Duluth Holdings, Inc. saw fiscal third quarter net sales decrease 6.1 percent to $138.2 million, compared to $147.1 million in the corresponding period last year. Direct-to-consumer net sales decreased by 4.4 percent to $87.0 million in the quarter, which was said to be primarily driven by a slight decline in site visits, partially offset by improved conversion rates compared to the prior year period. Retail store net sales decreased by 8.8 percent to $51.2 million reportedly due to slower store traffic, partially offset by a higher average transaction value during the quarter.

Women’s AKHG sub-brand net sales increased 19.0 percent compared to the prior-year third quarter.

Gross profit decreased to $69.4 million, or 50.2 percent of net sales, compared to $76.9 million, or 52.3 percent of net sales, in the corresponding prior-year period. The company said the decrease in gross profit margin rate was primarily due to a lower mix of full-price sales amidst the continued promotional retail environment.

SG&A expenses decreased 2.9 percent to $81.8 million, compared to $84.3 million in the year-ago period. As a percentage of net sales, SG&A expenses increased to 59.2 percent, compared to 57.3 percent in the corresponding prior-year period.

The decrease in SG&A expense was said to be due to a slight decrease in advertising spend and efficiencies across the fulfillment center network, partially offset by higher personnel costs and higher depreciation from foundational strategic investments.

The retailer posted a net loss of $10.5 million, or a loss of 32 cents per diluted share, in the quarter, compared to a loss of $6.2 million, or a loss of 19 cents per diluted share, in the year-ago quarter.

Duluth reported an Adjusted EBITDA loss of $1.6 million in fiscal Q3, compared to an Adjusted EBITDA profit of $1.7 million in fiscal Q3 last year.

President and CEO, Sam Sato commented, “Reflecting on what has remained a dynamic consumer environment in which we continued to see customers gravitating to value, our third quarter performance was hampered by lower traffic in both our direct and retail channels, as well as an under-penetrated position in spring-summer goods following strong unit sell-throughs during the second quarter. That said, our overall inventory mix is strong with a significantly higher level of newness and 30 percent less clearance inventory. In addition to managing the business prudently on both the inventory and expense fronts, we strategically pulsed a higher-than-planned level of events combined with select pull forward of fall-winter receipts enabling us to maintain high levels of shopper conversion in-store, as well as improve our conversion and retention rates in our direct channel.

We are not satisfied with our third quarter performance, however, I am pleased to report that we have experienced a solid trend improvement in our business over the Black Friday through Cyber Monday period. Our decisive actions to improve the business, including introducing more newness than we ever have, pulling forward select spring 2024 product, and chasing targeted best sellers to capitalize on winning products is paying off.”

Balance Sheet and Liquidity
The company ended the quarter with a cash balance of $8.2 million, net working capital of $62.3 million, and a $36 million outstanding balance on the Duluth Trading $200 million revolving line of credit.

Inventory was $174.0 million at quarter-end, representing a 15.0 percent decrease compared to the prior-year third quarter. The company said the inventory composition was “healthy and well managed.”

Updated Fiscal 2023 Outlook
The company’s updated fiscal 2023 outlook is as follows:

  • Net sales in the range of $640 million to $655 million;
  • Adjusted EBITDA in the range of $35 million to $39 million;
  • Loss per share in the range of 25 cents to 15 cents per diluted share; and
  • Capital expenditures, inclusive of software hosting implementation costs, of approximately $55 million.

Photo courtesy Duluth