News Release
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Highlights for the Third Quarter Ended October 28, 2018
- Net sales increased 27.4% to
$106.7 million compared to$83.7 million in the prior-year third quarter - Gross margin increased 50 basis points to 57.1% compared to 56.6% in the prior-year third quarter
- Operating loss of
$2.6 million compared to operating loss of$0.6 million in the prior-year third quarter - Net loss of
$3.2 million , or$0.10 per diluted share, compared to net loss of$0.8 million , or$0.03 per diluted share, in the prior-year third quarter - Adjusted EBITDA1 of
$1.0 million compared to$1.9 million in the prior-year third quarter - The Company opened four retail stores in
Golden, CO ;Ramsey, NJ ;Canton, OH andGreensboro, NC , totaling approximately 79,000 gross square feet - 35th 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.
Management Commentary
“We are pleased with our third quarter results, which were in-line with our expectations and also marked our 35th consecutive quarter of increased net sales year-over-year. We continue to see strong contribution from our new stores and growth from our Women’s business,” said
“Throughout the year, our team worked tirelessly and our results year-to-date put us in a strong position heading into the holiday season. We expect to deliver on our fiscal 2018 guidance. We have made significant investments during the year that strengthen our competitive position and enable us to provide an outstanding customer experience, including:
- improvements in the e-commerce and mobile experience;
- buy-online-pickup-in-store and ship-from-store in seven of our stores;
- mini-distribution center in our
Greensboro retail store; - electronic gift cards;
- launch of our Women’s plus line;
- 15 new store locations to touch and experience our products; and
- upgrades to our
Belleville distribution center.”
Operating Results for the Third Quarter Ended October 28, 2018
Net sales increased 27.4% to
Gross profit increased 28.6% to
Selling, general and administrative expenses increased 32.3% to
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of
Fiscal 2018 Outlook
The Company’s fiscal 2018 outlook is provided on a 53-week period, compared to a 52-week period in fiscal 2017. The Company reaffirmed its fiscal 2018 outlook as follows:
- Net sales in the range of
$555.0 million to $575.0 million - EPS in the range of
$0.79 to $0.84 per diluted share, with an effective tax rate of 26% - The Company has completed its plan of opening 15 new stores, which added approximately 250,000 of additional gross square footage
The Company updated its fiscal 2018 outlook as follows:
- Adjusted EBITDA1 in the range of
$53.0 million to $56.0 million , up from previous guidance of$51.0 million to $54.0 million - Capital expenditures, net of proceeds from finance lease obligations, of
$50.0 million to $55.0 million 2
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 opening of 15 retail stores, investments in technology and infrastructure improvements.
The table below recaps the Company’s fiscal 2018 stores opened and signed new store leases and the anticipated opening timeframe.
Gross | ||||
Location | Timing | Square Footage | ||
Anchorage, AK1 | Opened March 1, 2018 | 25,409 | ||
West Fargo, ND | Opened March 22, 2018 | 14,557 | ||
Colorado Springs, CO | Opened May 3, 2018 | 12,410 | ||
Lubbock, TX | Opened May 10, 2018 | 15,536 | ||
Denton, TX | Opened May 17, 2018 | 14,557 | ||
Portland, OR | Opened May 24, 2018 | 19,075 | ||
Columbus, OH | Opened June 7, 2018 | 14,749 | ||
Arlington, TX | Opened July 12, 2018 | 15,536 | ||
Golden, CO | Opened September 13, 2018 | 20,415 | ||
Ramsey, NJ | Opened September 27, 2018 | 13,300 | ||
Canton, OH | Opened October 11, 2018 | 14,557 | ||
Greensboro, NC1 | Opened October 25, 2018 | 30,508 | ||
Oklahoma City, OK | Opened November 1, 2018 | 15,536 | ||
South Portland, ME | Opened November 8, 2018 | 12,964 | ||
Cary, NC | Opened November 15, 2018 | 11,164 | ||
Friendswood, TX | First half Fiscal 2019 | 16,026 | ||
Katy, TX | First half Fiscal 2019 | 16,000 | ||
Wichita, KS | First half Fiscal 2019 | 15,385 | ||
Spokane Valley, WA | First half Fiscal 2019 | 15,656 | ||
Jacksonville, FL | First half Fiscal 2019 | 14,557 | ||
Rogers, AR | First half Fiscal 2019 | 15,656 | ||
Danbury, CT | First half Fiscal 2019 | 9,792 | ||
Madison, AL | First half Fiscal 2019 | 15,656 | ||
Round Rock, TX | Second half Fiscal 2019 | 15,536 | ||
1Gross square footage includes space used for direct-to-customer fulfillment |
Conference Call Information
A conference call and audio webcast with analysts and investors will be held on Thursday, December 6, 2018 at
- Live conference call: 844-875-6915 (domestic) or 412-317-6711 (international)
- Conference call replay available through
December 20, 2018 : 877-344-7529 (domestic) or 412-317-0088 (international) - Replay access code: 10126364
- 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/10126364 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
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 October 28, 2018, versus the three and nine months ended October 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
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 and 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
Investor Contacts:
Duluth@finprofiles.com
(Tables Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
October 28, 2018 | January 28, 2018 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 2,500 | $ | 2,865 | ||||
Accounts receivable | 339 | 52 | ||||||
Other receivables | 2,827 | 273 | ||||||
Inventory, net | 131,448 | 89,548 | ||||||
Prepaid expenses & other current assets | 11,975 | 7,642 | ||||||
Deferred catalog costs | 1,137 | 1,446 | ||||||
Total current assets | 150,226 | 101,826 | ||||||
Property and equipment, net | 165,885 | 109,705 | ||||||
Restricted cash | 693 | 4,218 | ||||||
Available-for-sale security | 6,323 | 6,323 | ||||||
Goodwill | 402 | 402 | ||||||
Other assets, net | 988 | 628 | ||||||
Total assets | $ | 324,517 | $ | 223,102 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 34,200 | $ | 17,320 | ||||
Accrued expenses and other current liabilities | 30,715 | 25,261 | ||||||
Income taxes payable | — | 7,631 | ||||||
Current maturities of capital lease obligations | 165 | 4 | ||||||
Current maturities of long-term debt | 80 | 80 | ||||||
Total current liabilities | 65,160 | 50,296 | ||||||
Long-term line of credit | 65,000 | — | ||||||
Capitalized lease obligations, less current maturities | 27,578 | 31 | ||||||
Finance lease obligations under build-to-suit leases | 17,330 | 26,578 | ||||||
Deferred rent obligations, less current maturities | 3,892 | 3,355 | ||||||
Deferred tax liabilities | 1,573 | 2,100 | ||||||
Long-term debt, less current maturities | 1,333 | 1,393 | ||||||
Total liabilities | 181,866 | 83,753 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
Treasury stock | (92 | ) | (57 | ) | ||||
Capital stock | 89,335 | 88,043 | ||||||
Retained earnings | 49,972 | 48,084 | ||||||
Total shareholders' equity of Duluth Holdings Inc. | 139,215 | 136,070 | ||||||
Noncontrolling interest | 3,436 | 3,279 | ||||||
Total shareholders' equity | 142,651 | 139,349 | ||||||
Total liabilities and shareholders' equity | $ | 324,517 | $ | 223,102 |
DULUTH HOLDING INC.
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share figures)
Three Months Ended | Nine Months Ended | |||||||||||||
October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||||
Net sales | $ | 106,701 | $ | 83,729 | $ | 317,561 | $ | 253,642 | ||||||
Cost of goods sold (excluding depreciation and amortization) | 45,730 | 36,302 | 138,410 | 108,649 | ||||||||||
Gross profit | 60,971 | 47,427 | 179,151 | 144,993 | ||||||||||
Selling, general and administrative expenses | 63,534 | 48,039 | 172,075 | 137,467 | ||||||||||
Operating (loss) income | (2,563 | ) | (612 | ) | 7,076 | 7,526 | ||||||||
Interest expense | 1,583 | 661 | 3,638 | 1,199 | ||||||||||
Other income, net | 3 | 73 | 168 | 175 | ||||||||||
(Loss) income before income taxes | (4,143 | ) | (1,200 | ) | 3,606 | 6,502 | ||||||||
Income tax (benefit) expense | (1,067 | ) | (454 | ) | 913 | 2,480 | ||||||||
Net (loss) income | (3,076 | ) | (746 | ) | 2,693 | 4,022 | ||||||||
Less: Net income attributable to noncontrolling interest | 74 | 70 | 157 | 199 | ||||||||||
Net (loss) income attributable to controlling interest | $ | (3,150 | ) | $ | (816 | ) | $ | 2,536 | $ | 3,823 | ||||
Basic earnings per share (Class A and Class B): | ||||||||||||||
Weighted average shares of common stock outstanding | 32,098 | 31,861 | 32,065 | 31,837 | ||||||||||
Net (loss) income per share attributable to controlling interest | $ | (0.10 | ) | $ | (0.03 | ) | $ | 0.08 | $ | 0.12 | ||||
Diluted earnings per share (Class A and Class B): | ||||||||||||||
Weighted average shares and equivalents outstanding | 32,098 | 31,861 | 32,402 | 32,297 | ||||||||||
Net (loss) income per share attributable to controlling interest | $ | (0.10 | ) | $ | (0.03 | ) | $ | 0.08 | $ | 0.12 |
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Nine Months Ended | ||||||||
October 28, 2018 | October 29, 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 2,693 | $ | 4,022 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization | 8,187 | 5,104 | ||||||
Stock based compensation | 1,305 | 1,186 | ||||||
Deferred income taxes | (150 | ) | (60 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (287 | ) | (17 | ) | ||||
Other receivables | (2,554 | ) | (1,320 | ) | ||||
Inventory | (44,776 | ) | (57,020 | ) | ||||
Prepaid expense & other current assets | (4,951 | ) | (3,136 | ) | ||||
Deferred catalog costs | (1,416 | ) | (1,006 | ) | ||||
Trade accounts payable | 19,126 | 18,665 | ||||||
Income taxes payable | (7,780 | ) | (5,225 | ) | ||||
Accrued expenses and deferred rent obligations | 7,101 | 3,850 | ||||||
Net cash used in operating activities | (23,502 | ) | (34,957 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (45,878 | ) | (37,501 | ) | ||||
Change in other assets | (439 | ) | (6,323 | ) | ||||
Purchases of other assets | — | (85 | ) | |||||
Net cash used in investing activities | (46,317 | ) | (43,909 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from line of credit | 100,982 | 76,476 | ||||||
Payments on line of credit | (35,982 | ) | (26,375 | ) | ||||
Proceeds from long term debt | — | 800 | ||||||
Payments on long term debt | (60 | ) | (34 | ) | ||||
Payments on capital lease obligations | (4 | ) | (14 | ) | ||||
Change in bank overdrafts | — | 2,930 | ||||||
Distributions to holders of noncontrolling interest in variable interest entity | — | (400 | ) | |||||
Proceeds from finance lease obligations | 941 | 2,358 | ||||||
Capital contributions to variable interest entity | — | 794 | ||||||
Shares withheld for tax payments on vested restricted shares | (35 | ) | (57 | ) | ||||
Other | 87 | 38 | ||||||
Net cash provided by financing activities | 65,929 | 56,516 | ||||||
Decrease in cash and restricted cash | (3,890 | ) | (22,350 | ) | ||||
Cash and restricted cash at beginning of period | 7,083 | 25,477 | ||||||
Cash and restricted cash at end of period | $ | 3,193 | $ | 3,127 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 3,362 | $ | 947 | ||||
Income taxes paid | $ | 10,055 | $ | 8,950 | ||||
Supplemental disclosure of non-cash information: | ||||||||
Property and equipment acquired through capital lease | $ | 27,711 | $ | — | ||||
Property and equipment acquired under build-to-suit leases | $ | 3,583 | $ | 12,739 | ||||
Unpaid liability to acquire property and equipment | $ | 3,001 | $ | 4,144 |
Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA
(Unaudited)
(Amounts in thousands)
Three Months Ended | Nine Months Ended | |||||||||||||
October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||||
Net (loss) income | $ | (3,076 | ) | $ | (746 | ) | $ | 2,693 | $ | 4,022 | ||||
Depreciation and amortization | 3,118 | 1,824 | 8,187 | 5,104 | ||||||||||
Interest expense | 1,583 | 661 | 3,638 | 1,199 | ||||||||||
Income tax (benefit) expense | (1,067 | ) | (454 | ) | 913 | 2,480 | ||||||||
EBITDA | $ | 558 | $ | 1,285 | $ | 15,431 | $ | 12,805 | ||||||
Non-cash stock based compensation | 447 | 569 | 1,305 | 1,186 | ||||||||||
Adjusted EBITDA | $ | 1,005 | $ | 1,854 | $ | 16,736 | $ | 13,991 |
Segment Information
(Unaudited)
(Amounts in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | ||||||||||||
Net sales | |||||||||||||||
Direct | $ | 59,827 | $ | 54,146 | $ | 186,872 | $ | 175,588 | |||||||
Retail | 46,874 | 29,583 | 130,689 | 78,054 | |||||||||||
Total net sales | $ | 106,701 | $ | 83,729 | $ | 317,561 | $ | 253,642 | |||||||
Operating (loss) income | |||||||||||||||
Direct | $ | (8,357 | ) | $ | (2,738 | ) | $ | (9,362 | ) | $ | 230 | ||||
Retail | 5,794 | 2,126 | 16,438 | 7,296 | |||||||||||
Total operating (loss) income | (2,563 | ) | (612 | ) | 7,076 | 7,526 | |||||||||
Interest expense | 1,583 | 661 | 3,638 | 1,199 | |||||||||||
Other income, net | 3 | 73 | 168 | 175 | |||||||||||
(Loss) income before income taxes | $ | (4,143 | ) | $ | (1,200 | ) | $ | 3,606 | $ | 6,502 |
Net Sales by Business
(Unaudited)
(Amounts in thousands)
Three Months Ended | Nine Months Ended | |||||||||||
October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||
Net sales | ||||||||||||
Men's | $ | 72,789 | $ | 58,186 | $ | 216,143 | $ | 176,692 | ||||
Women's | 28,459 | 21,068 | 85,244 | 63,431 | ||||||||
Hard goods/other | 5,453 | 4,475 | 16,174 | 13,519 | ||||||||
Total net sales | $ | 106,701 | $ | 83,729 | $ | 317,561 | $ | 253,642 |
Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA
For the Fiscal Year Ending
(Unaudited)
(Amounts in thousands)
Low | High | |||||
Forecasted | ||||||
Net income | $ | 26,000 | $ | 27,500 | ||
Depreciation and amortization | 12,100 | 12,500 | ||||
Interest expense | 4,450 | 4,950 | ||||
Income tax expense | 9,000 | 9,550 | ||||
EBITDA | $ | 51,550 | $ | 54,500 | ||
Non-cash stock based compensation | 1,450 | 1,500 | ||||
Adjusted EBITDA | $ | 53,000 | $ | 56,000 |
Source: Duluth Trading Company