March 12, 2010
TO: L.L.Bean Employees
FROM: Chris McCormick
RE: Fiscal 2009 Results - Finishing an "up and down" year on an upswing
Today we shared our 2009 financial results and plans for 2010 with the Board of Directors, and I want to provide you with some of the same information. I am pleased to report that, based on outstanding expense control and careful management throughout this very unpredictable year, combined with a strong finish in January and February, we were able to beat our budgeted profitability levels.
In light of these accomplishments, the Board of the Directors has approved a 3.0% Discretionary Cash Performance Bonus for eligible employees to be paid on March 26, 2010. Approximately 5,000 employees are eligible to receive a bonus this year.
The shareholders and I would like to thank you for your outstanding efforts to provide our customers with legendary service in 2009. A few months ago the prospect of paying a bonus seemed remote, and we feel very fortunate to be in this position today. While we face many challenges ahead as the economy continues its slow recovery, we are optimistic about the future. Following is a summary of 2009 and initial plans for 2010.
Reflections on 2009
2009 was one of the most difficult years in retailing history. Given this environment, L.L.Bean began the year focused on preparing the business for the year ahead, and that required making many tough decisions and sacrifices across the organization. As we all know, the "great recession" has taken a serious toll on the global economy, the retail industry, and consumer spending habits. Our 2009 performance reflects this prolonged instability in the economy.
Net revenues for the year were $1.4 billion, down from 2008 as planned. We finished Spring down 2% from budget, but were encouraged to see strength return to the business in September and enjoyed a record-setting October. We revised the holiday forecast in accord with this early Fall strength, only to see sales trend downward again in November and December – two of our most critical months of the year. Peak was disappointing, as consumers were lured by deep discounting in the retail industry. Given our conservative inventory position, we chose to be more selective in our promotions and did not sacrifice margins for volume. Our strategy paid off, as 2010 began with customers returning to L.L.Bean in search of value and quality, resulting in our best January and February in years. Strong full-price sales enabled us to regain a good amount of the ground we'd lost in November and December.
In addition to finishing the year strong from a budget perspective, our core commitment to customer service was once again affirmed with the news that L.L.Bean was named Top Retailer in Service by the National Retail Federation for the third consecutive year, and that L.L.Bean was named #1 in customer service - across all service industries - by Bloomberg's BusinessWeek. Our customer service strength, the cornerstone of our business, remains alive and well even through these tough economic times!
I can't thank our employees enough for making this happen. You are our brand, you make us #1, and I've never been more proud of this organization. You have shown extraordinary resilience and flexibility though the year's ups and downs. Your commitment and good work has made this solid year possible. Attached is a partial list of our achievements over the past year.
The year ahead
2010 will be a rebuilding and reinvesting year for L.L.Bean. The prolonged recession has altered the retail industry and consumer buying habits, most likely for the long term. We need to adapt to strengthen our business model and enhance our ability to gain market share. Some of these investments are already underway – Web channel growth, continued expansion in China, growing the customer file, and attracting younger customers to the Bean brand. In just a few days, our new L.L.Bean Signature line will launch, and by all accounts, to a very eager audience of customers as well as kudos from the fashion industry.
In the meantime, thank you again for all of your hard work to drive results in 2009 – enjoy your merit increase, as well as your bonus. You have more than earned these rewards for outstanding efforts.
- Internet sales surpassed catalog orders for the first time. Considerable upgrades were made to the Web to support this transition and make for a more positive shopping experience. We were recognized as an industry leader through a variety of measurements and awards, including Internet Retailer #1 Apparel Site, Stores.org's Top 50 Retailers, and Gomez's Top 50 Retailers.
- Prepared for the launch of new Signature line, set for mid-March.
- For the second time in company history, received the C. Everett Koop National Health Award in recognition of L.L.Bean’s long-term efforts to improve employee health and wellness.
- Opened the Dedham retail store, a stand-alone Home Store on the Freeport campus, a new Kids’ department in the Freeport flagship store, a new Data Center, and 41 stores in China.
- Freeport Village Station, including a new L.L.Bean Outlet®, opened in May, one of the very few outdoor lifestyle malls to open in the country in 2009.
- 10,000,000 customers visited L.L.Bean retail stores in 2009.
- Outdoor Discovery Schools® hosted 23,000 participants in courses, trips, tours and Walk-On Adventures.
- L.L.Bean Manufacturing increased production by more than 200 percent over budget to respond to increases in L.L.Bean Boot demand.
- Further developed L.L.Bean’s social media presence on such sites as Facebook and Twitter as a means of engaging with customers and building brand awareness.
- L.L.Bean and its employees contributed $1,376,760 to the United Way campaign, another record-breaking donation to Maine agencies.
- The Peck Contact Center and Brunswick Manufacturing achieved the prestigious Star status under OSHA’s Voluntary Protection Program, and the Freeport Outlet became a merit site.
- Recognized with three gold and four silver awards at the Annual Conference for Catalog and Multichannel Merchants - the most awards won by any merchant at the event. The MCM awards are the industry’s top honors for retail and direct-to-business multichannel marketers.
- For the fourth consecutive year, a survey conducted by ForeSee Results, a leader in online customer satisfaction measurement, placed llbean.com at the top of the list for customer satisfaction in the apparel and accessories category.
For more information on any L.L.Bean news item or to arrange an interview with one of our in-house experts (on topics ranging from the outdoors to business), we invite the media to contact L.L.Bean Public Affairs at 207-552-6072.