Duluth Holdings, Inc., the parent of Duluth Trading, reported earnings topped guidance in the fourth quarter ended January 30. Sales grew 5.8 percent as retail sales jumped 32.8 percent.

Highlights for the Fourth Quarter Ended January 30, 2022

  • Net sales increased 5.8 percent to $270.8 million compared to $256.0 million in the prior-year fourth quarter;
  • Gross margin increased to 53.8 percent compared to 53.0 percent in the prior-year fourth quarter;
  • Operating income decreased 20.6 percent to $24.3 million, or 9.0 percent of net sales, compared to $30.5 million, or 11.9 percent of net sales in the prior-year fourth quarter;
  • Net income was $17.4 million, or $0.53 per diluted share, compared to $21.8 million, or $0.67 per diluted share in the prior-year fourth quarter; and
  • Adjusted EBITDA decreased 14.1 percent to $33.0 million compared to $38.5 million in the prior-year fourth quarter.

Highlights for the Fiscal Year Ended January 30, 2022

  • Net sales increased 9.4 percent to $698.6 million compared to $638.8 million in the prior year;
  • Gross margin increased to 54.0 percent compared to 51.9 percent in the prior year;
  • Operating income increased 82.1 percent to $44.1 million, or 6.3 percent of net sales, compared to $24.2 million, or 3.8 percent of net sales in the prior year;
  • Net income was $29.7 million, or $0.90 per diluted share, compared to $13.6 million, or $0.42 per diluted share in the prior year; and
  • Adjusted EBITDA increased 41.6 percent to $77.4 million compared to $54.7 million in the prior year.

Sales of $698.6 million for the year came in just below Duluth’s guidance in the range of $700 million to $715 million. Adjusted EBITDA of $75.2 million was above Duluth’s guidance in the range of $73 million to $75 million. EPS of 90 cents topped Duluth’s guidance in the range of $0.81 to $0.86 per diluted share.

Management Commentary
President and CEO, Sam Sato commented, “2021 was a year of evolution for Duluth Trading as we embarked on a journey to position our business to better compete and enable long-term growth. Our record results, including sales of $698 million, Adjusted EBITDA of $77.4 million, EPS of $0.90 and free cash flow of nearly $82 million showcase the tremendous progress we’ve made on seizing market growth opportunities.”

“Our company’s mission has long been grounded in the belief that there’s always a better way and we have never been more confident in our ability to execute our Big Dam Blueprint as we march to our goal of $1 billion in sales. I’d like to thank all our team members for an outstanding year in serving our customers at the highest levels and contributing to our record results,” Sato concluded.

Operating Results for the Fourth Quarter Ended January 30, 2022
Net sales increased 5.8 percent to $270.8 million, compared to $256.0 million in the same period a year ago. Retail store net sales increased by 32.8 percent to $91.1 million, a significant increase over last year’s fourth quarter when store traffic continued to be adversely affected by the pandemic. Direct-to-consumer net sales declined 4.1 percent to $179.7 million compared to the fourth quarter last year when online shopping was boosted by heavier discounts and customer store traffic was light due to Covid concerns. For a more normalized comparison, direct-to-consumer net sales increased 5.7 percent compared to the fourth quarter of fiscal 2019.

Net sales in-store markets increased 10.8 percent, to $186.3 million, compared to $168.1 million in the same period a year ago. The increase was driven by a continued ramp-up of in-store traffic and positive conversion trends as compared to the prior year. Net sales in non-store markets decreased 3.7 percent, to $82.5 million, compared to $85.6 million in the same period a year ago.

Men’s apparel net sales increased 7.0 percent and Women’s apparel net sales decreased 3.7 percent. The increase in Men’s apparel net sales was due to strength in core year-round items. The decrease in Women’s apparel net sales was primarily attributed to inventory delays resulting in gaps in woven tops.

Gross profit increased 7.4 percent to $145.7 million, or 53.8 percent of net sales, compared to $135.7 million, or 53.0 percent of net sales, in the corresponding prior-year period. Despite expensing approximately $6 million of expedited freight costs in the current quarter, the gross margin rate increased due to a higher mix of full-price sales from lower clearance inventory and successfully dialing back promotion activity.

Selling, general and administrative expenses increased 15.5 percent to $121.4 million, compared to $105.1 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses increased to 44.9 percent, compared to 41.1 percent in the corresponding prior-year period.

The increase in selling, general and administrative expenses was primarily due to increased advertising expense as we purposely pulled back in the prior year due to our uncertainty about customer demand resulting from the pandemic, coupled with higher personnel costs and elevated outside services costs in part due to progressing on initiatives tied to the Big Dam Blueprint.

Balance Sheet and Liquidity
The company ended the quarter with a cash balance of approximately $77.1 million, net working capital of $106.5 million, no outstanding Duluth Trading bank debt, and $15.1 million of fiscal 2021 capital expenditures.

Fiscal 2022 Outlook
As uncertainties related to COVID-19 begin to slowly decline, the company expects to see a steady improvement in demand in fiscal 2022. The company provided the following fiscal 2022 outlook:

  • Net sales in the range of $730 million to $755 million;
  • Adjusted EBITDA in the range of $84 million to $88 million;
  • EPS in the range of $0.93 to $1.02 per diluted share; and
  • Capital expenditures, inclusive of software hosting implementation costs, of approximately $57 million.

Photo courtesy Duluth Trading