LANDS' END, INC. Income Taxes Disclosure
NOTE 11. INCOME TAXES
The Company’s income (loss) before income taxes in the United States and in foreign jurisdictions is as follows:
(in thousands) |
|
Fiscal 2025 |
|
|
Fiscal 2024 |
|
|
Fiscal 2023 |
|
|||
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
20,948 |
|
|
$ |
17,535 |
|
|
$ |
(126,745 |
) |
Foreign |
|
|
(13,197 |
) |
|
|
(7,039 |
) |
|
|
(5,072 |
) |
Total income (loss) before income taxes |
|
$ |
7,751 |
|
|
$ |
10,496 |
|
|
$ |
(131,817 |
) |
Certain foreign operations are branches of Lands’ End and are subject to U.S. as well as foreign income tax. The pretax income (loss) by location and the analysis of the income tax provision by taxing jurisdiction are not directly related.
The components of the provision for (benefit from) income taxes are as follows:
(in thousands) |
|
Fiscal 2025 |
|
|
Fiscal 2024 |
|
|
Fiscal 2023 |
|
|||
United States |
|
$ |
2,231 |
|
|
$ |
4,065 |
|
|
$ |
(1,482 |
) |
Foreign |
|
|
12 |
|
|
|
198 |
|
|
|
349 |
|
Total provision (benefit) |
|
$ |
2,243 |
|
|
$ |
4,263 |
|
|
$ |
(1,133 |
) |
(in thousands) |
|
Fiscal 2025 |
|
|
Fiscal 2024 |
|
|
Fiscal 2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
414 |
|
|
$ |
(17 |
) |
|
$ |
(3,092 |
) |
State |
|
|
835 |
|
|
|
700 |
|
|
|
(192 |
) |
Foreign |
|
|
52 |
|
|
|
187 |
|
|
|
338 |
|
Total current |
|
|
1,301 |
|
|
|
870 |
|
|
|
(2,946 |
) |
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
2,541 |
|
|
|
2,646 |
|
|
|
(316 |
) |
State |
|
|
(1,559 |
) |
|
|
736 |
|
|
|
2,118 |
|
Foreign |
|
|
(40 |
) |
|
|
11 |
|
|
|
11 |
|
Total deferred |
|
|
942 |
|
|
|
3,393 |
|
|
|
1,813 |
|
Total provision (benefit) |
|
$ |
2,243 |
|
|
$ |
4,263 |
|
|
$ |
(1,133 |
) |
A reconciliation of the statutory federal income tax rate to the effective income tax rate after the adoption of ASU 2023-09 is as follows:
(in thousands) |
|
Fiscal 2025 |
|
|
Fiscal 2024 |
|
|
Fiscal 2023 |
|
|||||||||||||||
Tax at statutory federal tax rate |
|
$ |
1,628 |
|
|
|
21.0 |
% |
|
$ |
2,204 |
|
|
|
21.0 |
% |
|
$ |
(27,683 |
) |
|
|
21.0 |
% |
State income taxes, net of federal tax benefit (1) |
|
|
(572 |
) |
|
|
(7.4 |
)% |
|
|
1,134 |
|
|
|
10.8 |
% |
|
|
1,522 |
|
|
|
(1.2 |
)% |
Foreign tax effects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Germany statutory tax rate differential |
|
|
229 |
|
|
|
3.0 |
% |
|
|
166 |
|
|
|
1.6 |
% |
|
|
338 |
|
|
|
(0.3 |
)% |
Germany change in valuation allowance |
|
|
702 |
|
|
|
9.1 |
% |
|
|
508 |
|
|
|
4.8 |
% |
|
|
1,035 |
|
|
|
(0.8 |
)% |
United Kingdom |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United Kingdom statutory tax rate differential |
|
|
(360 |
) |
|
|
(4.6 |
)% |
|
|
(169 |
) |
|
|
(1.6 |
)% |
|
|
(143 |
) |
|
|
0.1 |
% |
United Kingdom change in valuation allowance |
|
|
2,255 |
|
|
|
29.1 |
% |
|
|
1,058 |
|
|
|
10.1 |
% |
|
|
896 |
|
|
|
(0.7 |
)% |
Other foreign jurisdictions |
|
|
(42 |
) |
|
|
(0.5 |
)% |
|
|
113 |
|
|
|
1.1 |
% |
|
|
(39 |
) |
|
|
0.0 |
% |
Effects of changes in tax law |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
Effects of cross-border tax laws |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Germany Branch |
|
|
(931 |
) |
|
|
(12.0 |
)% |
|
|
(674 |
) |
|
|
(6.4 |
)% |
|
|
(1,373 |
) |
|
|
1.0 |
% |
United Kingdom Branch |
|
|
(1,895 |
) |
|
|
(24.4 |
)% |
|
|
(888 |
) |
|
|
(8.5 |
)% |
|
|
(753 |
) |
|
|
0.6 |
% |
Other |
|
|
— |
|
|
|
— |
% |
|
|
28 |
|
|
|
0.3 |
% |
|
|
85 |
|
|
|
(0.1 |
)% |
Tax credits |
|
|
(116 |
) |
|
|
(1.5 |
)% |
|
|
(95 |
) |
|
|
(0.9 |
)% |
|
|
(85 |
) |
|
|
0.1 |
% |
Changes in valuation allowances |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
Nontaxable or nondeductible items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Executive compensation |
|
|
1,355 |
|
|
|
17.5 |
% |
|
|
674 |
|
|
|
6.4 |
% |
|
|
944 |
|
|
|
(0.7 |
)% |
Impairment |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
22,407 |
|
|
|
(17.0 |
)% |
Other |
|
|
116 |
|
|
|
1.5 |
% |
|
|
521 |
|
|
|
5.0 |
% |
|
|
1,860 |
|
|
|
(1.4 |
)% |
Changes in unrecognized tax benefits |
|
|
(126 |
) |
|
|
(1.6 |
)% |
|
|
(317 |
) |
|
|
(3.0 |
)% |
|
|
(144 |
) |
|
|
0.1 |
% |
Total |
|
$ |
2,243 |
|
|
|
28.9 |
% |
|
$ |
4,263 |
|
|
|
40.6 |
% |
|
$ |
(1,133 |
) |
|
|
0.9 |
% |
Deferred tax assets and liabilities consisted of the following:
(in thousands) |
|
January 30, |
|
|
January 31, |
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Deferred revenue |
|
$ |
7,784 |
|
|
$ |
8,079 |
|
Legal accruals |
|
|
745 |
|
|
|
1,183 |
|
Deferred compensation |
|
|
5,847 |
|
|
|
5,275 |
|
Deferred interest |
|
|
7,975 |
|
|
|
8,775 |
|
Reserve for returns |
|
|
1,929 |
|
|
|
2,208 |
|
Inventory |
|
|
2,344 |
|
|
|
3,210 |
|
CTA investment in foreign subsidiaries |
|
|
4,234 |
|
|
|
4,234 |
|
Operating lease liabilities |
|
|
4,672 |
|
|
|
6,089 |
|
Other |
|
|
1,228 |
|
|
|
1,127 |
|
Net operating loss carryforward |
|
|
20,784 |
|
|
|
17,618 |
|
Total deferred tax assets |
|
|
57,542 |
|
|
|
57,798 |
|
Less valuation allowance |
|
|
(20,929 |
) |
|
|
(18,058 |
) |
Net deferred tax assets |
|
$ |
36,613 |
|
|
$ |
39,740 |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Intangible assets |
|
$ |
62,103 |
|
|
$ |
61,919 |
|
LIFO reserve |
|
|
18,055 |
|
|
|
18,228 |
|
Property and equipment |
|
|
3,950 |
|
|
|
4,509 |
|
Operating lease right-of-use assets |
|
|
3,913 |
|
|
|
5,066 |
|
Catalog advertising |
|
|
984 |
|
|
|
1,468 |
|
Total deferred tax liabilities |
|
|
89,005 |
|
|
|
91,190 |
|
Net deferred tax liability |
|
$ |
52,392 |
|
|
$ |
51,450 |
|
As of January 30, 2026, the Company had $123.7 million of federal and state net operating loss (“NOL”) and interest expense carryforwards (generating a $10.7 million deferred tax asset) available to offset future taxable income. The federal carryforwards have an indefinite life. The state NOL carryforwards generally expire between 2026 and 2045 with certain state NOLs and interest expense carryforwards generated after 2017 having indefinite lives. The Company’s foreign subsidiaries had $64.1 million of NOL carryforwards (generating an $18.0 million deferred tax asset) available to offset future taxable income. These foreign NOLs can be carried forward indefinitely, however, a valuation allowance was established since the future utilization of these NOLs is uncertain.
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits (“UTBs”) is as follows:
(in thousands) |
|
Fiscal 2025 |
|
|
Fiscal 2024 |
|
|
Fiscal 2023 |
|
|||
Gross UTBs balance at beginning of period |
|
$ |
8,998 |
|
|
$ |
1,141 |
|
|
$ |
1,297 |
|
Tax positions related to the prior periods - gross |
|
|
(1,120 |
) |
|
|
7,980 |
|
|
|
(156 |
) |
Settlements |
|
|
— |
|
|
|
(123 |
) |
|
|
— |
|
Gross UTBs balance at end of period |
|
$ |
7,878 |
|
|
$ |
8,998 |
|
|
$ |
1,141 |
|
As of January 30, 2026, the Company had gross UTBs of $7.9 million. Of this amount, $0.7 million would, if recognized, impact its effective tax rate. The remaining liability relates to tax positions for which there are offsetting tax benefits, or the uncertainty was related only to timing. Tax years remain open for examination by the Internal Revenue Service as well as various state and foreign jurisdictions.
The Company classifies interest expense and penalties related to UTBs and interest income on tax overpayments as components of income tax expense. As of January 30, 2026, the total amount of interest expense and penalties recognized on the balance sheet was $0.4 million ($0.4 million net of federal benefit). As of January 31, 2025, the total amount of interest and penalties recognized on the balance sheet was $0.5 million ($0.4 million net of federal benefit). The total amount of net interest expense recognized in the Consolidated Statements of Operations was insignificant for all periods presented. The Company files income tax returns in both the United States and various foreign jurisdictions.
The amount of cash income taxes paid (refunded) by the Company, in accordance with the adoption of ASU 2023-09, is as follows:
(in thousands) |
|
Fiscal 2025 |
|
|
United States |
|
$ |
83 |
|
State |
|
|
|
|
Texas |
|
|
135 |
|
Florida |
|
|
112 |
|
North Carolina |
|
|
63 |
|
Massachusetts |
|
|
52 |
|
Louisiana |
|
|
42 |
|
Michigan |
|
|
(19 |
) |
Minnesota |
|
|
(25 |
) |
Illinois |
|
|
(32 |
) |
California |
|
|
(34 |
) |
New Jersey |
|
|
(146 |
) |
Other |
|
|
26 |
|
Foreign |
|
|
|
|
Hong Kong |
|
|
(635 |
) |
Total taxes paid (refunded) |
|
$ |
(378 |
) |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 26, 2026 | Showing above |
| 2025 | Mar 27, 2025 | |
| 2024 | Apr 3, 2024 | |
| 2023 | Apr 10, 2023 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.