Message from Chris McCormick: Board of Directors Approves 3% Bonus
Freeport, ME, March 9, 2012 – I'm pleased to announce that the L.L.Bean Board of Directors voted this afternoon to award a 3% bonus to eligible employees in recognition of your hard work in 2011 and for progress on the goals we set for the year. The bonus will be paid on Friday, March 23.
Today, I reviewed our 2011 results and plans for 2012 with the Board of Directors, and I want to share some of the highlights with you. First, let me share the business context.
As we're all aware, the economy has not improved as quickly as we had hoped. Federal Reserve Chairman Ben Bernanke recently characterized the economic recovery as "uneven and modest," and suggested that we may see more of the same in 2012. Mr. Bernanke's description is also a fair representation of what retailers and our business experienced in 2011, and that we are preparing for in 2012. We are now in the fourth year of a slow recovery from the deepest recession since the Great Depression.
While our progress was modest this year, we should all take great pride in our results. L.L.Bean has nearly returned to pre-recession sales levels, and we have performed equal to or better than our retail market segment as a whole. Our company remains financially very strong. Our brand, with its fiercely loyal customers, is continually recognized in the media, the marketplace, and by consumer rating organizations for our customer service, product quality and innovation, and our leading-edge development of online customer service and communications.
2011 results – a year of ups and downs
While we saw top-line merchandise sales growth of 8% in fiscal 2011 and 5.1% growth in net revenue, we experienced a fair amount of sales volatility over the course of the year. The launch of Free Shipping for all customers, all the time, started the year off with great momentum. Strong sales continued through June, but stalled in the summer as consumers were distracted by the debt ceiling debate in Washington.
Fall sales were encouraging, and Peak got off to a strong start on Black Friday and Cyber Monday. However, by early December, sales had tapered off for retailers in general as well as Bean. The holiday season once again became highly promotional across the industry, leading to markdowns that hurt retailers' margins. This challenge was compounded for L.L.Bean and other companies in the outerwear and cold weather gear business due to the unseasonably warm weather and lack of snow across the country this year.
Sales in January and February were helped by more seasonable weather, our winter sale, and gift card redemption, helping to make up some ground lost in the critical month of December.
Leaders will soon share with you a more detailed look at the highlights for 2011, but at a high level, I want to share our key successes:
- While our margins and profits suffered relative to plan, we did meet our merchandise sales growth goal and did so in a challenging environment.
- Free Shipping year–round has been incorporated as a "best in class" customer offering, placing us well ahead of the competition.
- The National Retail Federation/American Express Customer's Choice survey ranked L.L.Bean number two in customer service.
- As consumers continue to embrace the Internet, social media and mobile technology, L.L.Bean is leading the way. Our email marketing achieved record growth in 2011. Our social media efforts have grown, and Gomez recently ranked our mobile site second in mobile performance.
- Our 100th anniversary celebration is off to a strong start and gaining considerable media attention. Our most iconic product – the Bean Boot – is leading the way. Manufacturing is producing record volumes of boots as new generations of customers discover them for their function and their fashion.
- And on the productivity front, we have made continued progress. Examples include:
- We have reduced our product assortment, resulting in a more focused and productive product line.
- Business transformation efforts that will change how we work are off to a good start and will create a stronger company. The Mind to Market process is being piloted now, and the Simplification Roadmap is preparing to launch its first, high-priority projects in early 2012.
Outlook for 2012
Looking ahead to 2012, we remain mindful that, as Mr. Bernanke has said, the economic recovery remains "modest and uneven." As we head into another year of economic uncertainty, we have adopted a conservative budget, maintaining a tight control on expenses coupled with plans for only modest growth. You'll hear more about the 2012 budget in the coming weeks. A lot of good work has been done to create a plan that is both realistic and could some have upside potential should our conservative planning pay off.
I know these past few years of slow economic growth have been hard on employees and families as well as on businesses. I appreciate your loyalty and the good work you have contributed to ensure this year ended on a high note. On behalf of L.L.Bean's Board of Directors, I want to thank you all and hope that the bonus will help.