs, including increased tariffs applicable to countries where the Company’s vendors manufacture Lands’ End product, may result in an increase in the cost of the Company’s products.
In addition, conflict‑related disruptions in global energy markets and shipping lanes in early 2026 have contributed to heightened volatility in crude oil and refined‑product prices and interruptions to certain maritime routes, which may result in higher freight and delivery costs, carrier surcharges, longer transit times, and inventory delays.
Restructuring and Other Costs
During Fiscal 2025 the Company incurred ongoing costs related to exploring strategic alternatives for the Company to maximize shareholder value and has included those costs as part of restructuring and other. Additionally, the Company reduced approximately 6 % of its corporate office positions and incurred restructuring charges, primarily severance and benefit and other costs related to cost optimization of business operations. During Fiscal 2024 and Fiscal 2023, the Company reduced approximately 10 % of its corporate office positions and incurred restructuring charges, primarily severance and benefit and other related costs. The reductions in the corporate office positions were made to better align with the evolving needs of the business and to invest in key growth areas.
The following table summarizes the restructuring costs recognized in Other operating expense, net in the Consolidated Statement of Operations for Fiscal 2025, Fiscal 2024 and Fiscal 2023:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Employee severance and benefit costs
Strategic alternatives and other costs
Total restructuring and other
Included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets are approximately $ 6.0 million of strategic alternatives and other costs and $ 0.1 million of employee severance and benefit costs as of January 30, 2026 and approximately $ 2.0 million of employee severance and benefit costs as of January 31, 2025 yet to be paid.
Lands’ End Japan Closure
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During Fiscal 2022, the Board of Directors approved a plan to wind down and cease operations of Lands’ End Japan KK. Lands’ End Japan KK represents the Japan eCommerce operating segment. The Company recorded closing costs for employee severance and benefit costs, early termination and restoration costs of lease facilities and contract cancellation and other costs. The final liquidation occurred in First Quarter 2024.
The Company incurred no closing costs in Fiscal 2025 and 2024 and approximately $ 0.3 million during Fiscal 2023 recorded in Other operating expense, net in the Consolidated Statements of Operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company’s fiscal year end is on the Friday preceding the Saturday closest to January 31 each year. The fiscal periods in this report are presented as follows, unless the context otherwise requires:
Fiscal Year
Ended
Weeks
January 30, 2026
January 31, 2025
February 2, 2024
Seasonality
The Company’s operations have historically been seasonal, with a disproportionate amount of net revenue occurring in the fourth fiscal quarter, reflecting increased customer demand during the year-end holiday selling season. The impact of seasonality on results of operations is more pronounced since the level of certain fixed costs, such as occupancy and overhead expenses, do not vary with sales. The Company’s results of operations also may fluctuate based upon such factors as the timing of certain holiday season dates and promotions, the amount of net revenue contributed by new and existing stores, the timing and level of markdowns, competitive factors, weather and general economic conditions.
Working capital requirements typically increase during the second and third quarters of the fiscal year as inventory builds to support peak selling periods and, accordingly, typically decrease during the fourth quarter of the fiscal year as inventory is sold. Cash provided by operating activities is typically higher in the fourth quarter of the fiscal year due to reduced working capital requirements during that period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportable amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period. Significant accounting estimates inherent in the preparation of the consolidated financial statements include timing of revenue recognition, estimated merchandise returns, inventory valuation, impairment assessments for goodwill, indefinite-lived intangible assets and long-lived assets and income taxes. Actual results could differ from those estimates made by management, which could have a material impact on the Company’s financial position or results of operations.
Cash and cash equivalents
Cash and cash equivalents consist of highly liquid temporary instruments purchased with original maturities of three months or less. It also includes deposits in-transit from banks for payments related to third-party credit card and debit card transactions. The Company maintains a portion of its cash in Federal Deposit Insurance Corporation (“FDIC”) insured bank deposit accounts which, at times, may exceed federally insured limits. To date, the Company has not experienced any losses in such accounts. The Company does not believe, based on the size and strength of the banking institutions used, it is exposed to any significant credit risks in cash.
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Restricted cash
The Company classifies cash balances pledged as collateral as Restricted cash on the Consolidated Balance Sheets.
Allowance for Credit Losses
The Company provides an allowance for credit losses based on historical loss experience, collection experience, delinquency trends, economic conditions and specific identification. The Accounts receivable balance on the Consolidated Balance Sheets is presented net of the Company’s allowance for credit losses and is comprised of various customer-related accounts receivable.
Changes in the balance of the allowance for credit losses are as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Beginning balance
Provision
Write-offs
Ending balance
Inventory
Inventories primarily consist of merchandise purchased for resale. For financial reporting and tax purposes, the Company’s United States inventory, primarily merchandise held for sale, is stated at the lower of last-in, first-out (“LIFO”) cost or market. The Company accounts for its non-United States inventory on the first-in, first-out (“FIFO”) method, which is stated at the lower of cost or net realizable value. The United States inventory accounted for using the LIFO method was 89 % and 93 % of total inventory as of January 30, 2026 and January 31, 2025, respectively. If the FIFO method of accounting for inventory had been used, the effect on inventory would have been an increase of $ 0.6 million and $ 0.5 million as of January 30, 2026 and January 31, 2025, respectively.
The Company maintains a reserve for excess and obsolete inventory. The reserve is calculated based on historical experience related to liquidation and disposal of identified inventory. The excess and obsolescence reserve balances were $ 7.3 million and $ 11.7 million as of January 30, 2026 and January 31, 2025 , respectively.
Deferred Catalog Costs and Marketing
Costs incurred for direct response marketing consist primarily of catalog production and mailing costs that are generally amortized within two months from the date catalogs are mailed. Unamortized marketing costs reported as prepaid assets were $ 7.7 million and $ 10.1 million as of January 30, 2026 and January 31, 2025, respectively. The Company expenses the costs of marketing for website, magazine, newspaper, radio and other general media when the marketing takes place. Marketing expenses, including catalog costs amortization, digital-related costs and other print media were $ 219.1 million , $ 207.6 million and $ 200.5 million for Fiscal 2025, Fiscal 2024 and Fiscal 2023 , respectively. These costs are included within Selling and administrative expenses in the accompanying Consolidated Statements of Operations.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred. Internal and external costs directly related to the development of internal-use software during
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the application development stage, including costs incurred for third-party contractors and employee compensation, are capitalized. As of the balance sheet dates, Property and equipment, net consisted of the following:
(in thousands)
Asset Lives (years)
January 30,
January 31,
Land
Buildings and improvements
Furniture, fixtures and equipment
Computer hardware and software
Leasehold improvements
Construction in progress
Gross property and equipment
Less: Accumulated depreciation
Total property and equipment, net
As of both January 30, 2026 and January 31, 2025, construction in progress relates primarily to technological investments.
Depreciation expense is recorded over the estimated useful lives of the respective assets using the straight-line method. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense was $ 30.2 million, $ 33.8 million and $ 38.5 million for Fiscal 2025, Fiscal 2024 and Fiscal 2023 , respectively.
Leases
The Company is a lessee under various lease agreements for its Company Operated store locations and certain international distribution and office facilities. All leases are classified as operating leases. The Company’s leases have remaining lease terms ranging from less than one year up to six years with renewal options. The lease term is defined as the noncancelable portion of the lease term plus any periods covered by an option to extend the lease, if it is reasonably certain that the option will be exercised.
The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease inception. Lease commencement is the date in which the lessor provides the Company access to, and the right to control, the identified asset. At lease commencement, the Company recognizes a right-of-use asset and a corresponding lease liability measured at the present value of the future minimum lease payments. Minimum lease payments include the fixed lease component of the agreement, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. The right-of-use asset is recorded at the amount of the lease liability, increased for prepaid lease and initial direct costs paid and reduced by any lease incentives.
The Company has elected the practical expedient of not recognizing a right-of-use asset or lease liability for short-term leases, which are leases with a term of twelve months or less. Lease payments on short-term leases are expensed as incurred. The Company has lease agreements with lease and non-lease components. The Company has elected the practical expedient to combine lease and non-lease components. The Company does not have any leases with residual value guarantees or restrictions or covenants imposed by the lease.
Due to the absence of an implicit rate in the Company’s lease agreements, the Company estimates its incremental borrowing rate at lease commencement in determining the present value of lease payments for each lease based on the lease term, lease currency and the Company’s credit spread. The yield curve selected at the lease commencement date represents one notch above the Company’s unsecured credit rating, and therefore is considered a close proxy for the incremental borrowing rate the Company would incur for secured debt.
In addition to rent payments, the lease agreements contain payments for real estate taxes, insurance, common area maintenance and utilities that are not fixed. The Company accounts for these costs as variable payments and does not include such costs as a lease component.
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The Company’s leases are classified as operating leases, which are included in the Operating lease right-of-use asset, Lease liability – current and Lease liability – long-term on the Company’s Consolidated Balance Sheets. Lease expense is recognized on a straight-line basis over the lease term and is included in Selling and administrative expense in the Consolidated Statements of Operations. See Note 4, Leases .
Long-lived Asset Impairment Analysis
Property and equipment are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”) the Company reviewed the long-lived asset groups for impairment as of January 30, 2026 and January 31, 2025.
During Second Quarter 2024, the Company considered management’s decision to replace the existing information technology infrastructure with an enterprise resource planning (“ERP”) software system within the next 18 to 24 months to be a triggering event. The Company determined that certain long-lived assets, primarily capitalized internal-use software projects and computer software, would no longer be utilized or have future benefit with the planned ERP platform and recognized impairment in the amount of $ 0.4 million and $ 3.8 million for Fiscal 2025 and Fiscal 2024, respectively, recorded in Other operating expense, net in the Consolidated Statements of Operations.
The Company Operated store long-lived asset groups, including Operating right-of-use assets, are regularly reviewed for impairment indicators when the Company Operated store meets Same Store Sales status. A Company Operated store is included in U.S. Same Store Sales calculations when it has been open for at least 14 months. Impairment is assessed at the individual store level which is the lowest level of identifiable cash flows and considers the estimated undiscounted cash flows over the asset’s remaining life. If estimated undiscounted cash flows are insufficient to recover the investment, an impairment loss is recognized equal to the difference between the estimated fair value of the asset and its carrying value, net of salvage, and any costs of disposition. The fair value estimate is generally the discounted amount of estimated store-specific cash flows. During Fiscal 2025 , the Company recognized impairment in the amount of $ 0.3 million. During Fiscal 2024 and Fiscal 2023 , the Company recognized no impairment for right-of-use assets and property and equipment of Company Operated store locations.
Goodwill and Indefinite-lived Intangible Asset Impairment Assessments
Goodwill and the indefinite-lived trade name intangible asset are tested separately for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment assessments contain multiple uncertainties because the calculation requires management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. If actual results fall short of the Company’s estimates and assumptions used in estimating future cash flows and asset fair values, the Company may incur future impairment charges that could be material.
Goodwill impairment assessments
In Fiscal 2023, in connection with the preparation of the financial statements for the quarter ended October 27, 2023, the Company considered the decline in the Company’s stock price and market capitalization, as well as the then current market and macroeconomic conditions, to be a triggering event for the U.S. eCommerce and Outfitters reporting units and therefore completed an interim test for impairment of goodwill for these reporting units as of October 27, 2023. The Company tested goodwill for impairment using a one-step quantitative test. The quantitative test compared the reporting unit’s fair value to its carrying value. An impairment was recorded for any excess carrying value above the reporting unit’s fair value, not to exceed the amount of goodwill. The Company estimated fair value of its reporting units using a discounted cash flow model, commonly referred to as the income approach. The income approach used a reporting unit’s projection of estimated operating results and cash flows that was discounted using a weighted-average cost of capital that reflected then current market conditions appropriate to the Company’s reporting unit. The discounted cash flow model used management’s best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs and estimates of future
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expected changes in operating margins and cash expenditures. Other significant estimates and assumptions included terminal value growth rates, weighted average cost of capital and changes in future working capital requirements.
The testing resulted in goodwill impairment of the remaining $ 70.4 million and $ 36.3 million of goodwill allocated to the Company’s U.S. eCommerce and Outfitters reporting units, respectively.
Indefinite-lived intangible asset impairment assessments
The Company’s indefinite-lived intangible asset is the Lands’ End trade name. The Company reviews the trade name for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. For Fiscal 2025, the Company performed a qualitative impairment assessment. The qualitative impairment assessment involves three steps: (1) identify relevant inputs and assumptions that affect fair value, (2) identify relevant events and circumstances that may have an impact on those inputs and assumptions and (3) evaluate, both individually and in the aggregate, the impact of events and circumstances on the inputs and assumptions related to determining whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. For Fiscal 2024 and Fiscal 2023, the fair value of the trade name indefinite-lived intangible asset was estimated using the relief from royalty method. The relief from royalty method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a forecasted net revenue stream and discounting the resulting cash flows to determine a present value. The Company multiplied the selected royalty rate by the forecasted net revenue stream to calculate the cost savings (relief from royalty payment) associated with the asset. The cash flows are then discounted to present value using the selected discount rate and compared to the carrying value of the asset.
There was no impairment of the trade name during any period presented.
Financial Instruments with Off-Balance-Sheet Risk
The $ 225.0 million ABL Facility includes a $ 35.0 million sublimit for letters of credit and the maturity date is the earlier of (a) March 28, 2030 and (b) September 29, 2028 if, on or prior to such date, the Term Loan Facility has not been refinanced, extended or repaid in full . The ABL Facility is available for working capital and other general corporate liquidity needs. There was no balance outstanding as of January 30, 2026 and January 31, 2025. The balance of outstanding letters of credit w as $ 11.0 m illion and $ 10.9 million on January 30, 2026 and January 31, 2025 , respectively.
Fair Value of Financial Instruments
The Company determines the fair value of financial instruments in accordance with accounting standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in accordance with GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. The Company reports or discloses the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable. Total accounts receivable, net was $ 41.3 million and $ 47.8 million as of January 30, 2026 and January 31, 2025, respectively.
Cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and other current liabilities and revolving long-term borrowings on ABL Facility are reflected in the Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments.
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Long-term debt, net is reflected in the Consolidated Balance Sheets at amortized cost. The fair value of debt was determined utilizing Level 3 valuation techniques as of January 30, 2026 and January 31, 2025. See Note 8, Fair Value Measurements of Financial Assets and Liabilities .
Foreign Currency Translations and Transactions
The Company translates the assets and liabilities of foreign subsidiaries from their respective functional currencies to United States dollars at the appropriate spot rates as of the balance sheet date. Revenue and expenses of operations are translated to United States dollars using weighted average exchange rates during the year. The foreign subsidiaries use the local currency as their functional currency. The effects of foreign currency translation adjustments are included as a component of Accumulated other comprehensive loss in the accompanying Consolidated Statements of Changes in Stockholders’ Equity. Foreign currency translation gains, net, for Fiscal 2025 and Fiscal 2023 total approximately $ 0.1 million and $ 1.0 million, respectively. Foreign currency translation losses, net for Fiscal 2024 totaled approxim ately $ 0.6 m illion. The Company recognized a foreign exchange transaction gain of $ 2.0 million and $ 1.0 million in Fiscal 2025 and Fiscal 2023 , respectively. The Company recognized a foreign exchange transaction loss of $ 0.4 million in Fiscal 2024 . These are recorded in either Cost of sales (excluding depreciation and amortization) or Selling and administrative in the accompanying Consolidated Statements of Operations based on the underlying nature of the transactions giving rise to the gain or loss.
Revenue Recognition
Revenue includes sales of merchandise and delivery revenue related to merchandise sold. Substantially all of the Company’s revenue is recognized when control of product passes to customers, which for the U.S. eCommerce, Europe eCommerce, Outfitters and Third Party distribution channels is when the merchandise is received by the customer and for the Retail distribution channel is at the time of sale in the store. The Company recognizes revenue, including shipping and handling fees billed to customers, in the amount expected to be received when control of the Company’s products transfers to customers, and is presented net of various forms of promotions, which range from contractually fixed percentage price reductions to sales returns, discounts, and other incentives that may vary in amount. Variable amounts are estimated based on an analysis of historical experience and adjusted as better estimates become available.
The Company generates royalty revenue from licensing the right to use its trademarks to third parties. The licensing agreements generally are exclusive to a product category, selling channel and/or geography, have terms in excess of one year, provide for annual guaranteed minimum royalties and, in most cases, include renewal options. In certain agreements, the licensee pays the Company a fulfillment fee for licensed product sold on the Company’s website and fulfilled from the Company’s distribution center. The trademark royalty revenue and fulfillment fee are included in Net revenue and reported in the Licensing distribution channel.
In exchange for providing these rights, the license agreements require the licensees to pay the Company a trademark royalty based on net sales as defined in the license agreements. The Company recognizes sales-based royalty revenue (i) when a contractually guaranteed minimum is not expected to be met, the minimum is recognized as revenue on a straight-line basis over the contractual period, or (ii) when the contractually guaranteed minimum is expected to be met, revenue is recognized when the related sales of the licensed product occurs. The fulfillment fee is recognized when control of the product passes to the customers. In certain licensing agreements, the Company agreed to provide marketing activities. The Company receives reimbursement for such services at cost. The amount of these reimbursements are recorded as a reduction of Selling and administrative expenses in the Consolidated Statements of Operations. The amount of these reimbursements was $ 11.4 million and $ 9.3 million for Fiscal 2025 and Fiscal 2024, respectively.
The Company excludes from revenue, taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities.
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Contract Liabilities
Contract liabilities consist of payments received in advance of the transfer of control to the customer. As products are delivered and control transfers, the Company recognizes the deferred revenue in Net revenue in the Consolidated Statements of Operations. The following table summarizes the deferred revenue associated with payments received in advance of the transfer of control to the customer reported in Accrued expenses and other current liabilities in the Consolidated Balance Sheets and amounts recognized through Net revenue for each period presented. The majority of deferred revenue as of January 30, 2026 is expected to be recognized in Net revenue in First Quarter 2026, as products are delivered to customers.
(in thousands)
Fiscal 2025
Fiscal 2024
Deferred revenue beginning of period
Deferred revenue recognized in period
Revenue deferred in period
Deferred revenue end of period
Revenue from gift cards is recognized when (i) the gift card is redeemed by the customer for merchandise, or (ii) as gift card breakage, an estimate of gift cards which will not be redeemed where the Company does not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions. Gift card breakage is recorded within Net revenue in the Consolidated Statements of Operations. Prior to their redemption, gift cards are recorded as a liability, included within Accrued expenses and other current liabilities in the Consolidated Balance Sheets. The liability is estimated based on expected breakage that considers historical patterns of redemption. The following table provides the reconciliation of the contract liability related to gift cards:
(in thousands)
Fiscal 2025
Fiscal 2024
Balance as of beginning of period
Gift cards sold
Gift cards redeemed
Gift card breakage
Balance as of end of period
Refund Liabilities
Refund liabilities, primarily associated with product sales returns and retrospective volume rebates, represent variable consideration and are estimated and recorded as a reduction to Net revenue based on historical experience. As of January 30, 2026 and January 31, 2025, $ 14.1 million and $ 15.2 million , respectively, of refund liabilities, primarily associated with estimated product returns, were recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.
Cost of Sales
Cost of sales are comprised principally of the costs of merchandise sold, inbound shipping and handling, tariffs, duty, warehousing and distribution (including receiving, picking, packing, store delivery and value-added costs), customer shipping and handling costs and physical inventory losses. Depreciation and amortization are not included in the Company’s Cost of sales.
Selling and Administrative Expenses
Selling and administrative expenses are comprised principally of payroll and benefits costs, marketing, information technology expenses, third-party services, occupancy costs of Company Operated stores and corporate facilities, and other administrative expenses. All stock-based compensation is recorded in Selling and administrative expenses. See Note 5, Stock-Based Compensation .
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Income Taxes
Deferred income tax assets and liabilities are based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws. The tax balances and income tax expense recognized are based on management’s interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects best estimates and assumptions regarding, among other things, the level of future taxable income and tax planning. Future changes in tax laws, changes in projected levels of taxable income, tax planning and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded.
Tax positions are recognized when they are more likely than not to be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is more likely than not to be realized upon settlement. The Company is subject to periodic audits by the United States Internal Revenue Service and other state and local taxing authorities. These audits may challenge certain of the Company’s tax positions such as the timing and amount of income and deductions and the allocation of taxable income to various tax jurisdictions. The Company evaluates its tax positions and establishes liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. These tax uncertainties are reviewed as facts and circumstances change and are adjusted accordingly. This requires significant management judgment in estimating final outcomes. Interest and penalties are classified as Income tax expense in the Consolidated Statements of Operations. See Note 11, Income Taxes , for further details.
The Company performed an evaluation of its deferred tax assets and determined that a valuation allowance is considered necessary for certain jurisdictions. See Note 11, Income Taxes , for further details on the valuation allowance.
Self-Insurance
The Company has a self-insured plan for health and welfare benefits and provides an accrual to cover the obligation. The accrual for the self-insured liability is based on claims filed and an estimate of claims incurred but not yet reported. The Company considers a number of factors, including historical claims information, when determining the amount of the accrual. Costs related to the administration of the plan and related claims are expensed as incurred. Total expenses, net of employee contributions, were $ 19.5 million , $ 21.8 million and $ 18.9 million for Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.
The Company also has a self-insured plan for certain costs related to workers’ compensation. The Company obtains third-party insurance coverage to limit exposure to this workers’ compensation self-insured risk.
Retirement Benefit Plan
The Company has a 401(k) retirement plan, which covers most regular employees and allows them to make contributions. The Company also provides a matching contribution on a portion of the employee contributions. Total expenses incurred under this plan were $ 2.4 million for Fiscal 2025, $ 3.7 million for Fiscal 2024 and $ 3.9 million for Fiscal 2023 . The decrease in Fiscal 2025 was attributed to a temporary suspension of the Company’s 401(k) matching contribution due to tariff mitigation.
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Other Comprehensive Income (Loss)
Other comprehensive income (loss) encompasses all changes in equity other than those arising from transactions with stockholders and is comprised solely of foreign currency translation adjustments. The Company’s foreign subsidiaries use their local currency as their functional currency. Functional currency assets and liabilities are translated into U.S. Dollars using exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates during the period. Resulting translation gains and losses are reported in other comprehensive income (loss), until the substantial liquidation of a subsidiary, at which time accumulated transaction gains or losses are reclassified into net income. During Fiscal 2023, the Company recognized a net gain of $ 0.4 million of cumulative foreign currency translation adjustments related to the substantial liquidation of Lands’ End Japan. See Note 1, Background and Basis of Presentation .
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Beginning balance: Accumulated other comprehensive loss (net of tax of $ 4,234 , $ 4,271 , and $ 4,525 , respectively)
Other comprehensive income (loss)
Foreign currency translation adjustments (net of tax of $ 0 , $( 37 ), and $( 348 ) , respectively)
Reclassification of foreign currency translation gain to income (net of tax of $ 0 , $ 0 , and $ 94 , respectively)
Ending balance: Accumulated other comprehensive loss (net of tax of $ 4,234 , $ 4,234 , and $ 4,271 , respectively)
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Stock-Based Compensation
Stock-based compensation expense for restricted stock units is comprised of both Deferred Awards and Performance Awards. Deferred awards only require each recipient to complete a service period for the awards to be earned. The fair value of Deferred Awards is based on the closing price of the Company’s common stock on the grant date.
Performance Awards have, in addition to a service requirement, financial performance criteria, event criteria and/or stock performance criteria that must be achieved for the awards to be earned. The Performance Awards granted in Fiscal 2023 are also subject to a relative total shareholder return (TSR) modifier. The fair value of Performance Awards granted prior to Fiscal 2023, as well as the portion of the Fiscal 2025 and 2024 Performance Awards with financial performance criteria, are based on the closing price of the Company’s common stock on the grant date. The fair value for both the Performance Awards granted in Fiscal 2025, Fiscal 2024 with stock performance criteria and the Performance Awards granted in Fiscal 2023 with a relative TSR modifier are based on the Monte Carlo simulation model. For Performance Awards granted in Fiscal 2025 with event criteria, the award vests at 100 % of the Target Shares upon the occurrence of the event within a specified amount of time, absent which the award expires unvested.
Option Awards provide the recipient with the option to purchase a set number of shares at a stated exercise price over the term of the contract, which is ten years for all Option Awards currently outstanding. Options are granted with a strike price equal to the stock price on the date of grant and vest over the requisite service period of the award.
The Company recognizes stock-based compensation cost net of estimated forfeitures and revises the estimated forfeitures in subsequent periods if actual forfeitures differ from the estimates. The Company estimates the forfeiture rate based on historical data as well as expected future behavior. Stock-based compensation is recorded in Selling and administrative expense in the Consolidated Statements of Operations over the period in which the employee is required to provide service in exchange for the Deferred Awards and Option Awards and over the applicable performance period for Performance Awards.
Earnings (Loss) per Share
The numerator for both basic and diluted EPS is net income (loss) attributable to the Company. The denominator for basic EPS is based upon the number of weighted average shares of the Company’s common stock outstanding during the reporting periods. The denominator for diluted EPS is based upon the number of weighted average shares of the Company’s common stock and common stock equivalents outstanding during the reporting periods using the treasury stock method in accordance with ASC 260, Earnings Per Share .
The following table summarizes the components of basic and diluted EPS:
(in thousands except per share data)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Net income (loss)
Basic weighted average shares outstanding
Dilutive impact of stock awards
Diluted weighted average shares outstanding
Earnings (loss) per share
Basic
Diluted
Anti-dilutive shares excluded from diluted earnings (loss) per common share calculation
Stock awards are considered anti-dilutive based on the application of the treasury stock method or in the event of a net loss.
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Repurchases of Common Stock
Shares of the Company’s common stock may be repurchased by the Company through open market transactions. The par value of the shares retired was charged against Common stock and the remaining purchase price, including any broker commissions and excise taxes paid, was either (i) allocated between Additional paid-in capital and Retained earnings, or (ii) charged directly against Additional paid-in capital. To the extent the shares are repurchased at a price less than that of initial issuance, or to the extent the Company does not have sufficient reserves in Retained earnings at the time of repurchase, the excess of the purchase price over par value is accounted for entirely as a deduction from Additional paid-in capital. The Company retired all shares that were purchased through the 2024 Share Repurchase Program. See Note 6, Stockholders’ Equity .
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which includes requirements that an entity disclose specific categories in the rate reconciliation table and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. ASU 2023-09 is effective for the annual periods beginning after December 15, 2024. The Company retrospectively adopted ASU 2023-09 in Fiscal 2025. See Note 11 , Income Taxes .
Recently Issued Accounting Pronouncements Not Yet Adopted
In September 2025, the FASB issued Accounting Standards Update (ASU) 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software , which modernizes the accounting for internal-use software to current development practices, clarifies when to begin capitalizing costs and enhances disclosure requirements. This update is effective for interim and annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of ASU 2025-06 on the Company’s Consolidated Financial Statements.
In July 2025, the FASB issued Accounting Standards Update (ASU) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides targeted relief for entities estimating expected credit losses on short-term receivables and contract assets under Topic 606. The guidance allows entities to bypass the requirement to incorporate macroeconomic data into their forecasts when such data is not expected to materially affect the estimate. ASU 2025-05 is effective for the annual periods beginning after December 15, 2025. The Company is currently assessing the impact of ASU 2025-05 on the Company’s Consolidated Financial Statements.
In November 2024, the FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). Under ASU 2024-03, a public entity is required to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. ASU 2024-03 allows for early adoption and requires either prospective adoption to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. The Company is currently assessing the impact of ASU 2024-03 on the Company’s Consolidated Financial Statement disclosures.
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NOTE 3. DEBT
ABL Facility
The Company’s $ 225.0 million committed revolving ABL Facility, as amended to date, includes a $ 35.0 million sublimit for letters of credit and is available for working capital and other general corporate liquidity needs. The amount available to borrow is the lesser of (1) the Aggregate Commitments of $ 225.0 million or (2) the Borrowing Base or Loan Cap which is calculated from Eligible Inventory, Trade Receivables and Credit Card Receivables, all foregoing capitalized terms not defined herein are as defined in the ABL Facility.
The following table summarizes the Company’s ABL Facility borrowing availability:
January 30, 2026
January 31, 2025
(in thousands)
Amount
Amount
ABL Facility limit
Borrowing Base
Outstanding borrowings
Outstanding letters of credit
ABL Facility utilization at end of period
ABL Facility borrowing availability
Effective with the Fifth Amendment to the ABL Facility, dated March 28, 2025 (the “Fifth Amendment”), a 0.10 % adjustment to the SOFR benchmark interest rate was eliminated and the benchmark rates under the ABL Credit Agreement are, at the election of the Company, either: (1) Term SOFR (which is a forward looking term rate based on the secured overnight financing rate), or (2) a Base Rate (which is the greatest of (a) 0 % per annum, (b) the federal funds rate plus 0.50 %, (c) the one-month Term SOFR rate plus 1.00 %, or (d) the Wells Fargo “prime rate”). The borrowing margin for SOFR Rate loans is (i) where the average daily total outstanding for the previous quarter is less than $95.0 million, 1.50 %, and (ii) where the average daily total outstanding for the previous quarter is equal to or greater than $95.0 million, 1.75 %. For Base Rate loans, the borrowing margin is (i) where the average daily total outstanding for the previous quarter is less than $95.0 million, 0.75 %, and (ii) where the average daily total outstanding for the previous quarter is equal to or greater than $95.0 million, 1.00 % (“Applicable Borrowing Margin”). The Applicable Borrowing Margin for all loans is based upon the average daily total loans outstanding for the previous quarter. The Fifth Amendment reduced aggregate commitments from $ 275 million to $ 225 million, and reduced the letter of credit sublimit from $ 70 million to $ 35 million, in line with the Company’s lower inventory levels and expected letter of credit capacity, and had no material interest rate impact.
The ABL Facility fees include (i) commitment fees of 0.20 % or 0.30 % based upon the average daily unused commitment (aggregate commitment less loans and letter of credit outstanding) under the ABL Facility for the preceding fiscal quarter, (ii) customary letter of credit fees and (iii) customary annual agent fees.
As of January 30, 2026 and January 31, 2025, the Company ha d no b orrowings outstanding under the ABL Facility.
Long-Term Debt
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The Company’s long-term debt consisted of the following:
January 30, 2026
January 31, 2025
(in thousands)
Amount
Interest Rate
Amount
Interest Rate
Term Loan Facility
Less: Current portion of long-term debt
Less: Unamortized debt issuance costs
Long-term debt, net
The interest rates per annum applicable to the loans under the Term Loan Facility are based on a fluctuating rate of interest equal to, at the Company’s election, either (1) Term Loan Adjusted SOFR loan (subject to a 2 % floor) plus an applicable margin, or (2) an alternative base rate loan plus an applicable margin. The applicable margin is based on the Company’s net leverage and will be, (i) for Term Loan Adjusted SOFR loans, 8.25 % per annum if the total leverage ratio is greater than or equal to 2.75 :1.00, 8.00 % per annum if the total leverage ratio is less than 2.75 :1.00 but greater than or equal to 2.25 :1.00, and 7.75 % per annum if the total leverage ratio is less than 2.25 :1.00 and (ii) for base rate loans, 7.25 % per annum if the total leverage ratio is greater than or equal to 2.75 :1.00, 7.00 % per annum if the total leverage ratio is less than 2.75 :1.00 but greater than or equal to 2.25 :1.00, and 6.75 % per annum if the total leverage ratio is less than 2.25 :1.00. In each case, the net leverage is determined as of the last day of each applicable measurement period.
The Term Loan Facility contains customary agency fees.
Maturity; Amortization and Prepayments
The ABL Facility maturity date is the earlier of (a) March 28, 2030 and (b) September 29, 2028 if, on or prior to such date, the Term Loan Facility has not been refinanced, extended or repaid in full in accordance with the terms thereof and not replaced with other indebtedness.
The Term Loan Facility matures on December 29, 2028 , and amortizes at a rate equal to 1.25 % per quarter. Depending upon the Company’s Total Leverage Ratio, as defined in the Term Loan Facility, mandatory prepayments in an amount equal to a percentage of the Company’s excess cash flows in each fiscal year, ranging from 0 % to 75 % are required. The Term Loan Facility also has typical prepayment requirements for the proceeds of certain asset sales, casualty events and extraordinary receipts. Voluntary prepayment and certain mandatory prepayments made (i) between December 30, 2025 and December 29, 2026, would result in a prepayment premium equal to 1 % of the principal amount of the loan prepaid, (ii) between December 30, 2026 and December 29, 2027, would result in a prepayment premium equal to 0.5 % of the principal amount of the loan prepaid and (iii) thereafter no prepayment premium is due.
The Company’s aggregate scheduled maturities of the Debt Facilities as of January 30, 2026 are as follows:
(in thousands)
Total
Guarantees; Security
All obligations under the Debt Facilities are unconditionally guaranteed by Lands’ End, Inc. and, subject to certain exceptions, each of its existing and future direct and indirect subsidiaries. The ABL Facility is secured by a
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first priority security interest in certain working capital of the borrowers and guarantors consisting primarily of accounts receivable and inventory. The Term Loan Facility is also secured by a second priority security interest in the same collateral, with certain exceptions.
The Term Loan Facility is also secured by a first priority security interest in certain property and assets, including certain fixed assets such as real estate, stock of subsidiaries and intellectual property, in each case, subject to certain exceptions. The ABL Facility is also secured by a second priority interest in the same collateral, with certain exceptions.
Representations and Warranties; Covenants
Subject to specified exceptions, the Debt Facilities contain various representations and warranties and restrictive covenants that, among other things, restrict Lands’ End, Inc.’s and its subsidiaries’ ability to incur indebtedness (including guarantees), grant liens, make investments, make dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers or change the nature of their business.
The Term Loan Facility contains financial covenants, including a quarterly maximum total leverage ratio test and a monthly minimum liquidity test.
Under the ABL Facility, if excess availability falls below the greater of 10 % of the Loan Cap amount or $ 12.0 million, the Company will be required to comply with a minimum fixed charge coverage ratio of 1.0 to 1.0.
The Debt Facilities contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances.
As of January 30, 2026, the Company was in compliance with its financial covenants in the Debt Facilities.
Events of Default
The Debt Facilities include customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross defaults related to certain other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control.
NOTE 4. LEASES
The following table summarizes the Company’s components of lease expense, primarily related to Company Operated stores, which is included in Selling and administrative expense in the Consolidated Statements of Operations:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Operating lease expense
Variable lease expense
Total lease expense
Short-term lease cost was not material for Fiscal 2025 and Fiscal 2023 . Short-term lease cost was $ 1.4 million for Fiscal 2024.
Supplemental balance sheet information related to operating leases are as follows:
($'s in thousands)
Fiscal 2025
Fiscal 2024
Operating lease right-of-use asset
Lease liability – current
Lease liability – long-term
Weighted average remaining lease term in years
Weighted average discount rate
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Supplemental cash flow information related to operating leases are as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Operating cash outflows from operating leases
Operating lease right-of-use-assets (reversal) obtained in exchange for lease liabilities
Maturities of operating lease liabilities as of January 30, 2026 are as follows:
(in thousands)
Thereafter
Total operating lease payments
Less imputed interest
Present value of lease liabilities
NOTE 5. STOCK-BASED COMPENSATION
The Company expenses the fair value of all stock awards over their requisite service period, ensuring that the amount of cumulative stock-based compensation expense recognized at any date is at least equal to the portion of the grant-date fair value of the award that is vested at that date. The Company has elected to adjust stock-based compensation expense for an estimated forfeiture rate for those shares not expected to vest and to recognize stock-based compensation expense on a straight-line basis for awards that only have a service requirement with multiple vest dates.
The Company has granted the following types of stock awards to employees at management levels and above, each of which are granted under the Company’s stockholder approved stock plans, other than inducement grants outside of the Company’s stockholder approved stock plans in accordance with Nasdaq Listing Rule 5635(c)(4):
Deferred Awards are in the form of restricted stock units and only require each recipient to complete a service period for the awards to be earned. Deferred Awards generally vest over three years . The fair value of Deferred Awards is based on the closing price of the Company’s common stock on the grant date. Stock-based compensation expense is recognized ratably over the service period and is reduced for estimated forfeitures of those awards not expected to vest due to employee turnover.
Performance Awards are in the form of restricted stock units and have, in addition to a service requirement, financial performance criteria, event criteria and/or stock performance criteria that must be achieved for the awards to be earned. For Performance Awards with financial performance criteria, the Target Shares earned can range from 50 % to 200 % (such result, the “Earned Shares”) once minimum thresholds have been reached and depend on the achievement of certain financial measures for the cumulative period comprised of three-consecutive fiscal years beginning with the fiscal year of the grant date. Performance Awards are also subject to limitations under the Company’s stockholder approved stock plans. The applicable percentage of the Target Shares, as determined by the applicable performance measure, vest after the completion of the applicable three-year performance period and upon determination of achievement of the performance measures by the Compensation Committee of the Board of Directors. Unearned Target Shares are forfeited.
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For Performance Awards granted in Fiscal 2025 with event criteria, the award vests at 100 % of the Target Shares upon the occurrence of the event within a specified amount of time, absent which the award expires unvested. For the Performance Awards granted in Fiscal 2025 and Fiscal 2024 with stock performance criteria, the Target Shares earned can range from 0 % to 100 % based on the Company’s highest average per share common stock closing price, measured over any 20 consecutive trading-day period from and after the date of grant and during the three-consecutive fiscal years beginning with the fiscal year of the grant date.
The Performance Awards granted in Fiscal 2023 are also subject to a relative total shareholder return (“TSR”) modifier which is based on the Company’s total return to stockholders over the measurement period relative to a custom peer group. The Fiscal 2023 Performance Award TSR modifier can result in an adjustment of 75 % to 125 % of the Earned Shares, subject to an overall cap of 200 % of Target Shares and a modifier limitation to 100 % of Target Shares in the event TSR is negative.
The grant date fair value of the Performance Awards granted in Fiscal 2025 and Fiscal 2024 with financial performance criteria and event criteria, are based on the closing price of the Company’s common stock on the grant date. The grant date fair value for the Performance Awards granted in Fiscal 2025 and Fiscal 2024 with stock performance criteria and the Performance Awards granted in Fiscal 2023 with a relative TSR modifier are based on the Monte Carlo simulation model.
iii.
Stock-based compensation expense, including awards with market conditions, is recognized ratably over the related service period, reduced for estimated forfeitures of those awards not expected to vest due to employee turnover and adjusted based on the Company’s estimate of the percentage of the aggregate Target Shares expected to be earned. The Company accrues for Performance Awards on the basis of a 100 % payout unless it becomes probable that the outcome will be significantly different, or the performance can be accurately measured. Stock-based compensation expense for awards with event criteria is not recognized until the event becomes probable.
Option Awards provide the recipient with the option to purchase a set number of shares at a stated exercise price over the term of the contract, which is ten years for all Option Awards currently outstanding. Options are granted with a strike price equal to the stock price on the date of grant and vest over the requisite service period of the award. The fair value of each Option Award is estimated on the grant date using the Black-Scholes option pricing model.
The following table provides a summary of the Company’s stock-based compensation expense, which is included in Selling and administrative expense in the Consolidated Statements of Operations:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Deferred awards
Performance awards (1)
Option awards
Total stock-based compensation expense
Net credit expense for Fiscal 2023 includes a reduction of the accrual for Performance Awards based on actual and projected results relative to performance measures and forfeitures.
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Deferred Awards
The following table provides a summary of the Deferred Awards activity for Fiscal 2025, Fiscal 2024 and Fiscal 2023.
Fiscal Year Ended
January 30, 2026
January 31, 2025
February 2, 2024
(in thousands, except per share amounts)
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Deferred Awards at beginning
of year
Granted
Vested
Forfeited
Deferred Awards at end
of year
Total unrecognized stock-based compensation expense related to unvested Deferred Awards was approximately $ 3.7 m illion as of January 30, 2026 , which is expected to be recognized ratably over a weighted average period of 1.7 years. The total fair value of Deferred Awards vested during Fiscal 2025 and Fiscal 2024 was $ 3.7 mi llion and $ 4.1 million, respectively. Deferred Awards granted to employees during Fiscal 2025 vest over a period of three years .
Performance Awards
The following table provides a summary of the Performance Awards activity for Fiscal 2025, Fiscal 2024 and Fiscal 2023:
Fiscal Year Ended
January 30, 2026
January 31, 2025
February 2, 2024
(in thousands, except per share amounts)
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Number
of Shares
Weighted
Average
Grant Date
Fair Value
Performance Awards at
beginning of year
Granted
Change in estimate - performance
Vested
Forfeited
Performance Awards at
end of year
Total unrecognized stock-based compensation expense related to unvested Performance Awards was approximatel y $ 2.9 m illion as of Fiscal 2025 which is expected to be recognized ratably over a weighted average period of 1.9 y ears. Additionally, total unrecognized stock-based compensation expense related to Performance Awards with event criteria was approximately $ 3.6 million, which is not expected to be recognized unless and until the event is probable of occurring. The Performance Awards granted to employees during Fiscal 2025 vest, if earned, after completion of the applicable performance period. The fair value of the 133,984 Performance Awards with stock performance criteria granted during Fiscal 2025 was estimated at $ 7.81 per share on the grant date using a Monte Carlo simulation.
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Options Awards
The following table provides a summary of the changes in outstanding Options Awards for Fiscal 2025, Fiscal 2024 and Fiscal 2023.
Fiscal Year Ended
January 30, 2026
January 31, 2025
February 2, 2024
Option Awards
Weighted
Average
Exercise Price per Share
Option Awards
Weighted
Average
Exercise Price per Share
Option Awards
Weighted
Average
Exercise Price per Share
(in thousands, except per share amounts)
Option Awards outstanding at beginning of year
Granted
Vested
Exercised
Forfeited
Option Awards outstanding at end of year
The following table provides a summary of information about the Option Awards vested and expected to vest during the contractual term, as well as Option Awards exercisable, as of January 30, 2026:
Option Awards
Weighted
Average
Remaining Contractual Life (Years)
Weighted
Average
Exercise Price
Aggregate Intrinsic Value
(in thousands, except per share and contractual life amounts)
Option Awards vested and expected to vest
Option Awards exercisable
There is no unrecognized stock-based compensation expense related to Option Awards as of January 30, 2026 .
NOTE 6. STOCKHOLDERS’ EQUITY
Share Repurchase Program
On March 15, 2024, the Company announced that its Board of Directors authorized the Company to repurchase up to $ 25.0 million of the Company’s common stock through March 31, 2026 (the “2024 Share Repurchase Program”). Under the 2024 Share Repurchase Program, the Company may repurchase its common stock through open market purchases, in privately negotiated transactions, or by other means in accordance with federal securities laws, including Rule 10b-18 of the Exchange Act. The amount and timing of purchases will be determined by the Company’s management depending upon market conditions and other factors and may be made pursuant to a Rule 10b5-1 trading plan. The 2024 Share Repurchase Program may be suspended or discontinued at any time. As of January 30, 2026 , additional purchases of up to $ 9.0 million could be made under the 2024 Share Repurchase Program. All repurchases are subject to compliance with the Term Loan Facility which imposes a per fiscal year limitation on share repurchases.
The following table summarizes the Company’s share repurchases during Fiscal 2025 and Fiscal 2024:
(in thousands except per share amounts)
January 30, 2026
January 31, 2025
Number of shares repurchased
Total cost
Average per share cost
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The Company retired all shares that were repurchased through the 2024 Share Repurchase Program during Fiscal 2025 and Fiscal 2024. In accordance with FASB ASC 505—Equity, the par value of the shares retired was charged against Common stock and the remaining purchase price, including any broker commissions and excise taxes paid, was either (i) allocated between Additional paid-in capital and Retained earnings, or (ii) charged directly against Additional paid-in capital. To the extent the shares are repurchased at a price less than that of initial issuance, or to the extent the Company does not have sufficient reserves in Retained earnings at the time of repurchase, the excess of the purchase price over par value is accounted for entirely as a deduction from Additional paid-in capital.
NOTE 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
(in thousands)
January 30,
January 31,
Deferred gift card revenue
Accrued employee compensation and benefits
Reserve for sales returns and allowances
Accrued property, sales and other taxes
Deferred revenue
Accrued interest
Other
Total Accrued expenses and other current liabilities
NOTE 8. FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND LIABILITIES
Cash and cash equivalents and restricted cash is reflected on the Consolidated Balance Sheets at fair value based on Level 1 inputs. Cash and cash equivalents and restricted cash amounts are valued based upon statements received from financial institutions. The fair value of restricted cash was $ 0.6 million and $ 2.6 million as of January 30, 2026 and January 31, 2025, respectively.
Carrying amounts and fair values of long-term debt, including current portion, in the Consolidated Balance Sheets are as follows:
January 30, 2026
January 31, 2025
(in thousands)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt, including current portion
The Company’s valuation of long-term debt, including current portion, at fair value is considered a Level 3 instrument under the fair value hierarchy. The Company’s valuation techniques include the Black-Derman-Toy (“BDT”) model as well as market inputs from management. The BDT modeling approach is particularly relevant given the Term Loan Facility’s features, including the optional redemption provision. There were no nonfinancial assets or no nfinancial liabilities recognized at fair value on a nonrecurring basis as of January 30, 2026 and January 31, 2025 .
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NOTE 9. GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSET
The Company’s intangible assets, consisting of a goodwill and trade name, were originally valued in connection with a business combination accounted for under the purchase accounting method. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill was fully impaired in Fiscal 2023.
In Fiscal 2025, the Company classified its trade name as an asset held for sale. See Note 10, Asset Held for Sale .
The following table summarizes the activity of the Company’s Goodwill and Intangible asset:
(in millions)
Goodwill
Intangible asset, net
Balance January 31, 2025
Gross amount
Accumulated impairment losses
Carrying Value
Balance January 30, 2026
Gross amount
Accumulated impairment losses
Reclassified to asset held for sale
Carrying Value
There was no impairment of the trade name during any period presented.
NOTE 10. ASSET HELD FOR SALE
As of January 30, 2026 , the Company classified its trade name with a carrying value of $ 257.0 million as an asset held for sale in accordance with ASC 360, following the decision to enter into a Membership Interest Purchase Agreement (“MIPA”) with WHP Global (“WHP”). Under the MIPA, the Company will contribute all of its intellectual property and related assets associated with the “Lands’ End” brand, including the trade name, to a new joint venture that will be owned 50/50 by Lands’ End and WHP Global. See Note 14 , Pending WHP Transaction .
The asset held for sale was measured at the lower of its carrying amount of fair value less cost to sell. No impairment adjustment was required as fair value less cost to sell exceeded the carrying value.
There were no assets classified as held for sale as of January 31, 2025, and comparative figures for the prior period have not been restated.
NOTE 11. INCOME TAXES
The Company’s income (loss) before income taxes in the United States and in foreign jurisdictions is as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Income (loss) before income taxes
United States
Foreign
Total income (loss) before income taxes
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Certain foreign operations are branches of Lands’ End and are subject to U.S. as well as foreign income tax. The pretax income (loss) by location and the analysis of the income tax provision by taxing jurisdiction are not directly related.
The components of the provision for (benefit from) income taxes are as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
United States
Foreign
Total provision (benefit)
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total provision (benefit)
A reconciliation of the statutory federal income tax rate to the effective income tax rate after the adoption of ASU 2023-09 is as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Tax at statutory federal tax rate
State income taxes, net of federal tax benefit (1)
Foreign tax effects
Germany
Germany statutory tax rate differential
Germany change in valuation allowance
United Kingdom
United Kingdom statutory tax rate differential
United Kingdom change in valuation allowance
Other foreign jurisdictions
Effects of changes in tax law
Effects of cross-border tax laws
Germany Branch
United Kingdom Branch
Other
Tax credits
Changes in valuation allowances
Nontaxable or nondeductible items
Executive compensation
Impairment
Other
Changes in unrecognized tax benefits
Total
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The state jurisdictions that contribute the majority (greater than 50%) of the tax effect in this category for all periods presented include California, New York, Minnesota, Massachusetts, and Wisconsin
Deferred tax assets and liabilities consisted of the following:
(in thousands)
January 30,
January 31,
Deferred tax assets
Deferred revenue
Legal accruals
Deferred compensation
Deferred interest
Reserve for returns
Inventory
CTA investment in foreign subsidiaries
Operating lease liabilities
Other
Net operating loss carryforward
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities
Intangible assets
LIFO reserve
Property and equipment
Operating lease right-of-use assets
Catalog advertising
Total deferred tax liabilities
Net deferred tax liability
As of January 30, 2026, the Company had $ 123.7 million of federal and state net operating loss (“NOL”) and interest expense carryforwards (generating a $ 10.7 million deferred tax asset) available to offset future taxable income. The federal carryforwards have an indefinite life. The state NOL carryforwards generally expire between 2026 and 2045 with certain state NOLs and interest expense carryforwards generated after 2017 having indefinite lives. The Company’s foreign subsidiaries had $ 64.1 million of NOL carryforwards (generating an $ 18.0 million deferred tax asset) available to offset future taxable income. These foreign NOLs can be carried forward indefinitely, however, a valuation allowance was established since the future utilization of these NOLs is uncertain.
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits (“UTBs”) is as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Gross UTBs balance at beginning of period
Tax positions related to the prior periods - gross
(decreases) increases
Settlements
Gross UTBs balance at end of period
As of January 30, 2026, the Company had gross UTBs of $ 7.9 million. Of this amount, $ 0.7 million would, if recognized, impact its effective tax rate. The remaining liability relates to tax positions for which there are offsetting tax benefits, or the uncertainty was related only to timing. Tax years 2022 through 2026 remain open for examination by the Internal Revenue Service as well as various state and foreign jurisdictions.
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The Company classifies interest expense and penalties related to UTBs and interest income on tax overpayments as components of income tax expense. As of January 30, 2026, the total amount of interest expense and penalties recognized on the balance sheet was $ 0.4 million ($ 0.4 million net of federal benefit). As of January 31, 2025, the total amount of interest and penalties recognized on the balance sheet was $ 0.5 million ($ 0.4 million net of federal benefit). The total amount of net interest expense recognized in the Consolidated Statements of Operations was insignificant for all periods presented. The Company files income tax returns in both the United States and various foreign jurisdictions.
The amount of cash income taxes paid (refunded) by the Company, in accordance with the adoption of ASU 2023-09, is as follows:
(in thousands)
Fiscal 2025
United States
State
Texas
Florida
North Carolina
Massachusetts
Louisiana
Michigan
Minnesota
Illinois
California
New Jersey
Other
Foreign
Hong Kong
Total taxes paid (refunded)
NO TE 12. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is party to various claims, legal proceedings and investigations arising in the ordinary course of business. Some of these actions involve complex factual and legal issues and are subject to uncertainties. At this time, the Company is not able to either predict the outcome of these legal proceedings or reasonably estimate a potential range of loss with respect to the proceedings. While it is not feasible to predict the outcome of such pending claims, proceedings and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on results of operations, cash flows or financial position taken as a whole.
NOTE 13. SEGMENT REPORTING
The Company identifies operating segments according to how business activities are managed and evaluated. The Company’s operating segments consisted of: U.S. eCommerce, Europe eCommerce, Outfitters, Third Party, Licensing and Retail.
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U.S. eCommerce offers products through the Company’s eCommerce website.
Europe eCommerce offers products primarily direct to consumers located in Europe through eCommerce international websites as well as third-party marketplace websites.
Outfitters sells uniform and logo apparel to businesses and their employees, as well as to student households through school relationships, located primarily in the U.S.
Third Party sells products direct to consumers through third-party marketplace websites.
Licensing earns royalties on the use of Lands’ End trademark and fees for fulfillment services provided by the Company.
Retail sells products through Company Operated stores, located in the U.S.
The internal reporting of these operating segments is based, in part, on the reporting and review process used by the Company’s chief operating decision maker (“CODM”), its Chief Executive Officer . The CODM assesses segment performance based on variable profit, which is defined as net revenue minus cost of sales and variable selling expenses. The Company’s CODM monitors actual segment variable profit results relative to operating plan and forecast to assess the performance of the business and allocate resources. The CODM does not utilize segment asset information to evaluate performance and make resource allocation decisions, and thus such disclosures are not provided. Variable profit is a non-GAAP financial measure, which management believes provides useful information to investors and to the CODM in order to assess segment performance. A reconciliation of variable profit to consolidated income (loss) before income taxes is set forth below.
The Company determined the U.S. eCommerce, Outfitters and Third Party operating segments share similar economic and other qualitative characteristics, and therefore the results of these operating segments are aggregated into the U.S. Digital segment. The Europe eCommerce, Licensing and Retail operating segments are not quantitatively significant to be separately reported.
The Company has determined its significant segment expense categories based on amounts regularly provided to the Company’s CODM to evaluate segment profitability and drive strategic decision making. The following presents U.S. Digital segment sales and expenses:
Fiscal 2025
Fiscal 2024
Fiscal 2023
(in thousands)
Segment
Total
Segment
Total
Segment
Total
Net revenue
All other net revenue (1)
Total consolidated net revenue
Product cost of goods sold
Shipping cost of goods sold
Marketing costs
Variable personnel costs
Other segment expenses (2)
Segment variable profit
All other net revenue is from Europe eCommerce, Licensing and Retail that does not meet the quantitative thresholds
Other segment expenses include credit card fees, customer service, webhosting, supplies and other miscellaneous expenses
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The reconciliation between segment variable profit to consolidated income (loss) before income taxes is as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
Fiscal 2023
Segment variable profit
All other variable profit (1)
Depreciation expense
Goodwill impairment
Unallocated corporate expenses (2)
Interest expense
Loss on extinguishment of debt
Other income (expense), net
Income (loss) before income taxes
All other variable profit is from Europe eCommerce, Licensing and Retail that does not meet the quantitative thresholds
Unallocated corporate expenses include fixed personnel costs, incentive compensation, office occupancy, information technology and professional fees
Net revenue is presented by distribution channel in the following table:
(in thousands)
Fiscal 2025
% of Net Revenue
Fiscal 2024
% of Net Revenue
Fiscal 2023
% of Net Revenue
U.S. eCommerce
Outfitters
Third Party
Total U.S. Digital Segment revenue
Europe eCommerce
Licensing and Retail
Total Net revenue
The geographical allocation of Net revenue is based upon where the product is shipped. The following presents summarized geographical information:
(in thousands)
Fiscal 2025
% of Net Revenue
Fiscal 2024
% of Net Revenue
Fiscal 2023
% of Net Revenue
United States
Europe
Other
Total Net revenue
Other than the United States no geographic region represented more than 10% of Net revenue.
Property and equipment, net by geographical location are as follows:
(in thousands)
Fiscal 2025
Fiscal 2024
United States
Europe
Asia
Total long-lived assets
Other than the United States, no geographic region is greater than 10% of total Property and equipment, net.
NOTE 14. PENDING WHP TRANSACTION
On January 26, 2026, the Company entered into a Membership Interest Purchase Agreement (“MIPA”) with WHP Global (“WHP”). Under the MIPA, (i) the Company will contribute all of its intellectual property and related assets associated with the “Lands’ End” brand, including all of the license agreements entered into in connection with
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Lands’ End’s licensing business (the “Contributed Assets”) to a newly formed Delaware limited liability company and wholly owned subsidiary of the Company (“IPCo”), and IPCo will assume certain liabilities related to the Contributed Assets and (ii) immediately thereafter, the Company will sell a 50 % controlling ownership stake in IPCo, to WHP for an aggregate purchase price of $ 300 million in cash (“the Transaction”). The Company intends to use the proceeds to, among other things, repay the Term Loan Facility. The closing of the Membership Interests Purchase (the “Closing”) is subject to certain customary closing conditions.
In addition, WHP Global commenced a tender offer for up to $ 100 million of Lands’ End shares at a price of $ 45.00 per share. The tender offer will be subject to proration if oversubscribed and will be conditioned on the closing of the Transaction. As a result of the tender offer, WHP Global is expected to own up to 7 % of Lands’ End outstanding shares of common stock.
Additionally, in certain WHP Global monetization events, such as a qualifying public listing or majority sale, Lands’ End may have the right or obligation to exchange its interest in the joint venture for equity in WHP Global, at the same valuation multiple as the WHP monetization event.
At the Closing, the Company will enter into a License Agreement, pursuant to which IPCo will grant a license the Company to design, manufacture, sell and promote certain categories of products (including the types of products that the Company designs, manufactures and sells as of the date hereof) in certain channels and in certain jurisdictions, including the United States, Canada, the United Kingdom, Germany, Austria and France. The License Agreement is royalty-bearing and subject to a guaranteed minimum royalty (“GMR”) of $ 50,000,000 per year (calculated pro rata based on an amount of $ 50,000,000 for a twelve (12) month period for the first contract year) through the end of the contract year 11, will increase one percent per year for contract years 12-21, and will be $ 55,231,106 for each contract year thereafter, with different royalty rates due depending on the channel under which products are sold. The initial term of the License Agreement is 10 years following the conclusion of the first contract year, and the License Agreement automatically renews for up to 12 successive renewal terms of 7 years each, unless the Company provides notice of non-renewal at least 24 months prior to the end of the initial or applicable renewal term. The License Agreement is only terminable by IPCo if the Company breaches its obligation to make its required guaranteed minimum payments, or to make undisputed royalty payments, in each case subject to an opportunity to cure such non-payment within a certain period of time.
In connection with the Transaction, the Company entered into certain contingent fee arrangements whereby the amounts owed are due and payable only in the event of closing of the Transaction. Approximately $ 17.3 million of transaction-related closing costs will become due and payable upon closing. No amount has been recorded associated with these contingent fee arrangements as of January 30, 2026. Additionally, on March 5, 2026, the Company amended the performance awards with event criteria to be eligible upon the Closing and vest over time thereafter, conditioned on continued employment, such that 50 % of the outstanding awards will vest upon the Closing, 25 % on the first anniversary of the Closing and 25 % on December 31, 2027 (provided that the Transaction has closed). The modification date fair value of these amended awards is estimated to be $ 5.4 million. Transaction-related costs and stock-based compensation expense will be expensed as incu rred or upon vesting, as applicable. As the Closing is expected to occur subsequent to January 30, 2026, no transaction-related costs or stock-based compensation expense have been recognized in the accompanying financial statements.
The Company will account for its investment in IPCo under the equity method of accounting.
NOTE 15. SUBESQUENT EVENT
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were not authorized by the statute. The Company is the importer of record for certain merchandise that was previously subject to such tariffs under IEEPA. The ruling does not establish a refund process,
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and significant uncertainty remains regarding how and when any amounts may be recovered. The Company is evaluating the ruling and potential actions available. Because the process, timing, and amount of any recovery are uncertain, the Company is unable to estimate the financial effects, if any, at this time.
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