News Release
View printer-friendly version |
Highlights for the Fourth Quarter Ended
- Net sales decreased 1.4% to
$256.0 million compared to$259.6 million in the prior-year fourth quarter - Gross margin increased to 53.0% compared to 52.8% in the prior-year fourth quarter
- Operating income decreased 7.8% to
$30.5 million , or 11.9% of net sales, compared to$33.1 million , or 12.8% of net sales in the prior-year fourth quarter - Net income was
$21.8 million , or$0.67 per diluted share, compared to$24.4 million , or$0.75 per diluted share in the prior-year fourth quarter - Adjusted EBITDA1 decreased 3.1% to
$38.7 million compared to$39.9 million in the prior-year fourth quarter
1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
Highlights for the Fiscal Year Ended
- Net sales increased 3.8% to
$638.8 million compared to$615.6 million in the prior year - Gross margin decreased to 51.9% compared to 53.3% in the prior year
- Operating income decreased 13.9% to
$24.2 million , or 3.8% of net sales, compared to$28.1 million , or 4.6% of net sales in the prior year - Net income was
$13.6 million , or$0.42 per diluted share, compared to$18.9 million , or$0.58 per diluted share in the prior year - Adjusted EBITDA1 increased 6.8% to
$55.5 million compared to$51.9 million in the prior year - Free Cash Flow2 was
$38.5 million compared to$(22.4) million in the prior year - The Company opened 4 retail stores, totaling approximately 58,700 gross square feet, and ended the year with a total of 65 stores
1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
2See Reconciliation of Net cash provided by operating activities to Free Cash Flow in the accompanying financial tables.
Management Commentary
“I am very proud of what our team accomplished in fiscal year 2020. Their agility and resourcefulness delivered full year net sales of
“Fortunately, our strong omnichannel presence allowed customers, who traditionally shopped in stores, to shift their buying patterns to online purchases. When our stores closed, we also ramped up digital marketing and promotions to draw current and new customers to our website. Overall, direct sales closed the retail gap and ended the year accounting for 72% of total 2020 sales.
“Early 2021 sales are off to a good start and are trending up in the mid-teens to last year. We are confident in our future based on the strength of our brand, our innovative product development resonating with customers and our ability to enhance profitability,” concluded Schlecht.
Operating Results for the Fourth Quarter Ended
Net sales decreased 1.4% to
Net sales in non-store markets increased 12.9%, to
Women’s apparel net sales decreased 3.5% and Men’s apparel net sales decreased 2.3%. This decrease was primarily attributed to slower store traffic due to the COVID-19 pandemic and reduced national TV ad spend, partially offset by growth strength in Women’s comfortable basics and Men’s core products.
Gross profit decreased 1.0% to
Selling, general and administrative expenses increased 1.2% to
The increase in selling, general and administrative expenses was primarily due to increased shipping costs to support website sales, which included
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of approximately
Other Developments
- Effective as of the close of the 2021 annual meeting, E. David Coolidge III is retiring from the Board of Directors and will not be standing for election.
Mr. Coolidge has served on our Board sinceSeptember 2015 and had served on the advisory board since 2001. The Company thanksMr. Coolidge for his many years of service, invaluable advice and guidance to Duluth Trading. - The Board of Directors nominated
Brett L. Paschke to stand for election as a director of Duluth Trading at the 2021 annual meeting.Mr. Paschke is a Partner and Managing Director atWilliam Blair & Company, L.L.C. , an investment banking and money management firm, and he has been a Partner since 2002.Mr. Paschke led theEquity Capital Markets Group at William Blair from 2009 to 2020, and under his leadership, William Blair served as an underwriter on almost 800 equity offerings raising a cumulative$200 billion , including approximately 20 percent of all US-listed IPOs. He was a member of William Blair’s firm-wide leadership group from 2013 to 2019 and led theBusiness and Financial Services Investment Banking Group at William Blair from 2004 to 2009.Mr. Paschke is also a board member ofPRA Group, Inc. (Nasdaq: PRAA), a global leader in acquiring and collecting nonperforming loans, since 2020 and serves on its the Audit and Compliance Committees.Mr. Paschke holds an A.B. fromPrinceton and an M.B.A. fromHarvard Business School .Mr. Paschke was selected to serve on our Board of Directors due to his extensive investment banking experience working with high-growth companies across various sectors and industries and his valuable insight on management and corporate finance. - The Company announced that it entered a partnership agreement with Tractor Supply Company to offer Duluth Trading’s Buck Naked™ underwear for men in 13 Tractor Supply stores. If this pilot program is mutually successful, it will be rolled out to other Tractor Supply stores over the course of 2021.
Fiscal 2021 Outlook
As uncertainties related to COVID-19 begin to slowly decline, the Company expects to see steady improvement in demand in fiscal 2021. The Company provided the following fiscal 2021 outlook:
- Net sales in the range of
$680 million to$700 million - Adjusted EBITDA1 in the range of
$66 million to$70 million - EPS in the range of
$0.64 to$0.70 per diluted share - Capital expenditures, inclusive of software hosting implementation costs, of approximately
$15 million
1See Reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the accompanying financial tables.
The table below recaps the Company’s fiscal 2020 stores opened, as well as the one signed new store lease for 2021 and the anticipated opening timeframe.
FISCAL 2020 STORES | EXECUTED LEASES as of |
|||||||
Gross | Gross | |||||||
Location | Square Footage | Location | Timing | Square Footage | ||||
16,828 | Q4 Fiscal 2021 | 11,441 | ||||||
20,388 | ||||||||
10,000 | ||||||||
11,441 | ||||||||
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
April 1, 2021 : 877-344-7529 (domestic) or 412-317-0088 (international) - Replay access code: 10152542
- 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/10152542 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) and Free Cash Flow. 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
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.
Management believes Free Cash Flow is a useful measure of performance as an indication of an organization’s financial strength and provides additional perspective on the ability to efficiently use capital in executing growth strategies. Free Cash Flow is used to facilitate a comparison of operating performance on a consistent basis from period-to-period and the ability to generate cash. Free Cash Flow is defined as net cash provided by operating activities less purchase of property and equipment and capital contributions towards build-to-suit stores.
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” and the forecasted results of operations in the Table “Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA,” 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 | $ | 47,221 | $ | 2,189 | ||||
Receivables | 2,820 | 1,470 | ||||||
Inventory, net | 149,052 | 147,849 | ||||||
Prepaid expenses & other current assets | 10,203 | 9,503 | ||||||
Prepaid catalog costs | 1,014 | 1,181 | ||||||
Total current assets | 210,310 | 162,192 | ||||||
Property and equipment, net | 124,237 | 137,071 | ||||||
Operating lease right-of-use assets | 117,490 | 120,431 | ||||||
Finance lease right-of-use assets, net | 53,468 | 46,677 | ||||||
Restricted cash | — | 51 | ||||||
Available-for-sale security | 6,111 | 6,432 | ||||||
Other assets, net | 3,961 | 1,196 | ||||||
Total assets | $ | 515,577 | $ | 474,050 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 33,647 | $ | 33,053 | ||||
Accrued expenses and other current liabilities | 37,686 | 29,464 | ||||||
Income tax payable | 7,579 | 3,427 | ||||||
Current portion of operating lease liabilities | 11,050 | 10,674 | ||||||
Current portion of finance lease liabilities | 2,629 | 1,600 | ||||||
Current maturities of Duluth long-term debt | 2,500 | 1,000 | ||||||
Current maturities of TRI long-term debt1 | 623 | 557 | ||||||
Total current liabilities | 95,714 | 79,775 | ||||||
Operating lease liabilities, less current portion | 104,287 | 106,120 | ||||||
Finance lease liabilities, less current portion | 43,299 | 37,434 | ||||||
Duluth long-term debt, less current maturities | 45,750 | 38,332 | ||||||
TRI long-term debt, less current maturities1 | 27,229 | 27,778 | ||||||
Deferred tax liabilities | 8,200 | 8,505 | ||||||
Total liabilities | 324,479 | 297,944 | ||||||
(628 | ) | (407 | ) | |||||
Capital stock | 92,875 | 90,902 | ||||||
Retained earnings | 101,166 | 87,589 | ||||||
Accumulated other comprehensive income | 48 | 188 | ||||||
Total shareholders' equity of |
193,461 | 178,272 | ||||||
Noncontrolling interest | (2,363 | ) | (2,166 | ) | ||||
Total shareholders' equity | 191,098 | 176,106 | ||||||
Total liabilities and shareholders' equity | $ | 515,577 | $ | 474,050 | ||||
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 | Fiscal Year Ended | |||||||||||||||
Net sales | $ | 255,960 | $ | 259,649 | $ | 638,783 | $ | 615,624 | ||||||||
Cost of goods sold (excluding depreciation and amortization) | 120,275 | 122,587 | 307,257 | 287,475 | ||||||||||||
Gross profit | 135,685 | 137,062 | 331,526 | 328,149 | ||||||||||||
Selling, general and administrative expenses | 105,136 | 103,913 | 307,311 | 300,041 | ||||||||||||
Operating income | 30,549 | 33,149 | 24,215 | 28,108 | ||||||||||||
Interest expense | 1,492 | 1,340 | 6,263 | 4,471 | ||||||||||||
Other income, net | 169 | 37 | 65 | 291 | ||||||||||||
Income before income taxes | 29,226 | 31,846 | 18,017 | 23,928 | ||||||||||||
Income tax expense | 7,464 | 7,638 | 4,637 | 5,429 | ||||||||||||
Net income | 21,762 | 24,208 | 13,380 | 18,499 | ||||||||||||
Less: Net loss attributable to noncontrolling interest | (69 | ) | (166 | ) | (197 | ) | (422 | ) | ||||||||
Net income attributable to controlling interest | $ | 21,831 | $ | 24,374 | $ | 13,577 | $ | 18,921 | ||||||||
Basic earnings per share (Class A and Class B): | ||||||||||||||||
Weighted average shares of common stock outstanding | 32,494 | 32,336 | 32,447 | 32,309 | ||||||||||||
Net income per share attributable to controlling interest | $ | 0.67 | $ | 0.75 | $ | 0.42 | $ | 0.59 | ||||||||
Diluted earnings per share (Class A and Class B): | ||||||||||||||||
Weighted average shares and equivalents outstanding | 32,665 | 32,336 | 32,580 | 32,371 | ||||||||||||
Net income per share attributable to controlling interest | $ | 0.67 | $ | 0.75 | $ | 0.42 | $ | 0.58 | ||||||||
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Fiscal Year Ended | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 13,380 | $ | 18,499 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 28,520 | 22,083 | ||||||
Stock-based compensation | 1,629 | 647 | ||||||
Deferred income taxes | (255 | ) | (1,151 | ) | ||||
Loss on disposal of property and equipment | 324 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (1,350 | ) | 877 | |||||
Income taxes receivable | — | 2,292 | ||||||
Inventory | (1,203 | ) | (50,164 | ) | ||||
Prepaid expense & other assets | 2,615 | 5,429 | ||||||
Software hosting implementation costs, net | (4,089 | ) | — | |||||
Deferred catalog costs | 167 | 1,322 | ||||||
Trade accounts payable | (1,464 | ) | 7,564 | |||||
Income taxes payable | 4,152 | 3,209 | ||||||
Accrued expenses and deferred rent obligations | 7,719 | (2,260 | ) | |||||
Noncash lease impacts | 606 | — | ||||||
Net cash provided by operating activities | 50,751 | 8,347 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (11,743 | ) | (24,435 | ) | ||||
Capital contributions towards build-to-suit stores | (520 | ) | (6,354 | ) | ||||
Principal receipts from available-for-sale security | 131 | 117 | ||||||
Change in other assets | — | (15 | ) | |||||
Net cash used in investing activities | (12,132 | ) | (30,687 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from line of credit | 95,388 | 271,754 | ||||||
Payments on line of credit | (114,720 | ) | (268,965 | ) | ||||
Proceeds from delayed draw term loan | 30,000 | 20,000 | ||||||
Payments on delayed draw term loan | (1,750 | ) | — | |||||
Payments on TRI long term debt | (483 | ) | (495 | ) | ||||
Payments on finance lease obligations | (1,958 | ) | (891 | ) | ||||
Shares withheld for tax payments on vested restricted stock | (221 | ) | (315 | ) | ||||
Other | 106 | 407 | ||||||
Net cash provided by financing activities | 6,362 | 21,495 | ||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 44,981 | (845 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 2,240 | 3,085 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 47,221 | $ | 2,240 | ||||
Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA
(Unaudited)
(Amounts in thousands)
Three Months Ended | Fiscal Year Ended | |||||||||||
Net income | $ | 21,762 | $ | 24,208 | $ | 13,380 | $ | 18,499 | ||||
Depreciation and amortization | 7,311 | 6,149 | 28,520 | 22,083 | ||||||||
Amortization of internal-use software hosting subscription implementation costs | 61 | — | 229 | — | ||||||||
Interest expense | 1,492 | 1,340 | 6,263 | 4,471 | ||||||||
Amortization of build-to-suit operating leases capital contributions | 198 | 211 | 794 | 784 | ||||||||
Income tax expense | 7,464 | 7,638 | 4,637 | 5,429 | ||||||||
EBITDA (non-GAAP) | $ | 38,288 | $ | 39,546 | $ | 53,823 | $ | 51,266 | ||||
Stock based compensation | 366 | 365 | 1,629 | 647 | ||||||||
Adjusted EBITDA (non-GAAP) | $ | 38,654 | $ | 39,911 | $ | 55,452 | $ | 51,913 | ||||
Free Cash Flow
(Unaudited)
(Amounts in thousands)
Fiscal Year Ended | ||||||||
Net cash provided by operating activities | $ | 50,751 | $ | 8,347 | ||||
Purchases of property and equipment | (11,743 | ) | (24,435 | ) | ||||
Capital contributions towards build-to-suit stores | (520 | ) | (6,354 | ) | ||||
Free Cash Flow (non-GAAP) | $ | 38,488 | $ | (22,442 | ) | |||
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 | $ | 20,950 | $ | 22,950 | ||
Depreciation and amortization | 26,595 | 27,700 | ||||
Amortization of internal-use software hosting subscription implementation costs | 3,200 | 3,500 | ||||
Interest expense | 5,400 | 5,200 | ||||
Amortization of build-to-suit operating leases capital contributions | 800 | 800 | ||||
Income tax expense | 7,155 | 7,850 | ||||
EBITDA (non-GAAP) | $ | 64,100 | $ | 68,000 | ||
Stock based compensation | 1,900 | 2,000 | ||||
Adjusted EBITDA (non-GAAP) | $ | 66,000 | $ | 70,000 | ||
Source: Duluth Trading Company