A new warehouse management system (WMS) knocked $22.3 million off Lands' End's Q1 revenue, an 8.5% drop to $238.9 million. The hit came from a one-week shipping backlog during the cutover, not from weak demand.
Without the disruption, the company said it would have posted low single-digit growth. The new system also lets its distribution centers complete orders the same day they arrive, which the old one could not do.
Why it happened: The switch changed how Lands' End's DCs receive, track and count inventory. Throughput slowed during the cutover. The company intentionally paced shipments while the centers ramped back to full speed, creating a backlog equal to about one week of demand before clearing it.
CEO Andrew McLean, on the earnings call, said: “We switched WMS on… some have switched on Manhattan and they find themselves backlogged by weeks. We were backlogged by one week.” Inventory ran ahead of the ramp-down, ending the quarter at $299.9 million versus $262.4 million a year earlier.
The financial hit: Gross margin fell to 46.7% from 50.8%, and adjusted EBITDA swung to negative $6.2 million from positive $9.5 million. CFO Bernard McCracken said, “That disruption was timing related rather than demand related.” Europe e-commerce, where the DCs were untouched, grew 14.5% over the same months.
What it unlocks: Three capabilities the old system could not support:
Complete orders the same day, reducing standard delivery times 20% to 25%
Qualify Lands' End products for an Amazon Prime badge
Serve as the foundation for the SAP system going live next year
What's next: Lands' End guided Q2 revenue to $290 million to $310 million, pointing to a clean recovery now that the DCs are at full capacity.
By the standards of these projects, a one-week stall is mild. Tennant, an industrial equipment maker, took a roughly $30 million sales hit from its own system go-live that dragged across a full quarter.
