Lands’ End, Inc. (“Lands’ End” or the “Company”) is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. Lands’ End offers products online at www.landsend.com, through Company Operated stores and through third-party distribution channels.

Terms that are commonly used in the Company’s Notes to the Consolidated Financial Statements are defined as follows:

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ABL Facility – Asset-based senior secured credit agreements, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo, N.A. and certain other lenders, as amended to date

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Adjusted EBITDA – Net income (loss) appearing on the Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items

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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

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ASU – Financial Accounting Standards Board Accounting Standards Update

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CARES Act – The Coronavirus Aid, Relief and Economic Security Act signed into law on March 27, 2020

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Company Operated stores – Lands’ End retail stores in the Retail distribution channel

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COVID – Coronavirus disease 2019 (COVID-19) caused by severe respiratory syndrome coronavirus 2 (SARS-CoV-2)

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Debt Facilities – Collectively, the Term Loan Facility and ABL Facility

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Deferred Awards – Time vesting stock awards

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EPS – Earnings per share

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ESL – ESL Investments, Inc. and its investment affiliates, including Edward S. Lampert

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FASB – Financial Accounting Standards Board

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First Quarter 2020 – The 13 weeks ended May 1, 2020

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First Quarter 2021 – The 13 weeks ended April 30, 2021

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Fiscal 2021 – The 52 weeks ended January 28, 2022

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Fiscal 2022 – The Company’s next fiscal year representing the 52 weeks ending January 27, 2023

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GAAP – Accounting principles generally accepted in the United States

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LIBOR – London inter-bank offered rate

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Option Awards – Stock option awards

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Performance Awards – Performance-based stock awards

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Sears Holdings – Sears Holdings Corporation, a Delaware corporation, and its consolidated subsidiaries

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SEC – United States Securities and Exchange Commission

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Second Quarter 2020 – The 13 weeks ended July 31, 2020

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Separation – On April 4, 2014 Sears Holdings distributed 100% of the outstanding common stock of Lands’ End to its stockholders

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Term Loan Facility – Term loan credit agreement, dated as of September 9, 2020, among the Company, Fortress Credit Corp., as Administrative Agent and Collateral Agent, and the lenders party thereto

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Third Quarter 2021 – The 13 weeks ended October 29, 2021

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Transform Holdco – Transform Holdco LLC, an affiliate of ESL, which on February 11, 2019 acquired from Sears Holdings substantially all of the go-forward retail footprint and other assets and component businesses of Sears Holdings as a going concern

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UTBs – Gross unrecognized tax benefits

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 are 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.

COVID surfaced in late 2019 and in March 2020, the World Health Organization declared COVID a pandemic. The onset of the COVID pandemic had a disruptive impact on the Company’s business operations and an unfavorable impact on the Company’s results of operations during the first half of Fiscal 2020. During the Second Quarter 2020, the Company began a recovery that continued to build on the momentum experienced before the COVID pandemic. The Company’s strong foundation and ongoing enhancements across the four strategic pillars of product, digital, uni-channel distribution and infrastructure and business processes have supported the Company during the COVID pandemic and continue to support the Company’s financial performance and encouraging customer metrics. The ultimate timing and impact of customer demand levels across all distribution channels will depend on the duration and scope of the COVID pandemic, overall economic conditions and consumer preferences.

From the beginning of the COVID pandemic, the Company’s priority has been the safety of employees and customers. On March 16, 2020, the Company temporarily closed its Company Operated stores. These stores reopened during Second Quarter 2020. Since the onset of the COVID pandemic, the Company has taken extra precautions in its offices, distribution centers and Company Operated stores, which have varied from time to time based on the then current guidance from global, federal and state health authorities. These measures have included retail guidelines, work-from-home policies, social distancing, masking, thermal scanning and partitions in facilities. With the emergence of COVID variants and periodic increases in the number of reported cases affecting different regions, the Company has been required to keep these measures in place longer than anticipated.

As with all industries, the Company experienced global supply chain challenges and the Company continually monitors its supply chain for manufacturing and transportation delays caused or exacerbated by the COVID pandemic. During Fiscal 2021, the COVID pandemic impacted the Company’s distribution process, third-party manufacturing partners and logistics partners, including shipping delays due to port congestion, and closure of certain third-party manufacturing facilities and production lines. These global supply chain challenges caused manufacturing, transport and receipt of inbound product delays, and resulted, at times, in lower inventory positions and higher than normal back orders. In addition, due to the global supply chain challenges the Company experienced increased transportation and distribution costs during the second half of Fiscal 2021.

The Company expects these global supply chain challenges and increases in transportation costs to continue throughout Fiscal 2022. These shipping delays and additional costs may continue to impact the Company’s future net sales, gross margin and net earnings depending upon the ultimate timing of delivery and availability of product.

The Company has and may continue to experience a U.S. labor shortage affecting its ability to staff and operate its U.S. distribution centers. Due to the seasonal nature of its business, the Company relies heavily on flexible part-time employees to staff its distribution centers in support of its peak seasons, including the back-to-school shopping season and fourth fiscal quarter holiday shopping season.

The Company considered the COVID pandemic to be a triggering event in First Quarter 2020 for the Company’s Outfitters and Japan eCommerce reporting units and therefore completed an interim test for impairment of goodwill for these reporting units as of May 1, 2020. This testing resulted in no impairment of the Company’s Outfitters reporting unit and full impairment of the $3.3 million of goodwill allocated to the Company’s Japan eCommerce reporting unit recorded in the First Quarter 2020. There was not a triggering event or impairment charge for any reporting unit in Fiscal 2021 and the remaining fiscal quarters of Fiscal 2020.

During Second Quarter 2020, the Company reduced approximately 10% of corporate positions. The Company incurred total severance costs of approximately $2.9 million related to the reduction of corporate positions which was recorded in Other operating expense (income), net in the Consolidated Statements of Operations.