Duluth Trading Company reported fiscal first-quarter net sales increased 0.7 percent to $123.8 million, compared to $122.9 million in the year-ago comparable period. Direct-to-consumer net sales increased 2.3 percent to $79.5 million, driven by a higher conversion rate. Retail store net sales decreased 2.1 percent to $44.3 million, due to lower store traffic, which was partially offset by strong conversion rates. The women’s business reportedly continues strong momentum with net sales growth of 14.4 percent over the prior-year first quarter and AKHG sub-brand net sales increased 42.5 percent compared to the year-ago first quarter.

“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,” commented company President and CEO Sam Sato. “As planned, our inventory balance is below the prior year and on track to meet our goals for the year.”

Gross profit decreased to $65.7 million, or 53.0 percent of net sales, in the first quarter, compared to $67.1 million, or 54.6 percent 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 percent.

Selling, general and administrative expenses increased 3.2 percent to $70.2 million, compared to $68.0 million in the corresponding prior-year period. As a percentage of net sales, selling, general and administrative expenses increased to 56.7 percent, compared to 55.3 percent in the corresponding prior year period.

The increase in selling, general and administrative expense was said to be 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 resulting operating loss was $4.5 million for the quarter, compared to an operating loss of $0.9 million in the year-ago period.

EBITDA was $4.3 million in the first quarter, with adjusted EBITDA coming in at $5.3 million for the period.

The effective tax rate related to controlling interest was 27 percent in the first quarter, compared to 25 percent prior-year period.

Duluth posted a net loss of $3.9 million, or a loss of 12 cents per diluted share, in the first quarter, compared to a net loss of $1.3 million, or 4 cents per diluted share, in the prior-year Q1 period.

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.

Inventories were said to be well managed, down 4.8 percent to $145.0 million at quarter-end, compared to the year-ago quarter-end and down 6.4 percent compared to fiscal year-end.

“We are also excited to see progress that is on track for our strategic investment in a new automated fulfillment center in Adairsville, GA,” added Sato. “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.”

Looking ahead, Duluth Trading Company reaffirmed its fiscal 2023 outlook as follows:

  • 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 2 cents to 8 cents per diluted share; and
  • Capital expenditures, inclusive of software hosting implementation costs, of approximately $55 million.

Photo courtesy Duluth Trading Company