News Release
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Highlights for the Third Quarter Ended
- Net sales increased 21.2% to
$67.0 million compared to$55.3 million in the prior-year third quarter - Gross margin increased 60 basis points (bps) to 57.8% compared to 57.2% in the prior-year third quarter
- Net income was
$0.5 million , or$0.01 per diluted share, compared to$1.5 million , or$0.06 per diluted share, in the prior-year third quarter. Adjusted for income taxes, pro forma net income for the prior-year third quarter was$0.9 million , or$0.04 per diluted share - Adjusted EBITDA1 was
$2.5 million compared to$2.7 million in the prior-year third quarter - During the third quarter, the Company opened three new retail stores, two in the
Chicago metro market and one inKing of Prussia, Pennsylvania , for a total of 12 retail stores and two outlet stores - 27th consecutive quarter of increased net sales year-over-year
1See reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
“While we have achieved 27 consecutive quarters of increased net sales year-over-year, third-quarter net sales fell short of our expectations. In the latter part of September and through the quarter end in October, we experienced unusually warm weather that extended across the country and this had an impact on our total net sales for the third quarter. This unseasonable weather, coupled with a highly promotional environment, continued into early fourth quarter. As a result, we are revising our 2016 fiscal full-year guidance and now expect net sales in the range of
“Despite the challenging environment we are experiencing right now, our entire team has been operating at the highest level to ensure customer satisfaction and brand integrity. I am especially proud of our team’s execution on opening seven new stores during fiscal 2016, which exceeded our original expectation of three to five new stores this year. In the third quarter we opened three new stores and recently opened two more during the fourth quarter, one in
Operating Results for the Third Quarter Ended
Net sales increased 21.2% to
Gross profit increased 22.6% to
Selling, general and administrative expenses increased 26.6% to
Net income was
The pro forma net income gives effect to the conversion of the Company to a “C” corporation, which was effective
Adjusted EBITDA was
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of approximately
Revised Fiscal 2016 Outlook
The Company revised its fiscal 2016 outlook as follows:
- Net sales in the range of
$360.0 million to $370.0 million - GAAP EPS in the range of
$0.52 to $0.60 per diluted share - Adjusted EBITDA in the range of
$34.0 million to $38.0 million - Capital expenditures of
$25.0 to $26.0 million 1
1Fiscal 2016 capital expenditures include the Company’s opening of seven retail stores coupled with the expansion of our distribution center at the Company’s
Long-Term Financial Targets
The Company reaffirmed its long-term financial targets of approximately 20% net sales growth, 25% net income growth and 25% Adjusted EBITDA growth.
Conference Call Information
A conference call and audio webcast with analysts and investors will be held on
- Live conference call: 844-875-6915 (domestic) or 412-317-6711 (international)
- Conference call replay available through
December 22, 2016 : 877-344-7529 (domestic) or 412-317-0088 (international) - Replay access code: 10097089
- Live and archived webcast: ir.duluthtrading.com
The Company is enabling investors to pre-register for the earnings conference call so that they can expedite their entry into the call and avoid the need to wait for a live operator. In order to pre-register for the call, investors can visit http://dpregister.com/10097089 and enter in their contact information. Investors will then be issued a personalized phone number and pin to dial into the live conference call. Individuals can pre-register any time prior to the start of the conference call on
About Duluth Trading
Duluth Trading is a rapidly growing lifestyle brand for the Modern, Self-Reliant American. Based in
Non-GAAP Measurements
Management believes that non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Within this release, including the tables attached hereto, reference is made to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). See attached Table “Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA” for a reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA for the three and nine months ended
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts included in this press release, including statements concerning Duluth Trading's plans, objectives, goals, beliefs, business strategies, future events, business conditions, its results of operations, financial position and its business outlook, business trends and certain other information herein are forward-looking statements, including Duluth Trading’s ability to execute on its growth strategies and statements under the headings “Revised Fiscal 2016 Outlook” and “Long-Term Financial Targets.” You can identify forward-looking statements by the use of words such as “may,” ”might,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “believe,” “estimate,” “project,” “target,” “predict,” “intend,” “future,” “budget,” “goals,” “potential,” “continue,” “design,” “objective,” “would” and other similar expressions. The forward-looking statements are not historical facts, and are based upon Duluth Trading's current expectations, beliefs, estimates, and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond Duluth Trading's control. Duluth Trading's expectations, beliefs and projections are expressed in good faith, and Duluth Trading believes there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, estimates, and projections will be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the forward-looking statements, including, among others, the risks, uncertainties, and factors set forth under “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the
(Tables Follow)
DULUTH HOLDINGS INC. | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
(Amounts in thousands) | ||||||||
October 30, 2016 | January 31, 2016 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 173 | $ | 37,873 | ||||
Accounts receivable | 30 | 20 | ||||||
Other receivables | 3,083 | 76 | ||||||
Inventory, net | 96,681 | 55,303 | ||||||
Prepaid expenses | 3,633 | 3,683 | ||||||
Deferred catalog costs | 4,633 | 1,435 | ||||||
Total current assets | 108,233 | 98,390 | ||||||
Property and equipment, net | 45,275 | 21,529 | ||||||
Restricted cash | 1,367 | — | ||||||
Goodwill | 402 | 402 | ||||||
Other assets, net | 343 | 299 | ||||||
Total assets | $ | 155,620 | $ | 120,620 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 19,277 | $ | 10,611 | ||||
Accrued expenses and other current liabilities | 17,384 | 12,049 | ||||||
Income taxes payable | — | 1,308 | ||||||
Bank overdrafts | 2,055 | — | ||||||
Current maturities of long-term debt | 62 | 722 | ||||||
Total current liabilities | 38,778 | 24,690 | ||||||
Long-term line of credit | 13,209 | — | ||||||
Finance lease obligations under built-to-suit leases | 1,957 | — | ||||||
Long-term debt, less current maturities | 731 | 4,301 | ||||||
Deferred rent obligations, less current maturities | 1,249 | 1,112 | ||||||
Deferred tax liabilities | 182 | 31 | ||||||
Total liabilities | 56,106 | 30,134 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
Capital stock | 86,191 | 85,389 | ||||||
Retained earnings | 10,740 | 3,443 | ||||||
Accumulated other comprehensive loss | — | (27 | ) | |||||
Total shareholders' equity of Duluth Holdings Inc. | 96,931 | 88,805 | ||||||
Noncontrolling interest | 2,583 | 1,681 | ||||||
Total shareholders' equity | 99,514 | 90,486 | ||||||
Total liabilities and shareholders' equity | $ | 155,620 | $ | 120,620 | ||||
DULUTH HOLDING INC. | ||||||||||||
Consolidated Statements of Operations | ||||||||||||
(Unaudited) | ||||||||||||
(Amounts in thousands, except per share figures) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | |||||||||
Net sales | $ | 67,008 | $ | 55,296 | $ | 201,463 | $ | 163,780 | ||||
Cost of goods sold | 28,260 | 23,692 | 84,102 | 69,051 | ||||||||
Gross profit | 38,748 | 31,604 | 117,361 | 94,729 | ||||||||
Selling, general and administrative expenses | 37,929 | 29,958 | 105,215 | 84,574 | ||||||||
Operating income | 819 | 1,646 | 12,146 | 10,155 | ||||||||
Interest expense | 33 | 114 | 108 | 226 | ||||||||
Other income, net | 33 | 44 | 163 | 119 | ||||||||
Income before income taxes | 819 | 1,576 | 12,201 | 10,048 | ||||||||
Income tax expense | 305 | — | 4,691 | — | ||||||||
Net income | 514 | 1,576 | 7,510 | 10,048 | ||||||||
Less: Net income attributable to noncontrolling interest | 52 | 67 | 188 | 149 | ||||||||
Net income attributable to controlling interest | $ | 462 | $ | 1,509 | $ | 7,322 | $ | 9,899 | ||||
Basic earnings per share (Class A and Class B): | ||||||||||||
Weighted average shares of common stock outstanding |
31,520 | 23,815 | 31,520 | 23,815 | ||||||||
Net income per share attributable to controlling interest |
$ | 0.01 | $ | 0.06 | $ | 0.23 | $ | 0.42 | ||||
Diluted earnings per share (Class A and Class B): | ||||||||||||
Weighted average shares and equivalents outstanding |
32,294 | 24,026 | 32,286 | 24,289 | ||||||||
Net income per share attributable to controlling interest |
$ | 0.01 | $ | 0.06 | $ | 0.23 | $ | 0.41 | ||||
Pro forma net income information (Note 1): | ||||||||||||
Income attributable to controlling interest before provision for income taxes |
$ | 1,509 | $ | 9,899 | ||||||||
Pro forma provision for income taxes | 604 | 3,960 | ||||||||||
Pro forma net income attributable to controlling interest |
$ | 905 | $ | 5,939 | ||||||||
Pro forma basic net income per share attributable to controlling interest (Class A and Class B) |
$ | 0.04 | $ | 0.25 | ||||||||
Pro forma diluted net income per share attributable to controlling interest (Class A and Class B) |
$ | 0.04 | $ | 0.24 | ||||||||
Note 1: The pro forma net income information gives effect to the conversion of the Company to a “C” corporation on
DULUTH HOLDINGS INC. | ||||||||||
Consolidated Statements of Cash Flows | ||||||||||
(Unaudited) | ||||||||||
(Amounts in thousands) | ||||||||||
Nine Months Ended | ||||||||||
October 30, 2016 | November 1, 2015 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 7,510 | $ | 10,048 | ||||||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||||
Depreciation and amortization | 3,215 | 1,998 | ||||||||
Amortization of stock-based compensation | 969 | 499 | ||||||||
Deferred income taxes | 151 | — | ||||||||
Loss on disposal of property and equipment | 3 | — | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | (10 | ) | (37 | ) | ||||||
Other receivables | (3,007 | ) | (654 | ) | ||||||
Inventory | (40,891 | ) | (31,187 | ) | ||||||
Prepaid expense | 181 | (1,248 | ) | |||||||
Deferred catalog costs | 485 | 311 | ||||||||
Trade accounts payable | 6,713 | 4,915 | ||||||||
Income taxes payable | (1,308 | ) | — | |||||||
Accrued expenses and deferred rent obligations | (794 | ) | (1,910 | ) | ||||||
Net cash used in operating activities | (26,783 | ) | (17,265 | ) | ||||||
Cash flows from investing activities: | ||||||||||
Purchases of property and equipment | (21,026 | ) | (6,553 | ) | ||||||
Change in restricted cash | (1,367 | ) | — | |||||||
Purchases of other assets | (80 | ) | (58 | ) | ||||||
Net cash used in investing activities | (22,473 | ) | (6,611 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Proceeds from line of credit | 18,156 | 64,058 | ||||||||
Payments on line of credit | (4,947 | ) | (34,365 | ) | ||||||
Proceeds from long term debt | — | 800 | ||||||||
Payments on long term debt | (4,216 | ) | (534 | ) | ||||||
Payments on capital lease obligations | (14 | ) | (256 | ) | ||||||
Change in bank overdrafts | 2,055 | 88 | ||||||||
Distributions to shareholders | (192 | ) | (13,671 | ) | ||||||
Distributions to holders of noncontrolling interest in variable interest entity | (30 | ) | (250 | ) | ||||||
Capital contributions to variable interest entity | 744 | 344 | ||||||||
Other | — | (10 | ) | |||||||
Net cash provided by financing activities | 11,556 | 16,204 | ||||||||
Decrease in cash | (37,700 | ) | (7,672 | ) | ||||||
Cash at beginning of period | 37,873 | 7,881 | ||||||||
Cash at end of period | $ | 173 | $ | 209 | ||||||
Supplemental disclosure of cash flow information | ||||||||||
Interest paid | $ | 116 | $ | 156 | ||||||
Income taxes paid | $ | 7,929 | $ | — | ||||||
DULUTH HOLDINGS INC. | ||||||||||||
Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA | ||||||||||||
(Unaudited) | ||||||||||||
(Amounts in thousands) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | |||||||||
Net income | $ | 514 | $ | 1,576 | $ | 7,510 | $ | 10,048 | ||||
Depreciation and amortization | 1,264 | 824 | 3,215 | 1,998 | ||||||||
Interest expense | 33 | 114 | 108 | 226 | ||||||||
Income tax expense | 305 | — | 4,691 | — | ||||||||
EBITDA | $ | 2,116 | $ | 2,514 | $ | 15,524 | $ | 12,272 | ||||
Non-cash stock based compensation | 354 | 167 | 969 | 499 | ||||||||
Payment of grantees' tax liabilities associated with grant of restricted stock awards |
— | — | — | 1,115 | ||||||||
Adjusted EBITDA | $ | 2,470 | $ | 2,681 | $ | 16,493 | $ | 13,886 | ||||
DULUTH HOLDINGS INC. | ||||||||||||||
Segment Information | ||||||||||||||
(Unaudited) | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | |||||||||||
Net sales | ||||||||||||||
Direct | $ | 52,271 | $ | 46,543 | $ | 166,437 | $ | 141,241 | ||||||
Retail | 14,737 | 8,753 | 35,026 | 22,539 | ||||||||||
Total net sales | $ | 67,008 | $ | 55,296 | $ | 201,463 | $ | 163,780 | ||||||
Operating income | ||||||||||||||
Direct | $ | (84 | ) | $ | 126 | $ | 8,694 | $ | 6,270 | |||||
Retail | 903 | 1,520 | 3,452 | 3,885 | ||||||||||
Total operating income | 819 | 1,646 | 12,146 | 10,155 | ||||||||||
Interest expense | 33 | 114 | 108 | 226 | ||||||||||
Other income, net | 33 | 44 | 163 | 119 | ||||||||||
Income before income taxes | $ | 819 | $ | 1,576 | $ | 12,201 | $ | 10,048 | ||||||
Investor Contacts:Donni Case (310) 622-8224Johan Yokay (310) 622-8241Financial Profiles, Inc. Duluth@finprofiles.com