Lands' End cuts, grows
Lands' End made a smart bet: It managed to cut ad spending to boost the bottom line without hurting sales.
In 2001, the company reversed its plan to increase TV advertising, opting instead to use less expensive and more targeted print marketing. The move contributed to its $3 million in net earnings for the second quarter, up from a $1.8 million loss in the same period last year.
"They really beat the estimates on the street by cutting back significantly on national advertising spending," said Derek Leckow, an analyst at Barrington Research. "Basically, what they've done is cut back down to historical levels and shifted some of the investment from TV to print media."
With last year's U.S. ad media budget-$18.5 million, according to Taylor Nelson Sofres' CMR-Lands' End spent 60% on TV and 40% on print, an aberration for the company as it tried to update its product line and image. This year's media investment-80% print-is more in line with the company's typical spending, about 1% to 1.5% of total annual sales, said Lands' End Director of Advertising and PR Scott Lenz. In the first quarter of 2001, Lands' End's ad outlay totaled $1.4 million, according to CMR.
Print advertising, through Omnicom Group's DDB Worldwide, Chicago, (with media buying via OMD, New York) appears in Lands' End standards like The New York Times and The New Yorker, as well as smaller niche books like American Heritage and The Utne Reader.
"We feel we've been able to match our customer profiles to the kind of magazines they read," said Mr. Lenz, a strategy that has proved more profitable than mass-reach TV ads. "I don't think we got the results we wanted" with the more emotionally focused TV ads, Mr. Lenz added.
In the first six months of 2000-Lands' End's biggest boom in TV ad spending-the company reported a net loss of $1.5 million, a significant drop from the $11 million in net earnings for the first half of 1999.
Mr. Lenz maintains that the rise in Lands' End's net sales-up 3.7% in the second quarter to $285.8 million from $275.6 million last year-is not just a result of the media reshuffle but also of merchandise expansion, catalog redesign and improved ordering on the Web.