Duluth Holdings Inc. (dba, Duluth Trading Company) (“Duluth
Trading” or the “Company”) (NASDAQ: DLTH), a lifestyle brand of
men’s and women’s workwear, casual wear, outdoor apparel and
accessories, today announced its financial results for the fiscal
first quarter ended April 30, 2023.
Highlights for the First Quarter Ended
April 30, 2023
- Net sales increase 0.7% to $123.8 million compared to $122.9
million in the prior year first quarter
- Women’s business continues strong momentum with net sales
growth of 14.4% over prior year first quarter
- AKHG sub-brand net sales increase 42.5% compared to prior
period first quarter
- Inventories are well managed, down 4.8% compared to prior
period first quarter and down 6.4% compared to year-end
- Adjusted EBITDA1 of $5.3 million
1See Reconciliation of net loss to EBITDA and EBITDA to Adjusted
EBITDA in the accompanying financial tables.
Management Commentary
President and CEO Sam Sato commented, “While consumers remain
selective in their discretionary spend, we are meeting their
demands with much improved in-stock positions and higher
sell-through rates than last year. As planned, our inventory
balance is below prior year and on track to meet our goals for the
year. We are also excited to see progress that is on-track for our
strategic investment in a new automated fulfillment center in
Adairsville, GA. The facility will go live in the third quarter and
handle over half of our direct order volume in the near-term. Our
investments in the supply chain and fulfillment automation set the
foundation to enable extended growth into new channels, brands and
customer adjacencies.”
Sato concluded, “Customers are responding well to our Spring
& Summer collections featuring functional styles for outdoor
work and play for those that take on life with their own two hands.
Rooted in ruggedness, our Duluth garden, landscaping and planting
assortment continues to build on its multi-year success, expanding
in both size and breadth across apparel and gear for both Men
and Women. The Women’s Heirloom collection of garden shirts,
overalls, aprons and vests have been a cornerstone to this year’s
offering and have exceeded our expectations setting the stage for
many years of future growth for this anchor category. Our Men’s
business experienced a significant improvement in trend from the
prior quarter with growth that was down slightly to last year.
Supported by the great momentum in garden, coupled with the AKHG
Women’s assortment, our Women’s business overall grew 14% in the
first quarter fueling total company net sales growth of 0.7%.”
Operating Results for the First Quarter Ended April 30,
2023
Net sales increased 0.7% to $123.8 million, compared to $122.9
million in the same period a year ago. Direct-to-consumer net sales
increased by 2.3% to $79.5 million driven by a higher conversion
rate. Retail store net sales decreased by 2.1% to $44.3 million due
to lower store traffic, which was partially offset by strong
conversion rates.
Gross profit decreased to $65.7 million, or 53.0% of net sales,
compared to $67.1 million, or 54.6% of net sales, in the
corresponding prior year period. The decrease in gross profit
margin rate was primarily due to a lower product margin rate, which
was partially offset by expensing $3.9 million of expedited freight
during the first quarter of 2022 compared to $0.1 million during
the current quarter, impacting the quarter-over-quarter margin rate
variance by 3.1%.
Selling, general and administrative expenses increased 3.2% to
$70.2 million, compared to $68.0 million in the same period a year
ago. As a percentage of net sales, selling, general and
administrative expenses increased to 56.7%, compared to 55.3% in
the corresponding prior year period.
The increase in selling, general and administrative expense was
partially due to higher occupancy costs from the new automated
Southeast fulfillment center, coupled with increased amortization
of software hosting implementation costs from continued capital
investments.
The effective tax rate related to controlling interest was 27%
in the current period compared to 25% prior year period.
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of $9.2
million, net working capital of $88.7 million, and no outstanding
balance on the Duluth Trading $200 million revolving line of
credit.
End of period inventory of $145.0 million represented a 4.8%
decrease compared to prior period first quarter and down 6.4%
compared to year-end.
Reaffirmed Fiscal 2023 Outlook
The Company’s reaffirmed fiscal 2023 outlook is as follows:
- Net sales in the range of $645 million to $660 million
- Adjusted EBITDA1 in the range of $47 million to $49
million
- EPS in the range of $0.02 to $0.08 per diluted share
- Capital expenditures, inclusive of software hosting
implementation costs, of approximately $55 million
1See Reconciliation of forecasted net income to forecasted
EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the
accompanying financial tables.
Conference Call Information
A conference call and audio webcast with analysts and investors
will be held on Thursday, June 1, 2023 at 9:30 am Eastern Time, to
discuss the results and answer questions.
- Live conference
call: 844-875-6915 (domestic) or 412-317-6711 (international)
- Conference call
replay available through June 8, 2023: 877-344-7529 (domestic) or
412-317-0088 (international)
- Replay access code:
8504935
- Live and archived
webcast:
ir.duluthtrading.com
Investors can pre-register for the earnings conference call to
expedite their entry into the call and avoid waiting for a live
operator. To pre-register for the call, please visit
https://dpregister.com/sreg/10178202/f937a546b8 and
enter your contact information. You will then be issued a
personalized phone number and pin to dial into the live conference
call. Investors can pre-register any time prior to the start of the
conference call.
About Duluth Trading
Duluth Trading is a lifestyle brand for the Modern, Self-Reliant
American. Based in Mount Horeb, Wisconsin, we offer high quality,
solution-based casual wear, workwear and accessories for men and
women who lead a hands-on lifestyle and who value a job well-done.
We provide our customers an engaging and entertaining experience.
Our marketing incorporates humor and storytelling that conveys the
uniqueness of our products in a distinctive, fun way, and are
available through our content-rich website, catalogs, and “store
like no other” retail locations. We are committed to outstanding
customer service backed by our “No Bull Guarantee” - if it’s not
right, we’ll fix it. Visit our website at
http://www.duluthtrading.com.
Non-GAAP Measurements
Management believes that non-GAAP financial measures may be
useful in certain instances to provide additional meaningful
comparisons between current results and results in prior operating
periods. Within this release, including the tables attached hereto,
reference is made to adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA). See attached Table
“Reconciliation of Net Loss to EBITDA and EBITDA to Adjusted
EBITDA,” for a reconciliation of net loss to EBITDA and EBITDA to
Adjusted EBITDA for the three months ended April 30, 2023, versus
the three months ended May 1, 2022.
Adjusted EBITDA is a metric used by management and frequently
used by the financial community, which provides insight into an
organization’s operating trends and facilitates comparisons between
peer companies, since interest, taxes, depreciation and
amortization can differ greatly between organizations as a result
of differing capital structures and tax strategies. Adjusted EBITDA
excludes certain items that are unusual in nature or not comparable
from period to period.
The Company provides this information to investors to assist in
comparisons of past, present and future operating results and to
assist in highlighting the results of on-going operations. While
the Company’s management believes that non-GAAP measurements are
useful supplemental information, such adjusted results are not
intended to replace the Company’s GAAP financial results and should
be read in conjunction with those GAAP results.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements, other than statements of historical facts
included in this press release, including statements concerning
Duluth Trading's plans, objectives, goals, beliefs, business
strategies, future events, business conditions, its results of
operations, financial position and its business outlook, business
trends and certain other information herein, including statements
under the heading “Reaffirmed Fiscal 2023 Outlook” are
forward-looking statements. You can identify forward-looking
statements by the use of words such as “may,” ”might,” “will,”
“should,” “expect,” “plan,” “anticipate,” “could,” “believe,”
“estimate,” “project,” “target,” “predict,” “intend,” “future,”
“budget,” “goals,” “potential,” “continue,” “design,” “objective,”
“forecasted,” “would” and other similar expressions. The
forward-looking statements are not historical facts, and are based
upon Duluth Trading's current expectations, beliefs, estimates, and
projections, and various assumptions, many of which, by their
nature, are inherently uncertain and beyond Duluth Trading's
control. Duluth Trading's expectations, beliefs and projections are
expressed in good faith, and Duluth Trading believes there is a
reasonable basis for them. However, there can be no assurance that
management's expectations, beliefs, estimates, and projections will
be achieved and actual results may vary materially from what is
expressed in or indicated by the forward-looking statements.
Forward-looking statements are subject to risks and uncertainties
that could cause actual performance or results to differ materially
from those expressed in the forward-looking statements, including,
among others, the risks, uncertainties, and factors set forth under
Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on
Form 10-K filed with the SEC on March 17, 2023 and other factors as
may be periodically described in Duluth Trading’s subsequent
filings with the SEC. These risks and uncertainties include, but
are not limited to, the following: the impact of inflation on our
results of operations; the prolonged effects of economic
uncertainties on store traffic and disruptions to our distribution
network, supply chains and operations; our ability to maintain and
enhance a strong brand image; effectively adapting to new
challenges associated with our expansion into new geographic
markets; generating adequate cash from our existing stores to
support our growth; effectively relying on sources for merchandise
located in foreign markets; transportation delays and
interruptions, including port congestion; inability to timely and
effectively obtain shipments of products from our suppliers and
deliver merchandise to our customers; the inability to maintain the
performance of a maturing store portfolio; the impact of changes in
corporate tax regulations; identifying and responding to new and
changing customer preferences; the success of the locations in
which our stores are located; our ability to attract and retain
customers in the various retail venues and locations in which our
stores are located; competing effectively in an environment of
intense competition; our ability to adapt to significant changes in
sales due to the seasonality of our business; price reductions or
inventory shortages resulting from failure to purchase the
appropriate amount of inventory in advance of the season in which
it will be sold in global market constraints; increases in costs of
fuel or other energy, transportation or utility costs and in the
costs of labor and employment; failure of our information
technology systems to support our current and growing business,
before and after our planned upgrades; and other factors that may
be disclosed in our SEC filings or otherwise. Forward-looking
statements speak only as of the date the statements are made.
Duluth Trading assumes no obligation to update forward-looking
statements to reflect actual results, subsequent events or
circumstances or other changes affecting forward-looking
information except to the extent required by applicable securities
laws.
(Tables Follow)***
DULUTH HOLDINGS INC.Condensed Consolidated
Balance Sheets(Unaudited)
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
April 30, 2023 |
|
January 29, 2023 |
|
May 1, 2022 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
9,210 |
|
|
$ |
45,548 |
|
|
$ |
40,370 |
|
Receivables |
|
6,437 |
|
|
|
6,041 |
|
|
|
5,097 |
|
Inventory, net |
|
144,969 |
|
|
|
154,922 |
|
|
|
152,244 |
|
Prepaid expenses & other current assets |
|
15,918 |
|
|
|
15,154 |
|
|
|
16,422 |
|
Total current assets |
|
176,534 |
|
|
|
221,665 |
|
|
|
214,133 |
|
Property and equipment,
net |
|
122,812 |
|
|
|
112,564 |
|
|
|
108,283 |
|
Operating lease right-of-use
assets |
|
128,436 |
|
|
|
131,753 |
|
|
|
118,414 |
|
Finance lease right-of-use
assets, net |
|
46,474 |
|
|
|
47,206 |
|
|
|
49,402 |
|
Available-for-sale
security |
|
5,416 |
|
|
|
5,539 |
|
|
|
6,066 |
|
Other assets, net |
|
8,591 |
|
|
|
8,727 |
|
|
|
6,495 |
|
Deferred tax assets |
|
136 |
|
|
|
— |
|
|
|
— |
|
Total assets |
$ |
488,399 |
|
|
$ |
527,454 |
|
|
$ |
502,793 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
$ |
36,123 |
|
|
$ |
56,547 |
|
|
$ |
54,523 |
|
Accrued expenses and other current liabilities |
|
30,921 |
|
|
|
40,815 |
|
|
|
32,214 |
|
Income taxes payable |
|
1,423 |
|
|
|
1,761 |
|
|
|
4,782 |
|
Current portion of operating lease liabilities |
|
15,713 |
|
|
|
15,571 |
|
|
|
13,191 |
|
Current portion of finance lease liabilities |
|
2,885 |
|
|
|
2,842 |
|
|
|
2,730 |
|
Duluth line of credit |
|
— |
|
|
|
— |
|
|
|
— |
|
Current maturities of TRI long-term debt1 |
|
787 |
|
|
|
768 |
|
|
|
711 |
|
Total current liabilities |
|
87,852 |
|
|
|
118,304 |
|
|
|
108,151 |
|
Operating lease liabilities,
less current maturities |
|
114,019 |
|
|
|
117,366 |
|
|
|
104,448 |
|
Finance lease liabilities,
less current maturities |
|
36,688 |
|
|
|
37,425 |
|
|
|
39,574 |
|
TRI long-term debt, less
current maturities1 |
|
25,726 |
|
|
|
25,913 |
|
|
|
26,440 |
|
Deferred tax liabilities |
|
— |
|
|
|
1,249 |
|
|
|
2,791 |
|
Total liabilities |
|
264,285 |
|
|
|
300,257 |
|
|
|
281,404 |
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
Treasury stock |
|
(1,732 |
) |
|
|
(1,459 |
) |
|
|
(1,457 |
) |
Capital stock |
|
99,968 |
|
|
|
98,842 |
|
|
|
96,299 |
|
Retained earnings |
|
129,303 |
|
|
|
133,172 |
|
|
|
129,575 |
|
Accumulated other
comprehensive income, net |
|
(207 |
) |
|
|
(148 |
) |
|
|
153 |
|
Total shareholders' equity of Duluth Holdings Inc. |
|
227,332 |
|
|
|
230,407 |
|
|
|
224,570 |
|
Noncontrolling interest |
|
(3,218 |
) |
|
|
(3,210 |
) |
|
|
(3,181 |
) |
Total shareholders' equity |
|
224,114 |
|
|
|
227,197 |
|
|
|
221,389 |
|
Total liabilities and shareholders' equity |
$ |
488,399 |
|
|
$ |
527,454 |
|
|
$ |
502,793 |
|
1Represents debt of the variable interest entity, TRI Holdings,
LLC, that is consolidated in accordance with ASC 810,
Consolidation. Duluth Holdings Inc. is not the guarantor nor the
obligor of this debt.
DULUTH HOLDING INC.Consolidated
Statements of
Operations(Unaudited)(Amounts in
thousands, except per share
figures) |
|
Three Months Ended |
|
April 30, 2023 |
|
May 1, 2022 |
Net sales |
$ |
123,759 |
|
|
$ |
122,904 |
|
Cost of goods sold (excluding
depreciation and amortization) |
|
58,108 |
|
|
|
55,841 |
|
Gross profit |
|
65,651 |
|
|
|
67,063 |
|
Selling, general and
administrative expenses |
|
70,200 |
|
|
|
67,994 |
|
Operating loss |
|
(4,549 |
) |
|
|
(931 |
) |
Interest expense |
|
934 |
|
|
|
876 |
|
Other income, net |
|
148 |
|
|
|
46 |
|
Loss before income taxes |
|
(5,335 |
) |
|
|
(1,761 |
) |
Income tax benefit |
|
(1,458 |
) |
|
|
(438 |
) |
Net loss |
|
(3,877 |
) |
|
|
(1,323 |
) |
Less: Net loss attributable to
noncontrolling interest |
|
(8 |
) |
|
|
(29 |
) |
Net loss attributable to
controlling interest |
$ |
(3,869 |
) |
|
$ |
(1,294 |
) |
Basic earnings per
share (Class A and Class B): |
|
|
|
|
|
Weighted average shares of
common stock outstanding |
|
32,865 |
|
|
|
32,714 |
|
Net loss per share
attributable to controlling interest |
$ |
(0.12 |
) |
|
$ |
(0.04 |
) |
Diluted earnings per
share (Class A and Class B): |
|
|
|
|
|
Weighted average shares and
equivalents outstanding |
|
32,865 |
|
|
|
32,714 |
|
Net loss per share
attributable to controlling interest |
$ |
(0.12 |
) |
|
$ |
(0.04 |
) |
DULUTH HOLDINGS INC.Consolidated
Statements of Cash
Flows(Unaudited)(Amounts in
thousands) |
|
|
|
|
|
|
|
Three Months Ended |
|
April 30, 2023 |
|
May 1, 2022 |
Cash flows from
operating activities: |
|
|
|
|
|
Net loss |
$ |
(3,877 |
) |
|
$ |
(1,323 |
) |
Adjustments to reconcile net
income to net cash used in operating activities: |
|
|
|
|
|
Depreciation and
amortization |
|
7,413 |
|
|
|
7,520 |
|
Stock based compensation |
|
990 |
|
|
|
618 |
|
Deferred income taxes |
|
(1,365 |
) |
|
|
37 |
|
Loss on disposal of property
and equipment |
|
— |
|
|
|
26 |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
Receivables |
|
(396 |
) |
|
|
358 |
|
Inventory |
|
9,953 |
|
|
|
(29,572 |
) |
Prepaid expense & other current assets |
|
84 |
|
|
|
746 |
|
Software hosting implementation costs, net |
|
(746 |
) |
|
|
(1,007 |
) |
Deferred catalog costs |
|
— |
|
|
|
10 |
|
Trade accounts payable |
|
(21,080 |
) |
|
|
10,362 |
|
Income taxes payable |
|
(338 |
) |
|
|
(2,032 |
) |
Accrued expenses and deferred rent obligations |
|
(4,475 |
) |
|
|
(17,500 |
) |
Other assets |
|
(17 |
) |
|
|
(11 |
) |
Noncash lease impacts |
|
(119 |
) |
|
|
51 |
|
Net cash used in operating
activities |
|
(13,973 |
) |
|
|
(31,717 |
) |
Cash flows from
investing activities: |
|
|
|
|
|
Purchases of property and
equipment |
|
(21,392 |
) |
|
|
(3,885 |
) |
Principal receipts from
available-for-sale security |
|
44 |
|
|
|
39 |
|
Proceeds from disposals |
|
— |
|
|
|
3 |
|
Net cash used in investing
activities |
|
(21,348 |
) |
|
|
(3,843 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
Proceeds from line of
credit |
|
10,000 |
|
|
|
— |
|
Payments on line of
credit |
|
(10,000 |
) |
|
|
— |
|
Payments on TRI long term
debt |
|
(186 |
) |
|
|
(168 |
) |
Payments on finance lease
obligations |
|
(694 |
) |
|
|
(664 |
) |
Payments of tax withholding on
vested restricted shares |
|
(273 |
) |
|
|
(455 |
) |
Other |
|
136 |
|
|
|
166 |
|
Net cash used in financing
activities |
|
(1,017 |
) |
|
|
(1,121 |
) |
Decrease in cash and cash
equivalents |
|
(36,338 |
) |
|
|
(36,681 |
) |
Cash and cash equivalents at
beginning of period |
|
45,548 |
|
|
|
77,051 |
|
Cash and cash equivalents at
end of period |
$ |
9,210 |
|
|
$ |
40,370 |
|
Supplemental
disclosure of cash flow information: |
|
|
|
|
|
Interest paid |
$ |
934 |
|
|
$ |
876 |
|
Income taxes paid |
$ |
216 |
|
|
$ |
1,610 |
|
Supplemental
disclosure of non-cash information: |
|
|
|
|
|
Unpaid liability to acquire
property and equipment |
$ |
1,832 |
|
|
$ |
4,121 |
|
DULUTH HOLDINGS INC.Reconciliation of Net
Loss to EBITDA and EBITDA to Adjusted EBITDAFor
the Fiscal Quarter Ended April 30, 2023 and May 1,
2022(Unaudited)(Amounts in
thousands) |
|
|
|
|
|
|
|
Three Months Ended |
|
April 30, 2023 |
|
May 1, 2022 |
(in thousands) |
|
|
|
|
|
Net loss |
$ |
(3,877 |
) |
|
$ |
(1,323 |
) |
Depreciation and amortization |
|
7,413 |
|
|
|
7,520 |
|
Amortization of internal-use software hosting |
|
|
|
|
|
subscription implementation costs |
|
1,270 |
|
|
|
633 |
|
Interest expense |
|
934 |
|
|
|
876 |
|
Income tax benefit |
|
(1,458 |
) |
|
|
(438 |
) |
EBITDA |
$ |
4,282 |
|
|
$ |
7,268 |
|
Stock based compensation |
|
990 |
|
|
|
618 |
|
Adjusted EBITDA |
$ |
5,272 |
|
|
$ |
7,886 |
|
DULUTH HOLDINGS INC.Reconciliation of
Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to
Forecasted Adjusted EBITDAFor the Fiscal Year
Ending January 28,
2024(Unaudited)(Amounts in
thousands) |
|
|
|
|
|
|
|
Low |
|
High |
Forecasted |
|
|
|
|
|
Net income |
$ |
600 |
|
$ |
2,500 |
Depreciation and amortization |
|
32,200 |
|
|
32,200 |
Amortization of internal-use software hosting subscription
implementation costs |
|
4,000 |
|
|
4,000 |
Interest expense |
|
5,000 |
|
|
4,450 |
Income tax expense |
|
200 |
|
|
850 |
EBITDA |
$ |
42,000 |
|
$ |
44,000 |
Stock based compensation |
|
5,000 |
|
|
5,000 |
Adjusted EBITDA |
$ |
47,000 |
|
$ |
49,000 |
Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/139d03ec-0c0b-430a-a557-511405c5da69
https://www.globenewswire.com/NewsRoom/AttachmentNg/a7542fdb-5490-41bc-bc77-f305363e0290
Investor Contacts:
Tom Filandro
ICR, Inc.
(646) 277-1200
DuluthIR@icrinc.com
Grafico Azioni Duluth (NASDAQ:DLTH)
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Da Mag 2023 a Mag 2024