Duluth Holdings, Inc. (dba Duluth Trading Company) reported another quarter of improved profitability with a boost from tax refunds and internal efforts to reduce discounting. Sales fell 7.8 percent as both web traffic and web conversion declined as a result of reduced promotional activity. The retailer raised its earnings guidance for the year.

Summary of the Second Quarter ended August 2, 2026

  • Net income of $18.4 million compared to net income of $1.3 million in the prior year second quarter. This includes the impact of $16.3 million in tariff refunds.
  • Reported and adjusted EPS of 50 cents. This includes a 44 cents impact from tariff refunds.
  • Adjusted EBITDA of $27.0 million compared to $12.0 million in the prior year second quarter. This includes the impact of $16.3 million in tariff refunds.
  • Inventory down $22.9 million or 15.5 percent vs. last year.
  • Cash and cash equivalents of $26.8 million with net liquidity of $96.1 million.

Management Commentary

President and CEO Stephanie Pugliese stated, “Our second quarter performance demonstrates strong execution of our operational priorities, inventory discipline, and successful promotional reset. By combining gross margin expansion with effective inventory management, we have delivered another quarter of improved profitability and free cash flow. Our core products continue to lead the way with customers responding favorably to our high-quality, solution-based workwear.”

Pugliese added, “As we enter the second half of the year, we are excited about our enhanced product offering including our new Hellbent work pants, No Quit utility shirts, and Heirloom prints. We remain focused in advancing our ‘Build to Last’ strategy, maximizing channel productivity, and consistently delivering an exceptional customer experience.”

Operating Results for the Second Quarter ended August 2, 2026

Net sales decreased by $10.3 million, or 7.8 percent, to $121.4 million for the three months ended August 2, 2026 compared to $131.7 million in the three months ended August 3, 2025. Direct-to-consumer net sales decreased by 11.5 percent to $70.1 million due to declines in web traffic and web conversion as a result of reduced promotional activity partially offset by higher average order values. Retail store net sales decreased by 2.4 percent to $51.3 million driven by lower traffic, partially offset by higher average order values in comparable stores, coupled with two new stores opened in the third quarter of 2025.

Gross margin expanded by 1,810 basis points to 72.8 percent of net sales in the three months ended August 2, 2026, compared to 54.7 percent of net sales in the three months ended August 3, 2025. Duluth recorded a reduction to cost of goods sold of $16.0 million related to refunds of previously incurred tariff charges. Excluding the impact of tariff refunds, gross margin was 59.6 percent in the three months ended August 2, 2026, an expansion of 490 basis points compared to the prior year. This increase in gross margin rate was primarily driven by an increase in average unit retail prices from reduced promotional activity, coupled with an improvement in product costs from our direct to factory sourcing initiative.

Selling, general and administrative expenses increased $0.7 million, or 1.1 percent, to $69.5 million in the three months ended August 2, 2026 compared to $68.8 million in the three months ended August 3, 2025. Selling, general and administrative expenses as a percentage of net sales increased by 510 basis points to 57.3 percent in the three months ended August 2, 2026, compared to 52.2 percent in the three months ended August 3, 2025. The increase in selling, general and administrative expenses as a percentage of net sales was mainly driven by an increase in advertising and shipping expenses, which was partially offset by leverage in variable expenses in our fulfillment centers and stores coupled with lower overhead expenses.

Balance Sheet and Liquidity

The company ended the quarter with $26.8 million of cash and cash equivalents, $85.7 million of net working capital, and zero outstanding debt on the $70.0 million Asset Based Lending facility resulting in approximately $96 million of net liquidity.

Fiscal 2026 Outlook

For Fiscal 2026, the company is:

  • Affirming previously issued fiscal 2026 net sales guidance range of $540 million to $560 million
  • Raising previously issued fiscal 2026 Adjusted EBITDA guidance to $38 million to $42 million compared to the previous guidance of $28 million to $32 million, including the impact of tariff refunds
  • Affirming capital expenditures, inclusive of software hosting implementation costs, of approximately $12 million

Image courtesy Duluth Trading