News Release

BELLEVILLE, Wis., March 20, 2018 (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 casual wear, workwear and accessories, today announced its financial results for the fiscal fourth quarter and fiscal year ended January 28, 2018 and its financial guidance for fiscal year 2018.

Highlights for the Fourth Quarter Ended January 28, 2018

• Net sales increased 24.7% to $217.8 million compared to $174.7 million in the prior-year fourth quarter
• Gross margin decreased 210 basis points to 53.3% compared to 55.4% in the prior-year fourth quarter
• Operating income increased 29.3% to $29.5 million, or 13.6% of net sales, compared to $22.9 million, or 13.1% of net sales in the prior-year fourth quarter
• Net income was $19.5 million, or $0.60 per diluted share, compared to $14.0 million, or $0.43 per diluted share in the prior-year fourth quarter. Excluding the impact of the U.S. Tax Cuts and Jobs Act (the “Tax Act”), net income was $17.6 million, or $0.55 per diluted share.
• Adjusted EBITDA¹ increased 31.4% to $32.4 million compared to $24.7 million in the prior-year fourth quarter
• The Company opened five new retail stores in Louisville, KY, Woodbury, MN, Grandville, MI, Waukesha, WI and Wixom, MI, totaling approximately 75,000 gross square feet
• 32^nd 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.

Highlights for the Fiscal Year Ended January 28, 2018

• Net sales increased 25.3% to $471.4 million compared to $376.1 million in the prior year
• Gross margin decreased 150 bps to 55.4% compared to 56.9% in the prior year
• Operating income increased 5.9% to $37.1 million, or 7.9% of net sales, compared to $35.0 million, or 9.3% of net sales in the prior year
• Net income was $23.4 million, or $0.72 per diluted share, compared to $21.3 million, or $0.66 per diluted share in the prior year. Excluding the impact of the Tax Act, net income was $21.5 million, or $0.67 per share.
• Adjusted EBITDA¹ increased 12.8% to $46.4 million compared to $41.2 million in the prior year
• The Company opened 15 retail stores, totaling approximately 228,000 gross square feet, and ended the year with a total of 31 stores

¹See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.

Management Commentary

“Fiscal 2017 was a year of solid growth for the Duluth Trading brand as reflected by more than 25% top-line growth and 23% growth in total new customers. We opened 15 stores and continued to expand our retail store footprint into the Eastern and Western United States. Net sales in our men’s business grew 22% and our women’s business grew 37%, exceeding the $100 million milestone and accounting for almost a quarter of our total annual sales. This marks our 32^nd consecutive quarter of increased net sales year-over-year,” said Stephanie Pugliese, Chief Executive Officer of Duluth Trading.

“With each new store opening, we are attracting more customers to the Duluth Trading brand and during fiscal 2017, new customers acquired through our retail segment accounted for 25% of total new customer growth. We continue to see higher sales growth in markets with an established store, which supports our long-term strategy to significantly expand our total market opportunity through continued strength in online capabilities and the full expression of the brand in a brick and mortar setting.”

“Looking ahead to 2018, we intend to greatly enhance our customers’ omnichannel experience with the completion of the order management system and e-commerce platform in the first half of the year. We plan to open 15 new stores that will reach into major customer markets like Texas and that will give us a coast-to-coast presence from Portland, Maine to Portland, Oregon. We are making investments to ensure the long-term growth potential of our business and are underway with executing our 2018 plan.”

Operating Results for the Fourth Quarter Ended January 28, 2018

Net sales increased 24.7% to $217.8 million, compared to $174.7 million in the same period a year ago. The net sales increase was driven by a 8.5% growth in direct net sales and a 98.8% growth in retail net sales, with growth in all product categories and in both men’s and women’s business. The increase in retail net sales was attributable to the opening of 15 new retail stores during fiscal 2017.

Gross profit increased 19.9% to $116.0 million, or 53.3% of net sales, compared to $96.8 million, or 55.4% of net sales, in the corresponding prior-year period. The 210 basis point decrease in gross margin was primarily due to an increase in global promotional days and flash sales, coupled with the continuing decline in shipping revenues.

Selling, general and administrative expenses increased 17.0% to $86.5 million, compared to $73.9 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses decreased 260 basis points to 39.7%, compared to 42.3% in the corresponding prior-year period. As a percentage of net sales, advertising and marketing costs decreased 370 basis points to 16.4% compared to 20.1% in the corresponding prior-year period, primarily due to a planned decrease in catalog spend coupled with a decline in digital and television advertising as percentage of net sales, primarily attributable to leverage gained from higher retail net sales. As a percentage of net sales, selling expenses increased 40 basis points to 14.1%, compared to 13.7% in the corresponding prior-year period, primarily due to an increase in customer service expense due to retail store growth, partially offset by leverage in shipping expenses due to increase proportion of retail net sales. As a percentage of net sales, general and administrative expenses increased 70 basis points to 9.2% compared to 8.5% in the corresponding prior-year period, primarily due to store occupancy, depreciation, and personnel expenses.

Balance Sheet and Liquidity

The Company ended the quarter with a cash balance of approximately $2.9 million, with net working capital of $51.5 million, and no borrowings on its $60.0 million revolving line of credit.

Fiscal 2018 Outlook

Fiscal 2018 outlook is provided on a 53-week period, compared to a 52-week period in fiscal 2017.

• Net sales in the range of $555.0 million to $575.0 million
• Adjusted EBITDA¹ in the range of $51.0 million to $54.0 million
• EPS in the range of $0.79 to $0.84 per diluted share, with an effective tax rate of 26% based on the Company’s provisional estimates from the impacts of the Tax Act
• Capital expenditures, net of proceeds from finance lease obligations of, $45.0 million to $55.0 million²
• 15 new store openings, adding 240,000 to 250,000 of additional gross square footage

¹See Reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the accompanying financial tables.
²Fiscal 2018 capital expenditures primarily include the Company’s plan to open 15 retail stores, investments in technology and infrastructure improvements.

The table below recaps the Company’s fiscal 2017 stores and signed new store leases for fiscal 2018 along with the opening timeframe.

¹Gross square footage excludes space used as a call center.

Conference Call Information

A conference call and audio webcast with analysts and investors will be held on Tuesday, March 20, 2018 at 9:30 am Eastern Time, to discuss the results and answer questions.

• Live conference call: 844-875-6915 (domestic) or 412-317-6711 (international)
• Conference call replay available through April 3, 2018: 877-344-7529 (domestic) or 412-317-0088 (international)
• Replay access code: 10117036
• 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/10117036  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.

About Duluth Trading

Duluth Trading is a rapidly growing lifestyle brand for the Modern, Self-Reliant American. Based in Belleville, 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 our products are sold exclusively 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 www.duluthtrading.com

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 months and fiscal year ended January 28, 2018, versus the three months and fiscal year ended January 29, 2017.  See also attached Table “Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA,” for a reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted adjusted EBITDA for the fiscal year ending February 3, 2019. Adjusted EBITDA is a metric used by management and frequently used by the financial community, which provides insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period.  The Company provides this information to investors to assist in comparisons of past, present and future operating results and to assist in highlighting the results of on-going operations.  While the Company’s management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company’s GAAP financial results and should be read in conjunction with those GAAP results.

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 statements regarding Duluth Trading’s ability to execute on its growth strategies, statements under the heading “Fiscal 2018 Outlook” and the forecasted results of operations in the Table “Reconciliation of Forecasted Net Income to Forecasted EBITDA to Forecasted Adjusted EBITDA.” 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,” “forecasted,” “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 Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2017, and other factors as may be periodically described in Duluth Trading’s subsequent filings with the SEC. Forward-looking statements speak only as of the date the statements are made. Duluth Trading assumes no obligation to update forward-looking statements to reflect actual results, subsequent events or circumstances or other changes affecting forward-looking information except to the extent required by applicable securities laws.

Investor Contacts:
Donni Case (310) 622-8224
Johan Yokay (310) 622-8241
Financial Profiles, Inc.
Duluth@finprofiles.com

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