Duluth (DLTH) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights Duluth Holdings Inc. reported Q1 2024 net sales of $116.7 million, a net loss of $7.9 million, and Adjusted EBITDA of $1.8 million, while management noted a 5.7% top-line decline and ongoing strategic initiatives First Quarter 2024 Highlights Duluth Holdings Inc. announced its Q1 2024 financial results, reporting net sales of $116.7 million, a net loss of $7.9 million, and Adjusted EBITDA of $1.8 million, highlighting healthy inventory and strong liquidity First Quarter 2024 Key Financial Highlights | Metric | Amount | | :----------------- | :------------- | | Net sales | $116.7 million | | Net loss | $7.9 million | | Adjusted EBITDA | $1.8 million | | Liquidity | $196 million | | Inventory composition | 93% current products | | Inventory change YoY | Down 5.9% | Management Commentary President and CEO Sam Sato expressed dissatisfaction with Q1 results, noting a 5.7% decline in top-line performance due to challenging traffic and inventory issues, while highlighting successful marketing events and ongoing strategic initiatives - Top-line performance declined 5.7% due to challenging traffic and sub-par in-stock position[3] - Successful marketing initiatives included an underwear trade-up event, which drove a 50% increase in store traffic on the day of the event, and a showusyourbibs social media campaign[4] - Strategic focus for 2024 includes accelerating operational improvements, expanding new products, optimizing marketing mix, improving gross profit margin rates, and prudently managing expenses and inventories[6] First Quarter 2024 Financial Performance The company's Q1 2024 operating results showed a 5.7% net sales decrease, gross profit decline with slight margin compression, and increased SG&A expenses, while maintaining $195.8 million in liquidity Operating Results The company experienced a 5.7% decrease in net sales, driven by declines in both direct-to-consumer and retail channels, with gross profit decreasing and SG&A expenses increasing, leading to deleveraging as a percentage of net sales Net Sales Net sales decreased by 5.7% to $116.7 million, with direct-to-consumer sales falling 5.1% due to fewer site visits and retail store sales decreasing 6.8% due to slower traffic, despite strong conversion rates Net Sales Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :---------------------- | :------------ | :------------ | :------- | | Total Net Sales | $116.7 million | $123.8 million | -5.7% | | Direct-to-consumer sales | $75.4 million | | -5.1% | | Retail store sales | $41.2 million | | -6.8% | - Direct-to-consumer net sales decline primarily driven by a decline in site visits[6] - Retail store net sales decline due to slower store traffic, partially offset by strong conversion rates[6] Gross Profit Gross profit decreased to $61.6 million, with the gross margin rate slightly down to 52.8% from 53.0% in the prior year, attributed to a delay in the positive impact of better new product costs due to selling through older, higher-cost inventory Gross Profit Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :---------------- | :------------ | :------------ | | Gross Profit | $61.6 million | $65.7 million | | Gross Margin Rate | 52.8% | 53.0% | - Delay in impact to gross margin rate as the company sells through older, higher-cost inventory, despite new product costs coming in better than expected[7] Selling, General and Administrative Expenses (SG&A) SG&A expenses increased by 0.6% to $70.6 million, deleveraging to 60.5% of net sales from 56.7% in the prior year, primarily due to higher fixed costs and depreciation from strategic investments, partially offset by logistics efficiencies SG&A Expenses (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :-------------------------------- | :------------ | :------------ | :------- | | SG&A Expenses | $70.6 million | $70.2 million | +0.6% | | SG&A as % of Net Sales | 60.5% | 56.7% | +3.8 pp | - Deleveraging mainly driven by higher fixed costs and depreciation from foundational strategic investments, partially offset by efficiencies across logistics and the fulfillment center network[8] Balance Sheet and Liquidity Duluth Holdings Inc. ended Q1 2024 with $6.8 million in cash, $75.9 million in net working capital, and $11.0 million outstanding on its revolving line of credit, resulting in $195.8 million of total liquidity Balance Sheet and Liquidity (as of April 28, 2024) | Metric | Amount | | :-------------------------------- | :------------- | | Cash and cash equivalents | $6.8 million | | Net working capital | $75.9 million | | Revolving line of credit outstanding | $11.0 million | | Total liquidity | $195.8 million | Fiscal 2024 Outlook The company updated its fiscal 2024 outlook, forecasting net sales of approximately $640 million, Adjusted EBITDA of approximately $39 million, and an EPS of approximately ($0.22) per diluted share, with capital expenditures projected around $25 million Updated Fiscal 2024 Outlook | Metric | Forecasted Amount | | :----------------------- | :---------------- | | Net sales | ~$640 million | | Adjusted EBITDA | ~$39 million | | EPS (diluted) | ~($0.22) per share | | Capital expenditures | ~$25 million | Company Information & Disclosures This section provides details on the Q1 2024 conference call, an overview of Duluth Trading's brand and business model, explanations of non-GAAP financial measures, and important forward-looking statement disclaimers Conference Call Information Duluth Holdings Inc. scheduled a conference call and audio webcast for May 30, 2024, to discuss Q1 results, providing details for live access, replay, and pre-registration - A conference call and audio webcast with analysts and investors was scheduled for Thursday, May 30, 2024, at 9:30 am Eastern Time[10] - Live conference call numbers, replay access (through June 7, 2024), and webcast link (ir.duluthtrading.com) were provided[11] - Investors could pre-register for the call to expedite entry[12] About Duluth Trading Duluth Trading is a lifestyle brand based in Mount Horeb, Wisconsin, 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[13] - Products are available through a content-rich website, catalogs, and retail locations, with marketing incorporating humor and storytelling[13] - The company is committed to outstanding customer service backed by its "No Bull Guarantee"[13] Non-GAAP Measurements The company uses non-GAAP financial measures, specifically Adjusted EBITDA, to provide additional meaningful comparisons and insights into operating trends, presenting it as supplemental information, not a replacement for GAAP results - Management uses non-GAAP financial measures, such as Adjusted EBITDA, to provide additional meaningful comparisons between current and prior operating periods[14] - Adjusted EBITDA provides insight into operating trends and facilitates comparisons between peer companies by excluding interest, taxes, depreciation, amortization, and certain unusual or non-comparable items[15] - Non-GAAP measurements are useful supplemental information but are not intended to replace GAAP financial results and should be read in conjunction with them[16] Forward-Looking Statements This section contains forward-looking statements regarding Duluth Trading's plans, objectives, and future financial performance, including the Fiscal 2024 Outlook, which are subject to various risks and uncertainties as detailed in SEC filings, with no obligation to update these statements - The press release includes forward-looking statements concerning Duluth Trading's plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, and business outlook, including the "Updated Fiscal 2024 Outlook"[17] - Forward-looking statements are based on current expectations, beliefs, estimates, and projections, but are subject to inherent uncertainties and risks that could cause actual results to differ materially[17] - Key risks include the impact of inflation, economic uncertainties, disruptions to supply chains, ability to maintain brand image, changes in consumer confidence, competition, and various operational and external factors detailed in SEC filings[17] Investor Contacts Contact information for investor relations is provided, with Tom Filandro of ICR, Inc. listed as the primary contact - Investor contact: Tom Filandro, ICR, Inc. (646) 277-1200, DuluthIR@icrinc.com[19] Financial Statements This section presents the condensed consolidated balance sheets, statements of operations, cash flows, and reconciliations of net loss to EBITDA and Adjusted EBITDA for both Q1 2024 and the fiscal year 2024 outlook Condensed Consolidated Balance Sheets The balance sheet shows total assets of $471.4 million as of April 28, 2024, a decrease from $490.5 million at January 28, 2024, with current assets decreasing primarily due to a significant drop in cash and cash equivalents, while inventory increased QoQ and total liabilities decreased Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | April 28, 2024 | January 28, 2024 | April 30, 2023 | | :-------------------------------- | :------------- | :--------------- | :------------- | | ASSETS | | | | | Cash and cash equivalents | $6,799 | $32,157 | $9,210 | | Inventory, net | $136,434 | $125,757 | $144,969 | | Total current assets | $171,426 | $180,974 | $176,534 | | Total assets | $471,383 | $490,453 | $488,399 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | Duluth line of credit | $11,000 | $— | $— | | Total current liabilities | $95,524 | $102,449 | $87,852 | | Total liabilities | $256,080 | $268,279 | $264,285 | | Total shareholders' equity | $215,303 | $222,174 | $224,114 | Consolidated Statements of Operations For Q1 2024, Duluth Holdings Inc. reported a net loss of $7.9 million, significantly wider than the $3.9 million net loss in the prior year, driven by a 5.7% decrease in net sales and a deleveraging of SG&A expenses, leading to an operating loss of $9.0 million and diluted EPS of ($0.24) Consolidated Statements of Operations (Amounts in thousands, except per share figures) | Metric | Three Months Ended April 28, 2024 | Three Months Ended April 30, 2023 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $116,684 | $123,759 | | Gross profit | $61,624 | $65,651 | | Selling, general and administrative expenses | $70,595 | $70,200 | | Operating loss | $(8,971) | $(4,549) | | Net loss | $(7,865) | $(3,877) | | Net loss per diluted share | $(0.24) | $(0.12) | Consolidated Statements of Cash Flows In Q1 2024, net cash used in operating activities increased significantly to $33.7 million from $14.0 million in the prior year, primarily due to changes in inventory and receivables, while net cash used in investing activities decreased substantially due to lower purchases of property and equipment, and financing activities provided $9.8 million, mainly from line of credit proceeds, resulting in an overall cash decrease of $25.4 million Consolidated Statements of Cash Flows (Amounts in thousands) | Metric | Three Months Ended April 28, 2024 | Three Months Ended April 30, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(33,666) | $(13,973) | | Net cash used in investing activities | $(1,477) | $(21,348) | | Net cash provided by (used in) financing activities | $9,785 | $(1,017) | | Decrease in cash and cash equivalents | $(25,358) | $(36,338) | | Cash and cash equivalents at end of period | $6,799 | $9,210 | Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (Q1 2024) For Q1 2024, EBITDA was $0.5 million, a significant decrease from $4.3 million in the prior year, and Adjusted EBITDA also saw a substantial decline to $1.8 million from $5.3 million, primarily reflecting the increased net loss Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (Amounts in thousands) | Metric | Three Months Ended April 28, 2024 | Three Months Ended April 30, 2023 | | :---------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(7,865) | $(3,877) | | EBITDA | $466 | $4,282 | | Adjusted EBITDA | $1,838 | $5,272 | Reconciliation of Forecasted Net Loss to EBITDA and Adjusted EBITDA (FY 2024) For the fiscal year ending February 2, 2025, the company forecasts a net loss of $7.4 million, with an estimated EBITDA of $34.8 million and Adjusted EBITDA of $39.0 million Reconciliation of Forecasted Net Loss to EBITDA and Adjusted EBITDA (Amounts in thousands) | Metric | Forecasted FY Ending Feb 2, 2025 | | :---------------------------- | :------------------------------- | | Net loss | $(7,400) | | EBITDA | $34,750 | | Adjusted EBITDA | $39,000 |