News Release
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Highlights for the First Quarter Ended
- Net sales increased 21.4% to
$133.4 million compared to$109.9 million in the prior year first quarter - Gross margin increased to 49.9% compared to 47.6% in the prior year first quarter
- Operating income increased
$20.9 million to$1.9 million compared to an operating loss of$(19.0) million in the prior year first quarter - Net income was
$0.5 million , or$0.02 per diluted share, compared to a net loss of$(15.1) million , or$(0.47) per diluted share in the prior year first quarter - Adjusted EBITDA1 increased to
$10.1 million compared to$(11.6) million in the prior year first quarter
1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
Management Commentary
“We are pleased to report a solid first quarter with net sales growing more than 21% to
“Having completed my last quarter as Executive Chairman and CEO on
Operating Results for the First Quarter Ended
Net sales increased 21.4% to
Net sales in store markets increased 33.3%, to
Men’s apparel net sales increased 23.6% driven by growth in seasonal outerwear and outdoor active. Women’s apparel net sales increased 13.9% driven by strength in woven bottoms, including shorts, skorts and capris.
Gross profit increased 27.2% to
Selling, general and administrative expenses decreased 9.3% to
The decrease in selling, general and administrative expense was primarily due to decreased traditional advertising, reduced digital prospecting spend, the elimination of third-party logistics, and
The effective tax rate related to controlling interest was 16%, which was impacted by changes to certain discrete items during the quarter. Excluding these non-recurring discrete items, the effective tax rate was 25% for both the current and the prior year quarter.
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of approximately
On
Fiscal 2021 Outlook
The Company updated its fiscal 2021 outlook as follows:
- Net sales in the range of
$695 million to$710 million - Adjusted EBITDA in the range of
$68 million to$71 million 1 - EPS in the range of
$0.66 to$0.72 per diluted share - Capital expenditures, inclusive of software hosting implementation costs, of
$15 million to$16 million
1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
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
June 17, 2021 : 877-344-7529 (domestic) or 412-317-0088 (international) - Replay access code: 10156187
- Live and archived webcast: ir.duluthtrading.com
Investors can pre-register for the earnings conference call to expedite their entry into the call and avoid waiting for a live operator. To pre-register for the call, please visit http://dpregister.com/10156187 and enter your contact information. You will then be issued a personalized phone number and pin to dial into the live conference call. Investors can pre-register any time prior to the start of the conference call.
About Duluth Trading
Duluth Trading is a 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 months ended
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, including statements under the heading “Fiscal 2021 Outlook” are forward-looking statements. 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
Investor Contacts:
Duluth@finprofiles.com
(Tables Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 26,054 | $ | 47,221 | ||||
| Receivables | 2,558 | 2,820 | ||||||
| Inventory, net | 144,185 | 149,052 | ||||||
| Prepaid expenses & other current assets | 10,980 | 10,203 | ||||||
| Prepaid catalog costs | 802 | 1,014 | ||||||
| Total current assets | 184,579 | 210,310 | ||||||
| Property and equipment, net | 119,783 | 124,237 | ||||||
| Operating lease right-of-use assets | 115,060 | 117,490 | ||||||
| Finance lease right-of-use assets, net | 52,329 | 53,468 | ||||||
| Available-for-sale security | 6,346 | 6,111 | ||||||
| Other assets, net | 4,067 | 3,961 | ||||||
| Total assets | $ | 482,164 | $ | 515,577 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 40,091 | $ | 33,647 | ||||
| Accrued expenses and other current liabilities | 30,903 | 37,686 | ||||||
| Income taxes payable | 7,683 | 7,579 | ||||||
| Current portion of operating lease liabilities | 11,189 | 11,050 | ||||||
| Current portion of finance lease liabilities | 2,578 | 2,629 | ||||||
| Current portion of Duluth long-term debt | 17,626 | 2,500 | ||||||
| Current maturities of TRI long-term debt1 | 640 | 623 | ||||||
| Total current liabilities | 110,710 | 95,714 | ||||||
| Operating lease liabilities, less current maturities | 101,876 | 104,287 | ||||||
| Finance lease liabilities, less current maturities | 42,304 | 43,299 | ||||||
| Duluth long-term debt, less current maturities | — | 45,750 | ||||||
| TRI long-term debt, less current maturities1 | 27,079 | 27,229 | ||||||
| Deferred tax liabilities | 8,252 | 8,200 | ||||||
| Total liabilities | 290,221 | 324,479 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| (986 | ) | (628 | ) | |||||
| Capital stock | 93,378 | 92,875 | ||||||
| Retained earnings | 101,710 | 101,166 | ||||||
| Accumulated other comprehensive (loss) income, net | 250 | 48 | ||||||
| Total shareholders' equity of |
194,352 | 193,461 | ||||||
| Noncontrolling interest | (2,409 | ) | (2,363 | ) | ||||
| Total shareholders' equity | 191,943 | 191,098 | ||||||
| Total liabilities and shareholders' equity | $ | 482,164 | $ | 515,577 | ||||
1Represents debt of the variable interest entity,
DULUTH HOLDING INC.
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share figures)
| Three Months Ended | ||||||||
| Net sales | $ | 133,419 | $ | 109,917 | ||||
| Cost of goods sold (excluding depreciation and amortization) | 66,876 | 57,585 | ||||||
| Gross profit | 66,543 | 52,332 | ||||||
| Selling, general and administrative expenses | 64,648 | 71,306 | ||||||
| Operating income (loss) | 1,895 | (18,974 | ) | |||||
| Interest expense | 1,308 | 1,350 | ||||||
| Other income, net | 16 | 59 | ||||||
| Income (loss) before income taxes | 603 | (20,265 | ) | |||||
| Income tax expense (benefit) | 105 | (5,086 | ) | |||||
| Net income (loss) | 498 | (15,179 | ) | |||||
| Less: Net loss attributable to noncontrolling interest | (46 | ) | (44 | ) | ||||
| Net income (loss) attributable to controlling interest | $ | 544 | $ | (15,135 | ) | |||
| Basic earnings (loss) per share (Class A and Class B): | ||||||||
| Weighted average shares of common stock outstanding | 32,540 | 32,372 | ||||||
| Net income (loss) per share attributable to controlling interest | $ | 0.02 | $ | (0.47 | ) | |||
| Diluted earnings (loss) per share (Class A and Class B): | ||||||||
| Weighted average shares and equivalents outstanding | 32,710 | 32,372 | ||||||
| Net income (loss) per share attributable to controlling interest | $ | 0.02 | $ | (0.47 | ) | |||
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
| Three Months Ended | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 498 | $ | (15,179 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 7,274 | 6,689 | ||||||
| Stock based compensation | 371 | 463 | ||||||
| Deferred income taxes | (16 | ) | (21 | ) | ||||
| Loss on disposal of property and equipment | 51 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | 262 | (1,989 | ) | |||||
| Inventory | 4,867 | (27,188 | ) | |||||
| Prepaid expense & other current assets | (595 | ) | 2,196 | |||||
| Software hosting implementation costs, net | (132 | ) | — | |||||
| Deferred catalog costs | 212 | 1,014 | ||||||
| Trade accounts payable | 5,991 | (1,842 | ) | |||||
| Income taxes payable | 104 | (3,427 | ) | |||||
| Accrued expenses and deferred rent obligations | (6,330 | ) | 5,126 | |||||
| Other assets | (33 | ) | — | |||||
| Noncash lease impacts | (101 | ) | 667 | |||||
| Net cash provided by (used in) operating activities | 12,423 | (33,491 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (2,033 | ) | (4,059 | ) | ||||
| Capital contributions towards build-to-suit stores | — | (74 | ) | |||||
| Principal receipts from available-for-sale security | 35 | 31 | ||||||
| Proceeds from disposals | 24 | — | ||||||
| Net cash used in investing activities | (1,974 | ) | (4,102 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from line of credit | — | 37,484 | ||||||
| Payments on line of credit | — | (21,816 | ) | |||||
| Proceeds from delayed draw term loan | — | 30,000 | ||||||
| Payments on delayed draw term loan | (30,625 | ) | (250 | ) | ||||
| Payments on TRI long term debt | (151 | ) | (116 | ) | ||||
| Payments on finance lease obligations | (615 | ) | (392 | ) | ||||
| Payments of tax withholding on vested restricted shares | (358 | ) | (107 | ) | ||||
| Other | 133 | (150 | ) | |||||
| Net cash (used in) provided by financing activities | (31,616 | ) | 44,653 | |||||
| (Decrease) increase in cash, cash equivalents and restricted cash | (21,167 | ) | 7,060 | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 47,221 | 2,240 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 26,054 | $ | 9,300 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | 1,348 | $ | 1,447 | ||||
| Income taxes paid | $ | — | $ | 37 | ||||
| Supplemental disclosure of non-cash information: | ||||||||
| Unpaid liability to acquire property and equipment | $ | 962 | $ | 2,000 | ||||
Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA
For the Fiscal Quarter Ended
(Unaudited)
(Amounts in thousands)
| Three Months Ended | |||||||
| (in thousands) | |||||||
| Net income (loss) | $ | 498 | $ | (15,179 | ) | ||
| Depreciation and amortization | 7,274 | 6,689 | |||||
| Amortization of internal-use software hosting | |||||||
| subscription implementation costs | 369 | — | |||||
| Interest expense | 1,308 | 1,350 | |||||
| Amortization of build-to-suit operating leases capital contribution |
199 | 199 | |||||
| Income tax expense (benefit) | 105 | (5,086 | ) | ||||
| EBITDA | $ | 9,753 | $ | (12,027 | ) | ||
| Stock based compensation | 371 | 463 | |||||
| Adjusted EBITDA | $ | 10,124 | $ | (11,564 | ) | ||
Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA
For the Fiscal Year Ended
(Unaudited)
(Amounts in thousands)
| Low | High | |||||
| Forecasted | ||||||
| Net income | $ | 21,900 | $ | 23,700 | ||
| Depreciation and amortization | 27,300 | 27,700 | ||||
| Amortization of internal-use software hosting subscription implementation costs | 3,200 | 3,500 | ||||
| Interest expense | 5,200 | 5,000 | ||||
| Amortization of build-to-suit operating leases capital contributions | 800 | 800 | ||||
| Income tax expense | 7,500 | 8,100 | ||||
| EBITDA | $ | 65,900 | $ | 68,800 | ||
| Stock based compensation | 2,100 | 2,200 | ||||
| Adjusted EBITDA | $ | 68,000 | $ | 71,000 | ||
Source: Duluth Trading Company