Duluth Holdings, Inc. reported fiscal first quarter net sales decreased 5.7 percent to $116.7 million, compared to $123.8 million in the Q1 period a year ago. Direct-to-consumer net sales decreased by 5.1 percent to $75.4 million, primarily driven by a decline in site visits compared to the prior year. Retail store net sales decreased by 6.8 percent to $41.2 million due to slower traffic in-store, partially offset by strong conversion rates.

Gross profit decreased to $61.6 million, or 52.8 percent of net sales, compared to $65.7 million, or 53.0 percent of net sales, in the corresponding prior year period. While new product costs came in better than expected, the retailer reported a delay in impact to the gross margin rate as it sells through older, higher cost inventory.

Selling, general and administrative expenses increased 0.6 percent to $70.6 million, compared to $70.2 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses deleveraged to 60.5 percent, compared to 56.7 percent in the corresponding prior year period, mainly driven by higher fixed costs and depreciation from foundational strategic investments, partially offset by efficiencies across logistics and the fulfillment center network.

The company posted a net loss of $7.9 million in the first quarter, compared to a net loss of $3.9 million in the year-ago Q1 period. Loss per share doubled from a loss of 12 cents a share in the year-ago quarter to 24 cents per share in the 2024 Q1 period.

Adjusted EBITDA was $1.8 million for the quarter.

President and CEO Sam Sato commented, “Despite some key quarter wins, we are not satisfied with our first quarter results, which fell short of our internal expectations. Our top-line quarter performance, at a decline of 5.7 percent, was hampered by challenging traffic and a sub-par in-stock position following stronger-than-expected unit selling late in the fourth quarter. We took swift action to improve our in-stock position in core items, which improved throughout the quarter and into the second quarter to date.

“On a lighter note, during the quarter, we furthered our emotional connection and awareness with both existing and new customers with the launch of a successful underwear trade-up event, which drove a store traffic increase of 50 percent on the day of the event with more than one-third of the trade ups coming from women. We also launched our #showusyourbibs social media campaign, which garnered tremendous buzz and supported continued growth in women’s-only buyers.

“I am pleased with the progress we’re making against our longer-term strategic initiatives. Our focus for 2024 remains on accelerating the operational improvements of the strategic roadmap, expanding our pipeline of new and innovative products, optimizing our marketing mix, improving gross profit margin rates, and controlling what we can control by prudently managing expenses and inventories,” concluded Sato.

Balance Sheet and Liquidity
Duluth Trading Company ended the quarter with $6.8 million of cash and cash equivalents, net working capital of $75.9 million, $11.0 million outstanding on its $200 million revolving line of credit, and $195.8 million of liquidity.

Quarter-end inventory composition was said to be “healthy,” down 5.9 percent compared to the prior year first quarter; and

Updated Fiscal 2024 Outlook
The retailer updated its fiscal 2024 outlook as follows:

  • Net sales of approximately $640 million;
  • Adjusted EBITDA of approximately $39 million;
  • EPS of approximately ($0.22) per diluted share; and
  • Capital expenditures, inclusive of software hosting implementation costs, of approximately $25 million.

Image courtesy Duluth Trading Company