Doubts in Dodgeville

Dec 01, 1998 10:30 PM  By

After three sluggish quarters and a stock plunge of roughly 50% for the year, Lands’ End’s board of directors apparently felt that enough was enough. On Oct. 28, the $1.24 billion apparel mailer’s board asked president/CEO Mike Smith and vice chairman of sales William Ferry to resign. At the same time, the board rehired Ferry’s predecessor, David Dyer, to replace Smith. Dyer was also named a board member.

Smith, a Lands’ End employee since 1983, had been promoted to president/CEO in 1994. No successor was named to Ferry, and it’s unclear whether his position will be filled.

As is the custom at Dodgeville, WI-based Lands’ End, nobody within the top ranks, including founder/ chairman Gary Comer, would discuss the moves. Although the departures were officially termed “resignations,” spokeswoman Charlotte LaComb admits that “this is a board decision to changemanagement. The core business has been problematic, not as strong as we’d like. There are economic uncertainties, and the retail and catalog environments are very competitive.”

For the first six months of the fiscal year, total sales were up 9.3%, to $507.8 million, due primarily to an increase in mailings and pages. But net income was cut almost in half, from $10.1 million for the first half of last year to $5.1 million for the six months ended July 31. As of early November, Lands’ End’s stock price was just below $23 a share, down from a 52-week high of more than $44 a share.

In a statement, Comer expressed the board’s gratitude to Smith and Ferry for “reaffirming the core values of the company.” Yet catalog/retail analyst Ken Gassman of Richmond, VA, investment firm Davenport & Co. contends that Smith’s decision to grow Lands’ End beyond its core apparel book was his downfall.

“Smith said a couple of years ago that he wanted to leverage the Lands’ End brand name beyond apparel. But that never materialized,” Gassman says. “He also talked about growing the Coming Home [domestics] catalog, but that never grew. Lands’ End has had a lot of false starts, so Comer probably said it’s time for progress.”

As for Smith’s successor, David Dyer has bounced around since leaving Lands’ End in August 1994 to become president/CEO of cable TV’s Home Shopping Network. After less than a year at HSN, he left to do catalog consulting. Most recently, he consulted with San Francisco-based Texas Pacific Group, the investment firm that bought a majority interest in cataloger/retailer J. Crew Group last year.

Consumers plan to spend nearly 5% more on holiday gifts this year than last, according to an October survey of 1,010 consumers by the National Retail Federation (NRF) and professional services firm Deloitte & Touche. Several of the mailers contacted by Catalog Age seem to be reaping rewards from this increase in spending already. As of early November, holiday sales at Godiva Chocolatier, for one, were up 20%-25% from last year despite only a “slight” rise in circulation. But others, such as jewelry and tabletop cataloger Ross-Simons, suffered flat sales in spite of circulation increases. They still have time to make up for their sluggish start, though: According to the NRF/Deloitte & Touche survey, as of October consumers had spent only 20% of what they planned to spend on holiday shopping.