Duluth (DLTH)2022-09-01 16:00Financial Performance - Net sales decreased by 5.1% year-over-year in Q2 2022 to $141.5 million, and decreased by 6.4% in the first six months of fiscal 2022 to $264.4 million[102]. - Net income for Q2 2022 was $2.4 million, down from $9.0 million in Q2 2021, and net income for the first six months of fiscal 2022 was $1.1 million compared to $9.5 million in the same period of the prior year[102]. - Adjusted EBITDA decreased to $13.2 million in Q2 2022 from $21.4 million in Q2 2021, and for the first six months of fiscal 2022, it was $21.1 million compared to $31.4 million in the prior year[102]. - Net sales decreased by $7.6 million, or 5.1%, to $141.5 million for the three months ended July 31, 2022, compared to $149.1 million for the same period in 2021[118]. - Gross profit decreased by $5.8 million, or 7.1%, to $75.6 million for the three months ended July 31, 2022, with a gross margin of 53.4%, down from 54.6% in the prior year[121]. - Selling, general and administrative expenses increased by $3.4 million, or 5.0%, to $71.7 million for the three months ended July 31, 2022, representing 50.7% of net sales compared to 45.8% in the prior year[122]. - For the six months ended July 31, 2022, net sales decreased by $18.1 million, or 6.4%, to $264.4 million compared to $282.6 million in the prior year[126]. - Gross profit for the six months ended July 31, 2022, decreased by $5.3 million, or 3.6%, to $142.7 million, with a gross margin of 54.0%, up from 52.4% in the prior year[128]. - Selling, general and administrative expenses increased by $6.7 million, or 5.1%, to $139.7 million for the six months ended July 31, 2022, representing 52.8% of net sales compared to 47.1% in the prior year[130]. - Adjusted EBITDA decreased by $8.2 million to $13.2 million for the three months ended July 31, 2022, representing 9.4% of net sales compared to 14.4% in the prior year[135]. Cash Flow and Capital Expenditures - As of July 31, 2022, the company's net working capital was $102.4 million, including $15.4 million in cash and cash equivalents[137]. - For the six months ended July 31, 2022, net cash used in operating activities was $41.1 million, compared to net cash provided of $26.5 million for the same period in 2021[143][144]. - Cash used in operating assets and liabilities for the six months ended July 31, 2022, was $58.9 million, primarily due to a $41.8 million increase in inventory[143]. - Net cash used in investing activities for the six months ended July 31, 2022, was $18.7 million, driven by capital expenditures of $18.8 million for new investments[145]. - Net cash used in financing activities for the six months ended July 31, 2022, was $1.8 million, primarily consisting of payments on finance lease obligations[147]. - The decrease in cash and cash equivalents for the six months ended July 31, 2022, was $61.7 million, compared to a decrease of $28.3 million for the same period in 2021[141]. - The company believes that cash flow from operating activities and available cash under its credit facility will be sufficient to cover working capital requirements and anticipated capital expenditures for the foreseeable future[139]. Strategic Initiatives - The company operates 62 retail stores and three outlet stores as of July 31, 2022, having expanded its retail presence since initiating its omnichannel platform in 2010[98]. - The "Big Dam Blueprint" focuses on a digital-first mindset, optimizing retail channels, evolving the multi-brand platform, and increasing investments for long-term growth[104]. - The company is analyzing opportunities for greater automation in logistics and technology improvements to support growth and integrate new brands[104]. Economic Environment - The U.S. economy has faced high inflation in the first two quarters of 2022, impacting operational and financial performance[107]. - The company continues to evaluate federal, state, and local regulations to ensure compliance in store operations amid ongoing economic challenges[108]. Market Risks - Forward-looking statements indicate potential risks including supply chain disruptions, competition, and changing consumer preferences[97]. - Net income attributable to controlling interest was $2.4 million for the three months ended July 31, 2022, down from $9.0 million in the same period in 2021[125].