We are lowering our price target on LE to $20 (from $45) and reducing our EPS projections after the company registered mixed (and somewhat irrelevant) 1QFY26 (April) results and, more importantly, provided a roadmap for the new Lands’ End after the creation of a joint venture for Lands’ End intellectual property with leading brand licensor WHP Global. While the joint venture drove: 1) material debt reduction; 2) provides highly increased financial latitude for stock repurchase and potential acquisitions; 3) allows for, via their 50% stake in the new venture, Lands’ End to receive a lucrative quarterly profit participation; and 4) a potentially lucrative conversion option for investors to participate in a monetization of WHP Global, the near term financial costs, in terms of royalty payments from Lands’ End to the joint venture and the loss of already operating licensing agreements, serve to materially reduce near term bottom line results; on a pro-forma basis, the joint venture reduced FY25 EPS from $0.86 to $0.55. As such, we are cutting our FY26 EPS to $0.39 (from $0.98) and FY27 EPS to $0.67 (from $1.17), leading us to reduce our price target for LE to $20, or 29.9X our new FY27 EPS. We continue to remain enthused by the longer term positive for Lands’ End, but acknowledge near term upside potential appears limited.
