Duluth (DLTH) - 2026 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2025 Financial Highlights Duluth Holdings Inc. reported a net income of $1.3 million for Q2 2025, a significant improvement from a net loss in the prior year, driven by gross margin expansion and SG&A leverage, with Adjusted EBITDA also increasing and inventory levels reduced Q2 2025 Key Financial Highlights | Metric | Amount | | :-------------------- | :------------------- | | Net Income | $1.3 million (vs. net loss of $2.0 million YoY) | | Adjusted EBITDA | $12.0 million (up $1.5 million YoY) | | Adjusted EBITDA as % of Net Sales | 9.1% | | Reported EPS | $0.04 | | Adjusted EPS | $0.03 | | Net Liquidity | $73.3 million | | Inventory (YoY Change) | Down $20.7 million (12.2%) | Management Commentary President and CEO Stephanie Pugliese expressed encouragement regarding Q2 results, attributing improvements to promotional resets, expense management, and inventory discipline, while highlighting ongoing efforts in product sourcing, fulfillment optimization, and store portfolio rationalization, with a future focus on marketing, product assortment, and core strengths to restore profitable growth - Management is encouraged by Q2 results, reflecting positive momentum in turnaround efforts[4] - Key improvements include promotional reset, expense management, and inventory discipline, leading to enhanced gross margin, reduced SG&A, and lower inventory levels[4] - Future focus areas include leveraging foundational work in product sourcing, optimizing fulfillment center network, rationalizing store portfolio, simplifying the business, reducing expenses, mitigating tariff impacts, and refocusing marketing and product assortment to restore profitable growth[4][7] Operating Results Net Sales Net sales for Q2 2025 decreased by 7.0% to $131.7 million, with direct-to-consumer sales seeing a 13.7% decline due to lower traffic, while retail store sales increased by 5.3% driven by higher average order values Q2 2025 Net Sales Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :----------------------- | :----------------- | :----------------- | :--------- | | Net Sales | $131.7 | $141.6 | -7.0% | | Direct-to-consumer Net Sales | $79.1 | N/A | -13.7% | | Retail Store Net Sales | $52.6 | N/A | +5.3% | - Direct-to-consumer net sales decreased due to lower traffic, partially offset by higher average order values[8] - Retail store net sales increased primarily driven by higher average order values[8] Gross Margin Gross margin improved to 54.7% of net sales in Q2 2025, up from 52.3% in the prior year, primarily due to reduced promotional activity leading to higher average unit retail sales and improved product costs from direct-to-factory sourcing Gross Margin Rate | Period | Gross Margin Rate | | :----- | :---------------- | | Q2 2025 | 54.7% | | Q2 2024 | 52.3% | | Change (YoY) | +2.4 percentage points | - The increase in gross margin rate was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from direct-to-factory sourcing initiative[9] Selling, General and Administrative Expenses SG&A expenses decreased by 7.1% to $68.8 million in Q2 2025, with SG&A as a percentage of net sales slightly decreasing to 52.2%, mainly due to leverage on outbound shipping costs from higher average order values and reductions in personnel and depreciation expenses SG&A Expenses Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | SG&A Expenses | $68.8 | $74.0 | -$5.2 | -7.1% | | SG&A as % of Net Sales | 52.2% | 52.3% | -0.1 pp | N/A | - The decrease in SG&A as a percentage of net sales was mainly driven by leverage on outbound shipping costs due to higher average order values coupled with a reduction in personnel and depreciation expenses[10] Financial Position & Liquidity Balance Sheet and Liquidity As of August 3, 2025, the company reported $5.7 million in cash and cash equivalents, $56.9 million in net working capital, $32.5 million in outstanding debt on its revolving line of credit, and $73.3 million in net liquidity Key Balance Sheet and Liquidity Metrics (as of August 3, 2025) | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Cash and cash equivalents | $5.7 | | Net working capital | $56.9 | | Outstanding debt (revolving line of credit) | $32.5 | | Net liquidity | $73.3 | Fiscal Year 2025 Outlook The Company is maintaining its previously issued fiscal 2025 financial guidance - The Company is maintaining its previously issued fiscal 2025 financial guidance[12] Conference Call Information A conference call and audio webcast for analysts and investors is scheduled for September 4, 2025, at 9:30 am Eastern Time to discuss the results, with pre-registration available to expedite entry - A conference call and audio webcast with analysts and investors will be held on Thursday, September 4, 2025, at 9:30 am Eastern Time[13] - Investors can pre-register for the earnings conference call to expedite their entry and avoid waiting for a live operator[14] - A conference call replay will be available through September 10, 2025[16] About Duluth Trading Duluth Trading is a lifestyle brand offering high-quality, solution-based casual wear, workwear, and accessories for men and women, emphasizing an engaging customer experience through its website, catalogs, and retail stores, backed by a "No Bull Guarantee" - Duluth Trading is a lifestyle brand for the Modern, Self-Reliant American, offering high quality, solution-based casual wear, workwear and accessories for men and women[17] - Products are available through a content-rich website, catalogs, and "store like no other" retail locations, with marketing incorporating humor and storytelling[17] - The company is committed to outstanding customer service backed by its "No Bull Guarantee"[17] Non-GAAP Measurements Definition and Purpose of Non-GAAP Measures Management uses non-GAAP financial measures like Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to provide additional meaningful comparisons, insights into operating trends, and facilitate peer company comparisons, excluding unusual or non-comparable items such as restructuring expenses, impairment expenses, and tax valuation allowances - Non-GAAP financial measures (Adjusted EBITDA, Adjusted Net Income, Adjusted EPS) are used to provide additional meaningful comparisons, insight into operating trends, and facilitate comparisons between peer companies[18][19][20] - Adjusted EBITDA excludes interest, taxes, depreciation, amortization, and certain items that are unusual in nature or not comparable from period to period[19] - Adjusted Net Income (Loss) and Adjusted EPS exclude restructuring expenses, impairment expenses, and an addition to the valuation allowance on deferred tax assets that are not comparable from period to period[20] Forward-Looking Statements & Risks The press release contains forward-looking statements regarding Duluth Trading's plans, objectives, and future performance, which are subject to various risks and uncertainties, including inflation, economic uncertainties, international trade conditions (tariffs), supply chain disruptions, inventory management, brand image, consumer confidence, e-commerce platform issues, debt covenants, natural disasters, and regulatory changes, among others - The press release includes forward-looking statements concerning Duluth Trading's plans, objectives, goals, beliefs, business strategies, future events, business conditions, and financial outlook[22] - Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially, including the impact of inflation, economic uncertainties, and the susceptibility of merchandise price and availability to international trade conditions like tariffs[22] - Other risks include disruptions to the distribution network, supply chains and operations, failure to effectively manage inventory levels, adapting to declines in consumer confidence, and disruptions to the e-commerce platform[22] Accounting Correction The Company revised prior period financial statements for an immaterial accounting correction related to sales tax collections, impacting accrued expenses, deferred taxes, and retained earnings on the Condensed Consolidated Balance Sheets and other financial statements - The Company revised its prior period financial statements for an accounting correction related to sales tax collections[24] - The impacts of these revisions were not material to the Company's previously filed financial statements and primarily related to accrued expenses and other current liabilities, deferred taxes, and retained earnings[24] Investor Contacts Investor inquiries can be directed to Heena Agrawal, Senior Vice President and Chief Financial Officer, or Chris Steffes, Senior Director of FP&A, via email - Investor contacts are Heena Agrawal (Senior Vice President and Chief Financial Officer) and Chris Steffes (Senior Director of FP&A)[25] - Investor inquiries can be sent to IR@duluthtrading.com[25] Financial Statements Condensed Consolidated Balance Sheets The balance sheet shows total assets of $433.8 million as of August 3, 2025, a decrease from $488.6 million in July 2024, with total liabilities also decreasing to $266.7 million from $276.6 million, while total shareholders' equity declined to $167.1 million from $212.0 million over the same period, with key changes including a decrease in inventory and an increase in the line of credit balance Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :-------------------------- | :------------- | :------------ | :----------- | | Total Assets | $433,800 | $488,609 | -$54,809 | | Total Liabilities | $266,742 | $276,618 | -$9,876 | | Total Shareholders' Equity | $167,058 | $211,991 | -$44,933 | | Inventory, net | $148,051 | $168,718 | -$20,667 | | Line of credit | $32,457 | $0 | +$32,457 | Consolidated Statements of Operations For the three months ended August 3, 2025, net sales decreased by 7.0% to $131.7 million, but the company returned to a net income of $1.3 million compared to a net loss of $2.0 million in the prior year, with gross profit slightly decreasing but operating income turning positive, while for the six months, net loss increased Consolidated Statements of Operations (Three Months Ended, Amounts in thousands) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :------------------------------------ | :------------- | :------------ | :----------- | | Net sales | $131,716 | $141,619 | -$9,903 | | Gross profit | $72,019 | $73,996 | -$1,977 | | Operating income (loss) | $2,402 | $(1,597) | +$3,999 | | Net income (loss) | $1,293 | $(1,970) | +$3,263 | | Basic earnings per share | $0.04 | $(0.06) | +$0.10 | Consolidated Statements of Operations (Six Months Ended, Amounts in thousands) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :------------------------------------ | :------------- | :------------ | :----------- | | Net sales | $234,420 | $258,303 | -$23,883 | | Net income (loss) | $(13,971) | $(9,835) | -$4,136 | | Basic earnings per share | $(0.41) | $(0.30) | -$0.11 | Consolidated Statements of Cash Flows For the six months ended August 3, 2025, net cash used in operating activities increased to $24.4 million from $17.1 million in the prior year, primarily due to changes in inventory and trade accounts payable, with net cash provided by financing activities significantly increasing to $30.3 million, mainly from proceeds from the line of credit, leading to an overall increase in cash and cash equivalents Consolidated Statements of Cash Flows (Six Months Ended, Amounts in thousands) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :------------------------------------ | :------------- | :------------ | :----------- | | Net cash used in operating activities | $(24,436) | $(17,052) | -$7,384 | | Net cash used in investing activities | $(3,465) | $(3,086) | -$379 | | Net cash provided by (used in) financing activities | $30,304 | $(2,232) | +$32,536 | | Increase (decrease) in cash and cash equivalents | $2,403 | $(22,370) | +$24,773 | | Cash and cash equivalents at end of period | $5,738 | $9,787 | -$4,049 | - Net cash provided by financing activities significantly increased, primarily due to proceeds from the line of credit ($76.2 million in 2025 vs. $40.5 million in 2024)[32] Non-GAAP Reconciliations Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA For Q2 2025, EBITDA was $10.0 million, and Adjusted EBITDA was $12.0 million, showing an increase from the prior year's $7.9 million and $10.5 million, respectively, with adjustments primarily including long-term incentive expense and restructuring expense EBITDA and Adjusted EBITDA (Three Months Ended, Amounts in thousands) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :-------------------- | :------------- | :------------ | :----------- | | Net income (loss) | $1,293 | $(1,970) | +$3,263 | | EBITDA | $9,976 | $7,886 | +$2,090 | | Adjusted EBITDA | $11,999 | $10,493 | +$1,506 | EBITDA and Adjusted EBITDA (Six Months Ended, Amounts in thousands) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :-------------------- | :------------- | :------------ | :----------- | | Net income (loss) | $(13,971) | $(9,835) | -$4,136 | | EBITDA | $5,341 | $8,352 | -$3,011 | | Adjusted EBITDA | $8,206 | $12,331 | -$4,125 | Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) and Adjusted EPS For Q2 2025, adjusted net income attributable to controlling interest was $1.1 million, resulting in an adjusted EPS of $0.03, a significant improvement from an adjusted net loss of $0.8 million and adjusted EPS of $(0.02) in the prior year, with adjustments including restructuring expenses and a tax valuation allowance Adjusted Net Income (Loss) and Adjusted EPS (Three Months Ended, Amounts in thousands, except per share) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :------------------------------------ | :------------- | :------------ | :----------- | | Net income (loss) attributable to controlling interest | $1,261 | $(1,981) | +$3,242 | | Adjusted net income (loss) attributable to controlling interest | $1,061 | $(752) | +$1,813 | | Adjusted EPS | $0.03 | $(0.02) | +$0.05 | Adjusted Net Income (Loss) and Adjusted EPS (Six Months Ended, Amounts in thousands, except per share) | Metric | August 3, 2025 | July 28, 2024 | Change (YoY) | | :------------------------------------ | :------------- | :------------ | :----------- | | Net income (loss) attributable to controlling interest | $(14,032) | $(9,854) | -$4,178 | | Adjusted net income (loss) attributable to controlling interest | $(9,695) | $(8,625) | -$1,070 | | Adjusted EPS | $(0.28) | $(0.26) | -$0.02 |