LXRandCo Announces Updated Strategic Plan Focused on Disciplined Growth, Expanded Margins and Cash Flow Generation

-- Company Streamlines Geographic Focus to U.S. and Canada – Plans to Open Net 39 New Stores in U.S. and Canada and Will Close All Locations in Europe –

MONTREAL, June 13, 2018 /CNW/ - LXRandCo, Inc. ("LXRandCo" or the "Company") (TSX: LXR) (TSX: LXR.WT), an international omni-channel retailer of branded vintage luxury handbags and accessories, today provided details of the Company's updated strategic plan, which will be presented at the Company's annual meeting of shareholders today at 10:30 a.m. ET in Montreal at the offices of Norton Rose Fulbright, 1 Place Ville-Marie, 25^th Floor. For those unable to attend the meeting in person, the live proceedings and slide presentation will be available via conference call and webcast (see below for details).

"The economic underpinnings of the LXRandCo business model are solid and provide a platform for long-term revenue growth and sustainable cash flow generation," said Steven Goldsmith, LXRandCo's new President and Chief Executive Officer. "We have an exciting business that remains uniquely positioned at the intersection of two compelling consumer trends – strong demand for branded personal luxury goods and the rapidly growing re-use economy – while, for our retail partners, our shop-in-shop model delivers high productivity and increased foot traffic. My initial weeks as President and CEO have confirmed my belief that the Company's desire to meet the significant unmet demand for its stores led it to do so in an unprofitable and inefficient manner.  As a result, we are evolving our strategic plan to realize the Company's full potential, with a specific focus on disciplined top-line growth, margin expansion and sustainable cash flow generation.  Every decision we make going forward, including those related to our retail partnerships, will be made within this context."

The key components of LXRandCo's strategic plan are as follows:

Focus on the U.S. and Canada – Effective immediately, LXRandCo will refocus its physical retail network presence with only the right partners located in the U.S. and Canada and plans to establish a presence in the largest 30 designated market areas ("DMAs"), which in aggregate represents more than half the combined population of both countries. Throughout the remainder of 2018, LXRandCo plans to open 55 new locations in the U.S. and Canada, 45 with existing partners and 10 with new partner Belk, a U.S. department store retailer with more than 290 stores located in 16 Southern states and a growing digital presence. The new locations target DMAs in which the Company was previously not represented or under-represented.

In addition, the Company will close all of its 27 stores in Europe. In aggregate, the Company's European business, was negatively impacted by higher store costs than their North American counterparts (including higher labour costs and costs due to increased regulatory and compliance requirements), higher corporate costs to support an overseas business, and a critical lack of scale.  The closures are expected to be completed as soon as practicable. In 2017, the Company's European stores in aggregate generated an EBITDA loss of approximately $0.9 million before corporate expenses.

The Company will also exit all of its 16 store locations with its retail partner Burlington (located predominately in the Northeast U.S.), which, in aggregate, have underperformed the Company's expectations on both a revenue growth and profitability basis.

The Company expects to redeploy all inventory and fixtures from the above closures to new locations that it currently intends to open this year.

At the completion of these openings and closures, LXRandCo anticipates having a total of 146 retail locations with seven partners. 

"We believe there is more than enough opportunity to continue to rapidly scale the LXRandCo retail network for the foreseeable future in the U.S. and Canadian marketplace, where we know our market and understand our customer well, and where we will benefit from better gross margins and a more favourable infrastructure cost profile than in Europe," said Mr. Goldsmith. "Within these markets, it is critical that we selectively partner with those retailers that support our geographic objectives, have customer profiles that are consistent with our offering, and provide a commercial arrangement that ensures our stores are cash flow positive from day one."

Product Focus – LXRandCo will streamline its product offering solely to branded vintage luxury women's handbags and accessories, the Company's core competency and, typically, the customer's primary entry point to luxury brands. They also generate higher gross margins than men's accessories, fine jewelry, apparel and other ancillary, non-core products. Accordingly, the Company will gradually phase out its men's accessories, fine jewelry, apparel and other ancillary offerings through the normal course sale of its existing inventories.

Focus on the Customer – LXRandCo will increase its focus and attention on serving its customer across the multiple channels in which she wants to engage. To this end, the Company will intensify its efforts to grow its underpenetrated e-commerce opportunity through initiatives related to its own e-commerce site (www.lxrco.com), better leveraging its retail partners' digital strategies and increasing its affiliate relationships. The Company also intends to pursue new growth initiatives for its established wholesale business, which it expects will expand its reach beyond the targeted DMAs for its retail network. In addition, over time, the Company will continue to expand its direct-from-consumer purchasing program, such that a significantly larger proportion of its customer base will be able to sell and/or trade their own vintage luxury handbags and accessories to LXRandCo.

Focus on Gross Margin Expansion – In addition to the anticipated benefits to gross margin from the increased geographical and product focus, LXRandCo expects gross margin to benefit from increased e-commerce and wholesale sales over both the short- and medium-term, as well as from more efficient logistics and a more disciplined inventory purchasing approach.  

Focus on Cost Management – In addition to the cost savings to be realized through closure of the European business, the Company is embarking on a cost reduction plan to bring selling, general and administrative costs in line with the revised revenue growth trajectory. The plan is expected to generate approximately $1.2 million in corporate cost savings annually, with approximately $800,000 to be realized in 2018 before restructuring costs. The Company also expects to realize approximately $600,000 in planned capital expenditures savings in 2018 by the redeploying of fixtures from the aforementioned store closures.

Mr. Goldsmith concluded, "I have no doubt that LXRandCo's business represents a significant, long-term top-line growth opportunity. The Company is on trend, provides value to its customers and retail partners, and has the capacity for sustainable margin expansion and strong cash flow generation. The successful execution of this renewed and more focused strategy will enable the Company to realize its true potential and drive long-term value for our shareholders."

As a result of the implementation of its new strategic plan, the Company is withdrawing previously provided guidance with respect to targeted retail network expansion and store counts, run-rate revenue, adjusted EBITDA and run-rate adjusted EBITDA.

Annual Meeting Conference Call and Webcast

Steven Goldsmith, President and CEO of LXRandCo, will present the Company's updated strategic plan at the Company's annual meeting of shareholders today, Wednesday, June 13, 2018 at 10:30 a.m. ET in Montreal at the offices of Norton Rose Fulbright, 1 Place Ville-Marie, 25^th Floor. For those unable to attend the meeting in person, an audio stream and slide presentation will be available via conference call and webcast. The conference call (with the ability to queue for questions), can be accessed via telephone by dialing 647-427-7450 or 1-888-231-8191. In the interests of time, questions will be limited to analysts and other professional investors. Participants can also access the audio stream and slide presentation via the Internet at http://investors.lxrco.com/events-and-webcasts.

An archive of the audio stream and slide presentation will be available approximately one-hour following completion of the event on the Company's web site: http://investors.lxrco.com/events-and-webcasts.

About LXRandCo

LXRandCo is a rapidly growing omni-channel retailer of branded vintage luxury handbags and accessories. LXRandCo sources and authenticates high-quality, pre-owned products from iconic brands such as Hermès, Louis Vuitton, Gucci and Chanel, among others, and sells them at attractive prices through: a retail network of "shop-in-shops" located in major department stores in the United States and Canada; wholesale operations primarily in the United States; and its own e-Commerce website, www.lxrco.com.

Caution Regarding Forward-Looking Statements

Certain statements in this press release are prospective in nature and constitute forward-looking information and/or forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking statements"). Forward-looking statements generally, but not always, can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "could", "would", "will", "expect", "intend", "estimate", "forecasts", "project", "seek", "anticipate", "believes", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events and the negative of any of these terms. Forward-looking statements in this news release include, but are not limited to, statements concerning future objectives and strategies to achieve those objectives, including, without limitation, store openings, as well as other statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, outlook, circumstances, performance or expectations that are not historical facts. Forward-looking statements reflect management's current beliefs, expectations and assumptions and are based on information currently available to management, which includes assumptions about continued revenues based on historical past performance, management's historical experience, perception of trends and current business conditions, expected future developments and other factors which management considers appropriate. With respect to the forward-looking statements included in this press release, management has made certain assumptions with respect to, among other things, the Company's ability to meet its future objectives and strategies, the Company's ability to achieve its future projects and plans and that such projects and plans will proceed as anticipated, the expected growth of the Company's e-Commerce revenue, the expected number and timing of store openings and closings in North America and internationally, entering into new and/or expanded retail partnerships or terminating same in North America and internationally, the Company's ability to source products, the Company's competitive position in the vintage luxury industry, and beliefs and intentions regarding the ownership of material trademarks and domain names used in connection with the marketing, distribution and sale of the Company's products, the expected benefits of the updated strategic plan announced herein, notably the expected corporate cost savings and the capital expenditure savings as, well as assumptions concerning general economic and market growth rates, currency exchange and interest rates and competitive intensity.

Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur.

All forward-looking statements included in and incorporated into this press release are qualified by these cautionary statements. Unless otherwise indicated, the forward-looking statements contained herein are made as of the date of this press release, and except as required by applicable law, the Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Readers are cautioned that the actual results achieved will vary from the information provided herein and that such variations may be material. Consequently, there are no representations by LXRandCo that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements.

Non-IFRS Measures

Certain non-IFRS measures are used in this press release as indicators of financial performance, including: "EBIDTA". Readers are cautioned that they are not defined performance measures under IFRS and may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to financial measures as reported by those entities. For a definition of "EBDITA", see section "How Management assess the Performance of LXRandCo" on page 8 of LXRandCo's MD&A dated May 3, 2018 and available at www.sedar.com.

SOURCE LXRandCo, Inc.

Audrey Lara, Chief Financial Officer, LXRandCo, Inc., [phone], [email protected]; Lawrence Chamberlain, Investor Relations, LodeRock Advisors, [phone], [email protected]