DULUTH HOLDINGS INC.

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Current wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical or current facts included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “could,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause performance or actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2024 Form 10-K, and other SEC filings, which factors are incorporated by reference herein. These risks and uncertainties include, but are not limited to, thefollowing: the impact of inflation and measures to control inflation on our results of operations; the prolonged effects of economic uncertainties on store and website traffic; the susceptibility of the price and availability of our merchandise to international trade conditions, including tariffs; changes in U.S. and non-U.S. laws affecting the importation and taxation of goods, including imposition of unilateral tariffs on imported goods; our ability to secure the personal and/or financial information of our customers and employees; disruptions to our distribution network, supply chains and operations; failure to effectively manage inventory levels; our ability to maintain and enhance a strong brand and sub-brand image; adapting to declines in consumer confidence, inflation and decreases in consumer spending; disruptions to our e-commerce platform; our ability to meet customer delivery time expectations; our ability to properly allocate inventory throughout our distribution network to fulfill customer demand; our failure to meet our debt covenant ratios; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating a…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical or current facts included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “could,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause performance or actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2024 Form 10-K, and other SEC filings, which factors are incorporated by reference herein. These risks and uncertainties include, but are not limited to, the following: the impact of inflation and measures to control inflation on our results of operations; the prolonged effects of economic uncertainties on store and website traffic; the susceptibility of the price and availability of our merchandise to international trade conditions, including tariffs; changes in U.S. and non-U.S. laws affecting the importation and taxation of goods, including imposition of unilateral tariffs on imported goods; our ability to secure the personal and/or financial information of our customers and employees; disruptions to our distribution network, supply chains and operations; failure to effectively manage inventory levels; our ability to maintain and enhance a strong brand and sub-brand image; adapting to declines in consumer confidence, inflation and decreases in consumer spending; disruptions to our e-commerce platform; our ability to meet customer delivery time expectations; our ability to properly allocate inventory throughout our distribution network to fulfill customer demand; our failure to meet our debt covenant ratios; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and catalog. In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of August 3, 2025, we operated 61 retail stores and three outlet stores.

Current wording

We are a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and catalog. In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of November 2, 2025, we operated 63 retail stores and three outlet stores.

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Net sales decreased by 7.0% over the prior year second quarter to $131.7 million, and net sales in the first six months of fiscal 2025 decreased by 9.2% over the first six months of the prior year to $234.4 million;

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Net sales decreased by 9.6% over the prior year third quarter to $114.9 million, and net sales in the first nine months of fiscal 2025 decreased by 9.4% over the first nine months of the prior year to $349.3 million;

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Net income of $1.3 million in fiscal 2025 second quarter compared to the prior year second quarter net loss of $2.0 million, and net loss in the first six months of fiscal 2025 of $14.0 million compared to a net loss in the first six months of fiscal 2024 of $9.8 million; and

Current wording

Net loss of $10.1 million in fiscal 2025 third quarter compared to the prior year third quarter net loss of $28.2 million, and net loss in the first nine months of fiscal 2025 of $24.0 million compared to a net loss in the first nine months of fiscal 2024 of $38.1 million; and

Previous wording

Adjusted EBITDA increased to $12.0 million in fiscal 2025 second quarter compared to the prior year second quarter Adjusted EBITDA of $10.5 million, and adjusted EBITDA in the first six months of fiscal 2025 of $8.2 million compared to $12.3 million over the first six months of fiscal 2024.

Current wording

Adjusted EBITDA increased to ($0.7) million in fiscal 2025 third quarter compared to the prior year third quarter Adjusted EBITDA of ($6.2) million, and Adjusted EBITDA in the first nine months of fiscal 2025 of $7.5 million compared to $6.1 million over the first nine months of fiscal 2024.

Previous wording

The macroeconomic environment is experiencing inflation, tariff and recessionary concerns and general uncertainty regarding the future economic environment and therefore we cannot predict the ultimate impact of these economic conditions on our operational and financial performance. Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand.

Current wording

The macroeconomic environment is experiencing inflation, tariff and recessionary concerns and general uncertainty regarding the future economic environment and therefore we cannot predict the ultimate impact of these economic conditions on our operational and financial performance. Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand. However, we expect that our operations will continue to be impacted by these macroeconomic headwinds, including tariffs, which may increase our merchandise costs, affect merchandise availability, and impact our financial performance.

Previous wording

Net sales decreased $9.9 million, or 7.0%, to $131.7 million in the three months ended August 3, 2025 compared to $141.6 million in the three months ended July 28, 2024. The decrease in net sales was primarily driven by decline in web traffic due to reduced promotional activity.

Current wording

Net sales decreased $12.2 million, or 9.6%, to $114.9 million in the three months ended November 2, 2025 compared to $127.1 million in the three months ended October 27, 2024. The decrease in net sales was primarily driven by declines in web traffic due to reduced promotional activity.

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Gross profit decreased $2.0 million, or 2.7%, to $72.0 million in the three months ended August 3, 2025 compared to $74.0 million in the three months ended July 28, 2024. As a percentage of net sales, gross margin increased to 54.7% in the three months ended August 3, 2025, compared to 52.3% of net sales in the three months ended July 28, 2024. The increase in gross margin rate was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative.

Current wording

Gross profit decreased $4.6 million, or 6.9%, to $61.8 million in the three months ended November 2, 2025 compared to $66.4 million in the three months ended October 27, 2024. The decrease in gross profit was partially driven by the $3 million impact of tariffs. As a percentage of net sales, gross margin increased to 53.8% in the three months ended November 2, 2025, compared to 52.3% of net sales in the three months ended October 27, 2024. The increase in gross margin rate was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative.

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Income tax benefit was $0.4 million in the three months ended August 3, 2025, compared to income tax benefit of $0.5 million in the three months ended July 28, 2024.

Current wording

Income tax expense was $0.0 million in the three months ended November 2, 2025, compared to income tax expense of $4.9 million in the three months ended October 27, 2024. The change was primarily driven by the valuation allowance established in the third quarter of 2024.

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Net income attributable to controlling interest was $1.3 million, in the three months ended August 3, 2025 compared to net loss of $2.0 million in the three months ended July 28, 2024.

Current wording

Net loss attributable to controlling interest was $10.1 million, in the three months ended November 2, 2025 compared to net loss of $28.2 million in the three months ended October 27, 2024.

Previous wording

Net sales decreased $23.9 million, or 9.2%, to $234.4 million in the six months ended August 3, 2025 compared to $258.3 million in the six months ended July 28, 2024. The decrease in net sales was primarily driven by decline in web traffic due to reduced promotional activity.

Current wording

Net sales decreased $36.1 million, or 9.4%, to $349.3 million in the nine months ended November 2, 2025 compared to $385.4 million in the nine months ended October 27, 2024. The decrease in net sales was primarily driven by decline in web traffic due to reduced promotional activity.

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Gross profit decreased $10.2 million, or 7.6%, to $125.4 million in the six months ended August 3, 2025 compared to $135.6 million in the six months ended July 28, 2024. As a percentage of net sales, gross margin increased to 53.5% of net sales in the six months ended August 3, 2025, compared to 52.5% of net sales in the six months ended July 28, 2024. The increase in gross margin rate was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative.

Current wording

Gross profit decreased $14.8 million, or 7.3%, to $187.2 million in the nine months ended November 2, 2025 compared to $202.0 million in the nine months ended October 27, 2024. As a percentage of net sales, gross margin increased to 53.6% of net sales in the nine months ended November 2, 2025, compared to 52.4% of net sales in the nine months ended October 27, 2024. The increase in gross margin rate was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative.

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The increase in selling, general and administrative expense as a percentage of net sales was mainly driven by decrease in net sales.

Current wording

The decrease in selling, general and administrative expense as a percentage of net sales was mainly driven by leverage on outbound shipping costs due to higher average order values coupled with a reduction in personnel and depreciation expenses.

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Income tax expense was $0.8 million in the six months ended August 3, 2025, compared to income tax benefit of $2.6 million in the six months ended July 28, 2024. The provision for second quarter of fiscal 2025 reflected a valuation allowance which was established against the net amount of deferred tax assets as well as pre-tax loss in the previous fiscal year.

Current wording

Income tax expense was $0.8 million in the nine months ended November 2, 2025, compared to income tax expense of $2.4 million in the nine months ended October 27, 2024. The provision for third quarter of fiscal 2024 and fiscal 2025 reflected a valuation allowance which was established against the net amount of deferred tax assets as well as a pre-tax loss in the previous fiscal year.

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Net loss attributable to controlling interest was $14.0 million, in the six months ended August 3, 2025 compared to net loss of $9.9 million in the six months ended July 28, 2024.

Current wording

Net loss attributable to controlling interest was $24.1 million, in the nine months ended November 2, 2025 compared to net loss of $38.1 million in the nine months ended October 27, 2024.

Previous wording

The following table presents reconciliations of net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures, for the periods indicated below. See the above section titled “How We Assess the Performance of Our Business,” for our definition of Adjusted EBITDA.

Current wording

The following table presents reconciliations of net loss to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures, for the periods indicated below. See the above section titled “How We Assess the Performance of Our Business,” for our definition of Adjusted EBITDA.

Previous wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $1.5 million to $12.0 million in the three months ended August 3, 2025 compared to $10.5 million in the three months ended July 28, 2024. As a percentage of net sales, Adjusted EBITDA increased to 9.1% of net sales in the three months August 3, 2025 compared to 7.4% of net sales in the three months ended July 28, 2024.

Current wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $5.5 million to ($0.7) million in the three months ended November 2, 2025 compared to ($6.2) million in the three months ended October 27, 2024. As a percentage of net sales, Adjusted EBITDA increased to (0.6%) of net sales in the three months November 2, 2025 compared to (4.9%) of net sales in the three months ended October 27, 2024.

Previous wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $4.1 million to $8.2 million in the six months ended August 3, 2025 compared to $12.3 million in the six months ended July 28, 2024. As a percentage of net sales, Adjusted EBITDA decreased to 3.5% of net sales in the six months August 3, 2025 compared to 4.8% of net sales in the six months ended July 28, 2024.

Current wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $1.4 million to $7.5 million in the nine months ended November 2, 2025 compared to $6.1 million in the nine months ended October 27, 2024. As a percentage of net sales, Adjusted EBITDA increased to 2.1% of net sales in the nine months ended November 2, 2025 compared to 1.6% of net sales in the nine months ended October 27, 2024.

Previous wording

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At August 3, 2025, our net working capital was $56.9 million, including $5.7 million of cash and cash equivalents.

Current wording

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At November 2, 2025, our net working capital was $51.1 million, including $8.2 million of cash and cash equivalents.

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For the six months ended August 3, 2025, net cash used in operating activities was $24.4 million, which primarily consisted of cash used in operating assets and liabilities of $27.0 million and a $14.0 million net loss for the six months ended August 3, 2025 partially offset by depreciation of $13.3 million. The cash used in operating assets and liabilities of $27.0 million was primarily due to a $30.7 million decrease in accounts payable and an $18.5 million decrease in inventory.

Current wording

For the nine months ended November 2, 2025, net cash used in operating activities was $31.1 million, which primarily consisted of cash used in operating assets and liabilities of $30.2 million and a $24.0 million net loss for the nine months ended November 2, 2025 partially offset by depreciation of $19.5 million. The cash used in operating assets and liabilities of $30.2 million was primarily due to a $25.7 million decrease in inventory.

Previous wording

For the six months ended July 28, 2024, net cash used in operating activities was $17.1 million, which primarily consisted of cash used in operating assets and liabilities of $21.9 million and an $9.8 million net loss for the six months ended July 28, 2024 partially offset by depreciation of $16.3 million. The cash used in operating assets and liabilities of $21.9 million was primarily due to a $43.0 million increase in inventory, partially offset by a $26.6 million increase in trade accounts payable.

Current wording

For the nine months ended October 27, 2024, net cash used in operating activities was $58.1 million, which primarily consisted of cash used in operating assets and liabilities of $49.4 million and a $38.1 million net loss for the nine months ended October 27, 2024 partially offset by depreciation of $24.7 million. The cash used in operating assets and liabilities of $49.4 million was primarily due to a $105.7 million increase in inventory, partially offset by a $53.2 million increase in trade accounts payable.

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For the six months ended August 3, 2025 and July 28, 2024, net cash used in investing activities was $3.5 million and $3.1 million, respectively.

Current wording

For the nine months ended November 2, 2025 and October 27, 2024, net cash used in investing activities was $5.7 million.

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Net Cash Provided by (Used in) Financing Activities

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Net Cash Provided by Financing Activities

Previous wording

For the six months ended August 3, 2025, net cash provided by financing activities was $30.3 million compared to net cash used in financing activities of $2.2 million for six months ended July 28, 2024.

Current wording

For the nine months ended November 2, 2025, net cash provided by financing activities was $41.6 million compared to net cash provided by financing activities of $41.0 million for nine months ended October 27, 2024.