DULUTH HOLDINGS INC

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 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 2023 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 and disruptions to our distribution network, supply chains and operations; 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 in our e-commerce platform; effectively adapting to new challenges associated with our expansion into new geographic markets; our ability to meet customer delivery time expectations; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating adequate cash from our existing stores and direct sales to support our growth; the impact of changes in corporate tax regulations and sales tax; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; effectively relying on sources for merchandise located in foreign markets; transportation delays and interruptions, including port congestion; inability to timely and effectively obtain shipments of prod…

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 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 2023 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 and 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 in our e-commerce platform; effectively adapting to new challenges associated with our expansion into new geographic markets; our ability to meet customer delivery time expectations; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating adequate cash from our existing stores and direct sales to support our growth; the impact of changes in corporate tax regulations and sales tax; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; effectively relying on sources for merchandise located in foreign markets; transportation delays and interruptions, including port congestion; inability to…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

From our heritage as a catalog for those working in the building trades, Duluth Trading has become a widely recognized brand and proprietary line of innovative and functional apparel and gear. Over the last decade, we have created strong brand awareness, built a loyal customer base and generated robust sales momentum. We have done so by sticking to our roots of “there’s gotta be a better way” and through our relentless focus on providing our customers with quality, functional products.

Current wording

From our heritage as a catalog for those working in the building trades, Duluth Trading has become a widely recognized brand and proprietary line of innovative and functional apparel and gear. Over the last decade, we have created strong brand awareness, built a loyal customer base and generated sales momentum. We have done so by sticking to our roots of “there’s gotta be a better way” and through our relentless focus on providing our customers with quality, functional products.

Previous wording

Net sales increased by 1.8% over the prior year second quarter to $141.6 million, and net sales in the first six months of fiscal 2024 decreased by 1.7% over the first six months of the prior year to $258.3 million;

Current wording

Net sales decreased by 8.1% over the prior year third quarter to $127.1 million, and net sales in the first nine months of fiscal 2024 decreased by 3.9% over the first nine months of the prior year to $385.4 million;

Previous wording

Net loss of $3.7 million in fiscal 2024 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 2024 of $11.6 million compared to a net loss in the first six months of fiscal 2023 of $5.9 million; and

Current wording

Net loss of $28.5 million in fiscal 2024 third quarter compared to the prior year third quarter net loss of $10.5 million, and net loss in the first nine months of fiscal 2024 of $40.1 million compared to a net loss in the first nine months of fiscal 2023 of $16.4 million; and

Previous wording

Adjusted EBITDA increased to $10.6 million in fiscal 2024 second quarter compared to the prior year second quarter Adjusted EBITDA of $8.6 million, and adjusted EBITDA in the first six months of fiscal 2024 of $12.4 million compared to $13.8 million over the first six months of fiscal 2023.

Current wording

Adjusted EBITDA decreased to ($6.8) million in fiscal 2024 third quarter compared to the prior year third quarter Adjusted EBITDA of ($1.6) million, and adjusted EBITDA in the first nine months of fiscal 2024 of $5.7 million compared to $12.3 million over the first nine months of fiscal 2023.

Previous wording

Gross profit increased $2.5 million, or 3.5%, to $74.0 million in the three months ended July 28, 2024 compared to $71.5 million in the three months ended July 30, 2023. As a percentage of net sales, gross margin increased to 52.3% of net sales in the three months ended July 28, 2024, compared to 51.4% of net sales in the three months ended July 30, 2023. The increase in gross margin percentage was primarily driven by our sourcing initiative.

Current wording

Gross profit decreased $3.0 million, or 4.3%, to $66.4 million in the three months ended October 27, 2024 compared to $69.4 million in the three months ended October 29, 2023. As a percentage of net sales, gross margin increased to 52.3% of net sales in the three months ended October 27, 2024, compared to 50.2% of net sales in the three months ended October 29, 2023. The increase in gross margin percentage was primarily driven by our sourcing initiatives.

Previous wording

Net loss attributable to controlling interest was $3.7 million, in the three months ended July 28, 2024 compared to net loss of $2.0 million in the three months ended July 30, 2023. In addition to the factors addressed above, the aforementioned $1.6 million in restructuring expense contributed to the net loss in the current period.

Current wording

Net loss attributable to controlling interest was $28.5 million, in the three months ended October 27, 2024 compared to net loss of $10.5 million in the three months ended October 29, 2023. In addition to the factors addressed above, $6.2 million in restructuring expense contributed to the net loss in the current period.

Previous wording

Store market net sales decreased $6.9 million, or 3.8%, to $176.1 million in the six months ended July 28, 2024 compared to $183.0 million in the six months ended July 30, 2023. The decrease was driven by slower store traffic compared to the prior year. Non-store market net sales decreased by $2.3 million, or 3.0%, to $75.7 million in the six months ended July 28, 2024 compared to $78.0 million in the six months ended July 30, 2023.

Current wording

Store market net sales decreased $14.8 million, or 5.3%, to $264.7 million in the nine months ended October 27, 2024 compared to $279.6 million in the nine months ended October 29, 2023. The decrease was driven by slower store traffic compared to the prior year. Non-store market net sales decreased by $6.0 million, or 5.1%, to $112.8 million in the nine months ended October 27, 2024 compared to $118.8 million in the nine months ended October 29, 2023.

Previous wording

Gross profit decreased $1.5 million, or 1.1%, to $135.6 million in the six months ended July 28, 2024 compared to $137.1 million in the six months ended July 30, 2023. As a percentage of net sales, gross margin increased to 52.5% of net sales in the six months ended July 28, 2024, compared to 52.2% of net sales in the six months ended July 30, 2023.

Current wording

Gross profit decreased $4.5 million, or 2.2%, to $202.0 million in the nine months ended October 27, 2024 compared to $206.5 million in the nine months ended October 29, 2023. As a percentage of net sales, gross margin increased to 52.4% of net sales in the nine months ended October 27, 2024, compared to 51.5% of net sales in the nine months ended October 29, 2023.

Previous wording

The increase in selling, general and administrative expenses included a $2.4 million non-recurring estimated sales tax expense. Excluding this non-recurring expense, selling, general and administrative expenses increased $1.0 million to $73.9 million, representing 52.2% of net sales.

Current wording

The increase in selling, general and administrative expenses included a $2.4 million non-recurring estimated sales tax expense. Excluding this non-recurring expense, selling, general and administrative expenses increased $2.4 million to $227.3 million, representing 59.0% of net sales.

Previous wording

The increase in selling, general and administrative expense as a percentage of net sales, excluding the aforementioned non-recurring estimated sales tax expense accrual, was primarily due to higher fixed costs and depreciation from foundational strategic investments.

Current wording

The increase in selling, general and administrative expense as a percentage of net sales, excluding the aforementioned non-recurring estimated sales tax expense accrual, was primarily due to higher fixed costs from foundational strategic investments.

Previous wording

Net loss attributable to controlling interest was $11.6 million in the six months ended July 28, 2024 compared to net loss of $5.9 million in the six months ended July 30, 2023. In addition to the factors addressed above, the aforementioned $1.6 million in restructuring expense contributed to the net loss in the current period.

Current wording

Net loss attributable to controlling interest was $40.2 million in the nine months ended October 27, 2024 compared to net loss of $16.3 million in the nine months ended October 29, 2023. In addition to the factors addressed above, $7.7 million in restructuring expense contributed to the net loss in the current period.

Previous wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $2.0 million to $10.6 million in the three months ended July 28, 2024 compared to $8.6 million in the three months ended July 30, 2023. As a percentage of net sales, Adjusted EBITDA increased to 7.5% of net sales in the three months July 28, 2024 compared to 6.2% of net sales in the three months ended July 30, 2023.

Current wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $5.2 million to ($6.8) million in the three months ended October 27, 2024 compared to ($1.6) million in the three months ended October 29, 2023. As a percentage of net sales, Adjusted EBITDA decreased to (5.3%) of net sales in the three months October 27, 2024 compared to (1.1%) of net sales in the three months ended October 29, 2023.

Previous wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $1.4 million to $12.4 million in the six months ended July 28, 2024 compared to $13.8 million in the six months ended July 30, 2023. As a percentage of net sales, Adjusted EBITDA decreased to 4.8% of net sales in the six months July 28, 2024 compared to 5.3% of net sales in the six months ended July 30, 2023.

Current wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $6.6 million to $5.7 million in the nine months ended October 27, 2024 compared to $12.3 million in the nine months ended October 29, 2023. As a percentage of net sales, Adjusted EBITDA decreased to 1.5% of net sales in the nine months ended October 27, 2024 compared to 3.1% of net sales in the nine months ended October 29, 2023.

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 July 28, 2024, our net working capital was $79.8 million, including $9.8 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 October 27, 2024, our net working capital was $60.6 million, including $9.3 million of cash and cash equivalents.

Previous wording

We expect to spend approximately $25.0 million in fiscal 2024 on capital expenditures, inclusive of software hosting implementation costs, primarily due to investments in logistics optimization, including investments in the fulfillment network and information technology. Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

Current wording

We expect to spend approximately $23.0 million in fiscal 2024 on capital expenditures, inclusive of software hosting implementation costs, primarily due to investments in logistics optimization, including investments in the fulfillment network and information technology. Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

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 $20.9 million and an $11.6 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 $20.9 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 $47.3 million and a $40.1 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 $47.3 million was primarily due to a $105.7 million increase in inventory, partially offset by a $53.2 million increase in trade accounts payable.

Previous wording

For the six months ended July 30, 2023, net cash used in operating activities was $1.2 million, which primarily consisted of cash used in operating assets and liabilities of $11.0 million and a $5.9 million net loss for the six months ended July 30, 2023 offset by depreciation of $14.9 million. The cash used in operating assets and liabilities of $11.0 million was primarily due to a $7.3 million decrease in accrued expenses and $2.2 million increase in inventory.

Current wording

For the nine months ended October 29, 2023, net cash used in operating activities was $31.0 million, which primarily consisted of cash used in operating assets and liabilities of $36.6 million and a $16.4 million net loss for the nine months ended October 29, 2023 partially offset by depreciation of $23.4 million. The cash used in operating assets and liabilities of $36.6 million was primarily due to a $19.0 million increase in inventory and $10.2 million decrease in trade accounts payable.

Previous wording

For the six months ended July 28, 2024 and July 30, 2023, net cash used in investing activities was $3.1 million and $31.4 million, respectively.

Current wording

For the nine months ended October 27, 2024 and October 29, 2023, net cash used in investing activities was $5.7 million and $39.8 million, respectively.

Previous wording

For the six months ended July 28, 2024, net cash used in financing activities was $2.2 million and $1.8 million, respectively.

Current wording

For the nine months ended October 27, 2024, net cash used in financing activities was $41.0 million and $33.5 million, respectively.