Duluth Holdings Inc. Announces First Quarter 2022 Financial Results

MOUNT HOREB, ​​Wis., June 02, 2022 (GLOBE NEWSWIRE) Duluth Holdings Inc. (dba, Duluth Trading Company) (“Duluth Trading” or the “Company”) (NASDAQ: DLTH), a lifestyle brand of workwear for men and women, casualwear, outdoor apparel and accessories, today announced its financial results for the fiscal first quarter ended May 1, 2022.

Highlights of the first quarter ended May 1, 2022

  • Net sales of $122.9 million compared to $133.4 million in the first quarter last year

  • Gross margin improved by 470 basis points to 54.6% from 49.9% in the first quarter of the prior year

  • Net loss of ($1.3) million, or ($0.04) per diluted share, compared to net earnings of $0.5 million, or $0.02 per diluted share in the first quarter of the year. ‘last year ; excluding the $3.9 million deferral of transportation costs, net income would have been $1.6 million, or $0.05 per diluted share

  • Adjusted EBITDA1 of $7.9 million, reflects 6.4% of net sales

1See Reconciliation of Net (Loss) to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.

Management commentary

Chairman and CEO Sam Sato said, “Our first quarter results demonstrate our continued operational efficiency in the face of an uneven macroeconomic environment. With our inventory healthy at the end of the quarter and digital marketing tactics that are backed by high data analytics, we are meeting the needs of our customers and executing our long-term brand growth strategies. The efficiency of our omnichannel model is producing a consistently strong gross profit margin, which for the first quarter was 54.6%, an increase of 470 basis points over last year. »

“We are excited to bring our evolving portfolio of brands to life with the launch of Duluth by Duluth Trading Co. and our rebrand from Alaskan Hardgear to AKHG, which is now expanding to include women. Both brands support our longstanding commitment to product innovation and quality. Duluth is our primary workwear brand, while AKHG fulfills our customers’ desires to be active outdoors and equips them for the adventures they take on. We are pleased with the customer reaction to our new brand positioning and expect the momentum to continue,” Sato concluded.

Results of operations for the first quarter ended May 1, 2022

Net sales decreased 7.9% to $122.9 million from $133.4 million in the same period a year ago. Retail store net sales edged up 0.4% to $45.2 million. Net direct-to-consumer sales decreased 12.1% to $77.7 million from the first quarter last year, primarily due to higher clearance sales, coupled with continued disruptions supply chain over the past year. Net direct-to-consumer sales were down 18.8% and 22.9% during the year in February and March, respectively, from a year earlier, but April finished strong with net direct-to-consumer sales up 10.8% as our inventory position continues to improve. .

Net sales in store markets decreased 5.4% to $85.1 million from $89.9 million in the same period a year ago. Non-store Markets net sales decreased 12.5% ​​to $36.8 million due to lower clearance sales due to the management of an improved inventory system during the current quarter.

Gross profit increased by 0.8% to $67.1 million, or 54.6% of net sales, compared to $66.5 million, or 49.9% of net sales, in the corresponding period of the previous year. Without the deferral of $3.9 million of expedited freight charges that were expensed in the current quarter, our first quarter gross profit margin would have been approximately 58%. The increase in the gross margin rate is explained by the decrease in clearance sales due to the improvement in the inventory position.

Selling, general and administrative expenses increased 5.2% to $68.0 million from $64.6 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses increased to 55.3% from 48.5% in the corresponding period last year.

The increase in selling, general and administrative expenses is primarily due to investments in new headcount, as well as increased brand development expenditures to support the launch of Duluth by Duluth Trading Co. and the change in name of Alaskan Hardgear in AKHG.

The effective tax rate related to the controlling interest was 25% compared to 16% for the corresponding period last year. The effective tax rate for the prior year was impacted by changes made to certain separate items.

Balance sheet and liquidity

The company ended the quarter with a cash balance of $40.4 million, an inventory balance of $152.2 million, net working capital of $106.0 million and no outstanding bank debt. Duluth Trading.

Outlook for fiscal year 2022

The Company’s outlook for the 2022 financial year is as follows:

  • Net sales in the range of $730 million to $755 million

  • Adjusted EBITDA in the range of $84 million to $88 million1

  • EPS between $0.93 and $1.02 per diluted share

  • Capital expenditures, including software hosting implementation costs, approximately $40 million

1See Reconciliation of Expected Net Income to Expected EBITDA and Expected EBITDA to Expected Adjusted EBITDA in the accompanying financial tables.

About Duluth Trading

Duluth Trading is a lifestyle brand for the modern, empowered American. Based in Mount Horeb, Wisconsin, we offer high-quality casual wear, workwear and accessories for men and women who live practical lives and appreciate a job well done. We provide our customers with an engaging and entertaining experience. Our marketing incorporates humor and storytelling that convey the uniqueness of our products in a distinctive and fun way, and are available through our content-rich website, catalogs and “store like no other” outlets. We’re committed to exceptional customer service backed by our ‘Bubble-Free Guarantee’ – if it’s not right, we’ll fix it. Visit our website at http://www.duluthtrading.com.

(Tables follow)

DULUTH PORTFOLIO INC.
Condensed consolidated balance sheets
(Unaudited)
(Amounts in thousands)

May 1, 2022 January 30, 2022
ASSETS

Current assets:

Cash and cash equivalents

$

40,370

$

77,051

Receivables

5,097

5,455

Income tax receivable

Inventory, net

152 244

122,672

Prepaid expenses and other current assets

16,422

17,333

Prepaid Catalog Fee

ten

Total current assets

214 133

222 521

Property and equipment, net

108,283

110,078

Operating lease right-of-use assets

118,414

120,911

Right-of-use finance lease assets, net

49,402

50 133

Safety available for sale

6,066

6,554

Other assets, net

6,495

5,353

Total assets

$

502 793

$

515 550

LIABILITIES AND EQUITY

Current liabilities:

Accounts Payable

$

54,523

$

45,402

Accrued expenses and other current liabilities

32,214

47,504

Taxes payable on income

4,782

6,814

Current portion of operating lease debts

13,191

12,882

Current portion of finance lease debts

2,730

2,701

Current portion of Duluth’s long-term debt

Current TRI long-term debt maturities1

711

693

Total current liabilities

108 151

115,996

Operating lease debt, less current maturities

104,448

107,094

Finance lease liabilities, less current maturities

39,574

40,267

Duluth long-term debt, less current maturities

IRR long-term debt, less current maturities1

26,440

26,608

Deferred tax liabilities

2,791

2,867

Total responsibilities

281 404

292,832

Commitments and contingencies

Equity:

Own shares

(1,457

)

(1,002

)

Share capital

96,299

95,515

Retained earnings

129,575

130,868

Accumulated other comprehensive income, net

153

489

Total equity of Duluth Holdings Inc.

224,570

225,870

Non-controlling interest

(3,181

)

(3,152

)

Total equity

221,389

222,718

Total liabilities and equity

$

502 793

$

515 550

1Represents the debt of the variable interest entity, TRI Holdings, LLC, which is consolidated in accordance with ASC 810, Consolidation. Duluth Holdings Inc. is neither the guarantor nor the debtor of this debt.

DULUTH PORTFOLIO INC.
Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except per share figures)

Three months completed
May 1, 2022 May 2, 2021

Net sales

$

122,904

$

133,419

Cost of goods sold (excluding depreciation and amortization)

55,841

66,876

Gross profit

67,063

66,543

Selling, general and administrative expenses

67,994

64,648

Operating profit (loss)

(931

)

1,895

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