Duluth (US:DLTH)2022-06-02 16:32Financial Data and Key Metrics Changes - The company reported first quarter net sales of nearly $123 million, a decrease of 7.9% compared to $133.4 million last year, but an increase of 11.8% compared to the same period in 2020 [30][42] - The net income loss for the quarter was $1.3 million, resulting in an earnings loss per share of $0.04, compared to a net income of $500,000 or $0.02 per diluted share reported in the first quarter last year [42] - Gross profit margin for Q1 was 54.6%, an increase of 470 basis points from 49.9% last year, despite incurring approximately $4 million in expedited freight costs [10][33] Business Line Data and Key Metrics Changes - The retail store channel saw a slight increase in net sales of 0.4%, driven by a 6% increase in average transaction value [16] - Direct channel sales were down 12.1% for the quarter, largely due to heavy clearance volume in the previous year and a strategic decision to reduce marketing spend early in the quarter [30][31] - The women's collection under the AKHG brand quickly reached a similar penetration level as the Duluth brand, indicating strong consumer reception [21] Market Data and Key Metrics Changes - The overall inventory position at quarter-end was 6% higher than last year, with clearance goods making up only 3% of total inventory compared to 8% last year [10][44] - Customer traffic and conversion improved in the latter half of the quarter, with high single-digit sales growth reported in April [9][32] Company Strategy and Development Direction - The company is focusing on creating distinct positions for each sub-brand to better meet customer needs and attract new customers [5][6] - Investments are being made in digital marketing and brand awareness campaigns to support new product launches and enhance customer engagement [12][14] - The company is implementing logistics expansion and automation projects to improve operational efficiency and support long-term growth [24][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflationary pressures in fuel, labor markets, and commodity prices but expressed confidence in the underlying demand for their products [11][28] - The company anticipates being well-positioned with merchandise to meet customer demand during key sales periods, including Father's Day and the fall and winter seasons [13][48] - The outlook for the second quarter and back-half of 2022 includes expectations for sales growth in both direct and retail channels [48][49] Other Important Information - The company ended the quarter with net working capital of $106 million, including $40 million in cash and no outstanding balance on its line of credit [43] - Capital expenditures for 2022 are expected to be $40 million, lower than previous guidance due to timing of progress payments for a new fulfillment center [45][46] Q&A Session Summary Question: Consumer reception of brand realignment - Management noted strong consumer response to the brand realignment, particularly with the AKHG brand, which has seen rapid penetration in the women's segment [52][54] Question: Full-year outlook and conservatism - Management maintained the full-year outlook, factoring in earlier receipt dates to mitigate supply chain constraints and ensure inventory availability [55][56] Question: Return on incremental marketing spend - Management confirmed the ability to flex marketing spend based on inventory flow and highlighted upcoming product launches that will drive marketing efforts [61][62] Question: Addressable market and revenue base - Management indicated that the focus on conventional buyers would not narrow the revenue base but rather improve structural margin opportunities [66] Question: Marketing strategy and catalog use - Management clarified that while catalog use has been reduced, it remains a valuable brand-building tool, and they are focusing on targeted digital marketing [78][80]