NOTE 5. EQUITY METHOD INVESTMENT

The Company accounts for investments through which it exercises significant influence but does not have control over the investee under the equity method. Under the equity method, the Company recorded its investment in the investee on the balance sheet initially at cost, and subsequently adjusts the carrying amount based on its share of the investee's net income or loss. Distributions received from the investee are recognized as a reduction of the carrying amount of the investment. The Company's share of equity (income)/losses and other adjustments associated with these equity investments are included in Other operating expense, net in the Condensed Consolidated Statements of Operations, and classified as a component of operating loss since the equity method investee’s operations are considered integral to the Company’s business. The carrying value for the Company's equity investment is reported in Equity method investment on the Condensed Consolidated Balance Sheets.

Equity Method Investment with WHP Global

On January 26, 2026, the Company entered into a Membership Interest Purchase Agreement (“MIPA”) with WH Topco, L.P., a Delaware limited partnership doing business as WHP Global. On April 1, 2026 the MIPA and related transactions were closed and funded (the “Closing”), pursuant to which, (i) the Company contributed all of its intellectual property and related assets associated with the “Lands’ End” brand, including all of the license agreements entered into in connection with Lands’ End’s licensing business (the “Contributed Assets”) to LE Topco, LLC (the “JV”) a newly formed Delaware limited liability company and wholly owned subsidiary and (ii) immediately thereafter, the Company sold a 50% controlling ownership stake in the JV to WHP Global for an aggregate purchase price of $300 million in cash, and contributed initial cash of $1.25 million to the JV.

In addition, WHP Global completed a tender offer for $100 million of Lands’ End shares at a price of $45.00 per share. As a result of the tender offer, WHP Global owns approximately 7.2% of Lands’ End outstanding shares of common stock and is now considered a related party.

At the Closing, the Company entered into a License Agreement, pursuant to which the JV granted a license to the Company to design, manufacture, sell and promote certain categories of products (including the types of products that the Company designed, manufactured and sold as of the date of the License Agreement) in certain channels and in certain jurisdictions, including the United States, Canada, the United Kingdom, Germany, Austria and France. The License Agreement is royalty-bearing and subject to a guaranteed minimum royalty (“GMR”) of $50,000,000 per year (calculated pro rata based on an amount of $50,000,000 for a twelve (12) month period for the first contract year) through the end of the contract year 11, will increase one percent per year for contract years 12-21, and will be $55,231,106 for each contract year thereafter, with different royalty rates due depending on the channel under which products are sold. The initial term of the License Agreement is 10 years following the conclusion of the first contract year, and the License Agreement automatically renews for up to 12 successive renewal terms of 7 years each, unless the Company provides notice of non-renewal at least 24 months prior to the end of the initial or applicable renewal term. The License Agreement is only terminable by the JV if the Company breaches its obligation to make its required guaranteed minimum payments, or to make undisputed royalty payments, in each case subject to an opportunity to cure such non-payment within a certain period of time. Additionally, pursuant to the WHP Transaction, in certain WHP Global monetization events, such as a qualifying public listing or majority sale, Lands’ End may have the right or obligation to exchange its interest in the JV for equity in WHP Global, at the same valuation multiple as the WHP Global monetization event.

Under the derecognition guidance from ASC 810, the Company derecognized the intellectual property assets at their carrying amount upon their contribution to the JV. In exchange for the Company's contribution of its intellectual property assets to the JV, WHP Global invested $300.0 million for a 50% stake in the JV. Separately, and as a closing condition, WHP Global completed a tender offer for $100 million of Lands’ End issued shares at a price of $45.00 per share. For accounting purposes, the difference between the purchase price paid by WHP Global in the tender offer and the trading price of the Company’s common stock on the day of the closing of the transaction in the amount of $74.3 million was treated as additional consideration for the sale of the 50% stake in the JV and a corresponding deemed distribution to shareholders. The Company did not receive or distribute this cash consideration.

The Company determined that the cash invested, along with the difference between the Company’s closing price of the common stock on the day of the closing of the transaction implied a fair value of the JV of $748.6 million. The carrying amount of the intellectual property assets was $257.0 million, previously classified as Asset Held for Sale as of January 30, 2026, resulting in a gain of $491.6 million included in Gain on WHP Transaction on the Condensed Consolidated Statements of Operations.

Summary Financial Information for Equity Method Investment