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MOUNT HOREB, Wis., Sept. 01, 2022 (GLOBE NEWSWIRE) Duluth Holdings Inc. (dba, Duluth Trading Company) (“Duluth Trading” or the “Company”) (NASDAQ: DLTH), a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories, today announced its financial results for the fiscal second quarter ended July 31, 2022.
Highlights for the Second Quarter Ended July 31, 2022
1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
Management Commentary
President and CEO, Sam Sato commented, “During the second quarter we were not immune to the heightened level of macro uncertainty and inflationary pressures impacting discretionary spending. As a result, we have prudently revised our full year guidance. Despite that backdrop, I am pleased with the underlying performance of our business and the progress we are making on our key strategic initiatives. We ended the second quarter with inventories up 22% compared to last year and 14% excluding in-transit goods. Importantly, nearly 90% of the inventory growth is in year-round evergreen goods. Simply stated, we are in a much healthier inventory position with improved flow of new, seasonal receipts and better in-stock positions to support overall sales growth. We continue to manage expenses well in the face of inflationary headwinds and our strong balance sheet allows us to remain committed to key investments in support of our Big Dam Blueprint to build out our infrastructure and technical skillsets, while also investing in our teams as we focus on the long term.”
Sato concluded, “During the second quarter we were encouraged with the recent launch of our AKHG Women’s collection that fills the open space for innovative and technical outdoor clothing designed for women. This new offering directly addresses our customer’s desire for apparel and gear that meet their active work and outdoor recreational activities, in addition to staying true to the Duluth Trading heritage of designing for quality, durability and problem-solving functionality. The customer response to our expanded Women’s categories overall has been strong and confirms our view of long-term growth potential embedded in our strategic plans. In particular, we see the Women’s apparel categories across our sub-brands having out-sized expansion opportunities.”
Operating Results for the Second Quarter Ended July 31, 2022
Net sales decreased 5.1% to $141.5 million, compared to $149.1 million in the same period a year ago. Direct-to-consumer net sales increased slightly by 0.1% to $85.3 million. Retail store net sales decreased by 12.0% to $56.2 million due to slower store traffic, which was partially offset by continued strong conversion rates.
Net sales in store markets decreased 6.3% to $100.4 million, compared to $107.1 million in the same period a year ago. The decrease was also driven by slower store traffic as compared to the prior year second quarter. Net sales in non-store markets decreased by 1.9%, to $39.9 million.
Gross profit decreased 7.1% to $75.6 million, or 53.4% of net sales, compared to $81.4 million, or 54.6% of net sales, in the corresponding prior year period. The decrease in gross profit margin was primarily driven by a non-recurring $1.3 million inventory write down on product, mostly consisting of goods damaged while in-transit, which decreased gross profit margin by 1.0%.
Selling, general and administrative expenses increased 5.0% to $71.7 million, compared to $68.3 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses increased to 50.7%, compared to 45.8% in the corresponding prior year period.
The increase in selling, general and administrative expense was primarily due to increased digital advertising to drive brand awareness and store traffic, investments in new headcount, as well as increased depreciation from continued capital investments.
The effective tax rate related to controlling interest was 23% compared to 25% in the corresponding prior year period.
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of $15.4 million, an inventory balance of $164.5 million, net working capital of $102.4 million, and no outstanding Duluth Trading bank debt.
On July 8, 2022, the Company entered into the First Amendment to its Credit Agreement (the “First Amendment”). To support future investments, the First Amendment increased the revolving commitment from $150 million to $200 million, as well as extended the maturity date from May 14, 2026 to July 8, 2027.
Updated Fiscal 2022 Outlook
The Company’s updated fiscal 2022 outlook is as follows:
1See Reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the accompanying financial tables.
About Duluth Trading
Duluth Trading is a lifestyle brand for the Modern, Self-Reliant American. Based in Mount Horeb, Wisconsin, we offer high quality, solution-based casual wear, workwear and accessories for men and women who lead a hands-on lifestyle and who value a job well-done. We provide our customers an engaging and entertaining experience. Our marketing incorporates humor and storytelling that conveys the uniqueness of our products in a distinctive, fun way, and are available through our content-rich website, catalogs, and “store like no other” retail locations. We are committed to outstanding customer service backed by our “No Bull Guarantee” - if it’s not right, we’ll fix it. Visit our website at http://www.duluthtrading.com.
(Tables Follow)
DULUTH HOLDINGS INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
| July 31, 2022 | January 30, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 15,369 | $ | 77,051 | ||||
| Receivables | 5,764 | 5,455 | ||||||
| Inventory, net | 164,499 | 122,672 | ||||||
| Prepaid expenses & other current assets | 16,841 | 17,333 | ||||||
| Prepaid catalog costs | 35 | 10 | ||||||
| Total current assets | 202,508 | 222,521 | ||||||
| Property and equipment, net | 114,616 | 110,078 | ||||||
| Operating lease right-of-use assets | 114,980 | 120,911 | ||||||
| Finance lease right-of-use assets, net | 48,669 | 50,133 | ||||||
| Available-for-sale security | 5,823 | 6,554 | ||||||
| Other assets, net | 6,725 | 5,353 | ||||||
| Total assets | $ | 493,321 | $ | 515,550 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 53,604 | $ | 45,402 | ||||
| Accrued expenses and other current liabilities | 28,961 | 47,504 | ||||||
| Income taxes payable | 583 | 6,814 | ||||||
| Current portion of operating lease liabilities | 13,422 | 12,882 | ||||||
| Current portion of finance lease liabilities | 2,763 | 2,701 | ||||||
| Current portion of Duluth long-term debt | — | — | ||||||
| Current maturities of TRI long-term debt1 | 729 | 693 | ||||||
| Total current liabilities | 100,062 | 115,996 | ||||||
| Operating lease liabilities, less current maturities | 101,008 | 107,094 | ||||||
| Finance lease liabilities, less current maturities | 38,870 | 40,267 | ||||||
| Duluth long-term debt, less current maturities | — | — | ||||||
| TRI long-term debt, less current maturities1 | 26,271 | 26,608 | ||||||
| Deferred tax liabilities | 2,729 | 2,867 | ||||||
| Total liabilities | 268,940 | 292,832 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| Treasury stock | (1,458 | ) | (1,002 | ) | ||||
| Capital stock | 97,102 | 95,515 | ||||||
| Retained earnings | 131,943 | 130,868 | ||||||
| Accumulated other comprehensive income, net | 2 | 489 | ||||||
| Total shareholders' equity of Duluth Holdings Inc. | 227,589 | 225,870 | ||||||
| Noncontrolling interest | (3,208 | ) | (3,152 | ) | ||||
| Total shareholders' equity | 224,381 | 222,718 | ||||||
| Total liabilities and shareholders' equity | $ | 493,321 | $ | 515,550 | ||||
1Represents debt of the variable interest entity, TRI Holdings, LLC, that is consolidated in accordance with ASC 810, Consolidation. Duluth Holdings Inc. is not the guarantor nor the obligor of this debt.
DULUTH HOLDING INC.
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share figures)
| Three Months Ended | Six Months Ended | |||||||||||||||
| July 31, 2022 | August 1, 2021 | July 31, 2022 | August 1, 2021 | |||||||||||||
| Net sales | $ | 141,511 | $ | 149,127 | $ | 264,415 | $ | 282,546 | ||||||||
| Cost of goods sold (excluding depreciation and amortization) | 65,903 | 67,701 | 121,744 | 134,577 | ||||||||||||
| Gross profit | ||||||||||||||||
