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Duluth (DLTH) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported second quarter net sales of $141.5 million, a decrease of 5.1% compared to $149.1 million last year, but an increase of 3% compared to the same period in 2020 [21] - Net income for the quarter was $2.4 million, or $0.07 per diluted share, down from $0.27 per diluted share reported in the second quarter last year [28] - Adjusted EBITDA for the second quarter was $13.2 million, a 38% decrease from last year [28] Business Line Data and Key Metrics Changes - Women's apparel categories grew nearly 4% over last year and represented a nearly 30% increase from the pre-pandemic period in 2019 [5] - The AKHG sub-brand led total sales growth of 21% in the second quarter, while the overall Duluth by Duluth Trading was down 9% due to reduced clearance sales [17] Market Data and Key Metrics Changes - Direct channel sales were up 0.1% from last year, while retail channel sales were down 12% driven by a decline in store traffic [21] - The company experienced a high single-digit increase in website visits, with nearly 70% of all visits coming through mobile devices [15] Company Strategy and Development Direction - The company is focusing on expanding its women's apparel offerings and enhancing its digital marketing strategy to attract high-value customers [4][12] - Investments are being made in logistics automation and technology upgrades to support long-term growth [11][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties and inflationary pressures impacting discretionary spending but expressed confidence in recapturing lost sales due to improved inventory positions [7][9] - The company expects sales in the direct channel to be up high single-digits in the third and fourth quarters, while retail sales are expected to be down mid-single-digits [32] Other Important Information - The company is committed to building its family of brands and enhancing customer data insights to inform marketing strategies [12] - A new Chief Technology and Logistics Officer has been hired to support the company's strategic initiatives [11] Q&A Session Summary Question: Changes to the guidance for the year - Management explained that the reduction in revenue guidance was primarily due to macro headwinds, but they expect to recapture lost sales from last year due to improved inventory [36][37] Question: Promotions across the industry - Management noted that while there is a shift towards more promotional periods, their gross margins remain healthy, and they are focused on maintaining brand positioning [38] Question: Long-term adjusted EBITDA margin targets - Management confirmed that long-term targets for adjusted EBITDA margins of 14% to 15% remain viable despite current challenges [39][40] Question: Trends across the quarter and into Q3 - Management indicated that retail foot traffic has improved since August, but they still expect slight declines compared to last year [44][45] Question: Marketing spend in Q4 - Management clarified that the reduction in marketing spend for Q4 is a shift in strategy rather than a decrease in overall marketing efforts, focusing more on digital channels [50] Question: Wholesale performance - Management reported positive momentum in their partnership with Tractor Supply, expanding their test to additional stores [53]