Duluth Holdings, Inc., the parent of Duluth Trading company, reported earnings declined 57.5 percent in the fourth quarter as sales fell 10.7 percent.
Adjusted EBITDA was down 37.5 percent in the quarter.
For the year, net earnings were down 92.2 percent, adjusted EBITDA fell 43.8 percent and sales declined 6.5 percent.
President and CEO, Sam Sato commented, “While we are not satisfied with our financial performance for the year, we finished the fourth quarter with good momentum and continue to see great progress in our AKHG outdoor recreation brand and our Women’s business overall, both posting positive sales growth for the quarter and full year. We ended the year with well-balanced inventories purposefully receiving new spring goods earlier to capture the seasonal transition business. Building on the momentum in our women’s business, we have elevated and expanded on our multi-year successful garden collection featuring new colors, prints and benefits, as well as new gear for those that take on life with their own two hands.
“The launch of our AKHG Lost Lake swim collection for Men and Women is capturing our customers’ interest. Our stylish patterns anchored on the purpose of providing necessary sun protection and fast drying fabrication features are resonating across genders, further cementing Duluth Trading company as a true co-gender lifestyle brand.”
Sato concluded, “Fiscal 2022 was a dynamic and challenging year. In the face of many cross currents, our teams remained agile and flexible navigating with an unwavering focus on servicing our customers day in and day out while controlling the areas of the business that were in our control. I am truly grateful for the hard work and dedication across our entire organization.”
Operating Results for the Fourth Quarter Ended January 29, 2023
- Net sales decreased 10.7 percent to $241.8 million, compared to $270.8 million in the same period a year ago. Retail store net sales decreased by 8.2 percent to $83.6 million due to slower store traffic, partially offset by continued strong conversion rates. Direct-to-consumer net sales decreased by 12.0 percent to $158.1 million compared to the fourth quarter last year.
- Net sales in-store markets decreased 10.3 percent, to $167.1 million, compared to $186.3 million in the same period a year ago. Net sales in non-store markets decreased 11.8 percent, to $72.7 million, compared to $82.5 million in the same period a year ago.
- Women’s apparel net sales increased 1.7 percent due to continued strength in the AKHG collection. This increase was offset by a 14.1 percent decrease in Men’s apparel net sales.
- Gross profit decreased 15.0 percent to $123.8 million, or 51.2 percent of net sales, compared to $145.7 million, or 53.8 percent of net sales, in the corresponding prior-year period. The decrease in gross profit margin rate was due to a lower mix of full-price sales, coupled with deeper discounts as a response to the heavily promotional fourth-quarter industry environment.
- SG&A expenses decreased 6.8 percent to $113.2 million, compared to $121.4 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses increased to 46.8 percent, compared to 44.9 percent in the corresponding prior-year period.
- The decrease in selling, general and administrative expenses was primarily due to a prudent pullback of spending during the promotional industry environment and period of uncertain customer demand.
- The effective tax rate related to controlling interest was 25 percent in both the current and prior year periods.
- Net earnings were down 57.5 percent to $7.4 million, or 23 cents a share, from $17.4 million, or 53 cents, a year ago.
- EBITDA fell 38.6 percent to $19.9 million from $32.5 million a year ago. Excluding stock-based compensation, adjusted EBITDA was down 37.5 percent to $20.6 million from $33.0 million.
Operating Results for the Year Ended January 29, 2023
- Net sales of $653.3 million compared to $698.6 million in the prior year, a decline of 6.5 percent;
- Net earnings were down 92.2 percent to $2.3 million, or 7 cents a share, from $29.7 million, or 90 cents, a year ago; and
- EBITDA fell 45.7 percent to $40.8 million from $75.2 million a year ago. Excluding stock-based compensation, adjusted EBITDA fell 43.8 percent to $43.5 million from $77.4 million.
Balance Sheet and Liquidity
The company ended the quarter with a cash balance of approximately $45.5 million, net working capital of $107.9 million, no outstanding Duluth Trading bank debt and $31.5 million of fiscal 2022 capital expenditures, inclusive of $8.7 million of investments in software hosting implementation costs.
End-of-year inventory of $154.9 million represented an increase of 26.3 percent compared to the prior year. This increase was due to the planned pull forward of spring 2023 receipts in the fourth quarter to avoid any supply chain constraints. As compared to Q4 2020, inventory increased $5.9 million, or 3.9 percent.
Fiscal 2023 Outlook
- Net sales in the range of $645 million to $660 million;
- Adjusted EBITDA in the range of $47 million to $49 million;
- EPS in the range of $0.02 to $0.08 per diluted share; and
- Capital expenditures, inclusive of software hosting implementation costs, of approximately $55 million.
Photo courtesy Duluth Trading Company