UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
On March 7, 2024, Duluth Holdings Inc. (the “Company” or “Duluth Trading”) issued a press release (the “Earnings Press Release”) discussing, among other things, its financial results for its fiscal fourth quarter and fiscal year ended January 28, 2024. A copy of the Earnings Press Release is furnished as Exhibit 99.1 to this report.
| Item 7.01 | Regulation FD Disclosure. |
On March 7, 2024, the Company issued an Investor Presentation. A copy of the Investor Presentation is attached as Exhibit 99.2, and is incorporated by reference herein.
The information reported in this Form 8-K, including the exhibits, is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. Further, the information reported in this Form 8-K, including the exhibits, shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filings.
Forward Looking Information
Certain matters discussed in this Current Report on Form 8-K and other oral and written statements by representatives of the Company including, but not limited to, the Company’s ability to meet its fiscal 2024 expectations (including its ability to achieve its projected net sales, adjusted EBITDA, and diluted EPS) and its ability to execute on its growth strategies and its long-term growth targets, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 result or 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 SEC on March 17, 2023 and other factors as may be periodically described in Duluth Trading’s subsequent filings with the SEC. These risks and uncertainties include, but are not limited to, the following: the impact of inflation and measures to control inflation on our results of operations; the prolonged effects of economic uncertainties on store traffic and disruptions to our distribution network, supply chains and operations; our ability to maintain and enhance a strong brand and sub-brand image; adapting to declines in consumer confidence, inflation and decreases in consumer spending; effectively adapting to new challenges associated with our expansion into new geographic markets; our ability to meet customer delivery time expectations; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating adequate cash from our existing stores and direct sales to support our growth; the impact of changes in corporate tax regulations and sales tax; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; effectively relying on sources for merchandise located in foreign markets; transportation delays and interruptions, including port congestion; inability to timely and effectively obtain shipments of products from our suppliers and deliver merchandise to our customers; the inability to maintain the performance of a maturing store portfolio; our inability to deploy marketing tactics to strengthen brand awareness and attract new customers in a cost effective manner; our ability to successfully open new stores; competing effectively in an environment of intense competition; our ability to adapt to significant changes in sales due to the seasonality of our business; price reductions or inventory shortages resulting from failure to purchase the appropriate amount of inventory in advance of the season in which it will be sold due to global market constraints; the potential for further increases in price and availability of raw materials; our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices; the susceptibility of the price and availability of our merchandise to international trade conditions; failure of our vendors and their manufacturing sources to use acceptable labor or other practices; our dependence upon key executive management or our inability to hire or retain the talent required for our business; increases in costs of fuel or other energy, transportation or utility costs and in the costs of labor and employment; failure of our information technology systems to support our current and growing business, before and after our planned upgrades; disruptions in our supply chain and fulfillment centers; our inability to protect our trademarks or other intellectual property rights; infringement on the intellectual property of third parties; acts of war, terrorism or civil unrest; the impact of governmental laws and regulations and the outcomes of legal proceedings; changes in U.S. and non-U.S. laws affecting the importation and taxation of goods, including imposition of unilateral tariffs on imported goods; our ability to secure the personal and/or financial information of our customers and comply with the security standards for the credit card industry; and other factors that may be disclosed in our SEC filings or otherwise. 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.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
The following exhibits are being furnished with this Current Report on Form 8-K.
| Exhibit |
Description | |
| 99.1 | Earnings Press Release, dated March 7, 2024 | |
| 99.2 | Investor Presentation, dated March 7, 2024 | |
| 104 | Cover Page interactive data file (embedded with the inline XBRL document) | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DULUTH HOLDINGS INC. | ||||
| Date: March 7, 2024 | ||||
| By: | /s/ Heena Agrawal | |||
| Name: | Heena Agrawal | |||
| Title: | Senior Vice President and Chief Financial Officer | |||
Exhibit 99.1
Duluth Holdings Inc. Announces Fourth Quarter and Fiscal 2023 Financial Results
Fourth quarter Net Sales increased 1.6% year-over-year to $245.6 million; diluted EPS of $0.21
Women’s business grew double digits in the fourth quarter across both Duluth and AKHG brands
Strong financial position with $232.2 million of liquidity
MOUNT HOREB, WI - March 7, 2024 – Duluth Holdings Inc. (dba, Duluth Trading Company) (“Duluth Trading” or the “Company”) (NASDAQ: DLTH), a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories, today announced its financial results for the fiscal fourth quarter and fiscal year ended January 28, 2024.
Highlights for the Fourth Quarter Ended January 28, 2024
| • | Net sales increase to $245.6 million compared to $241.8 million in the prior-year fourth quarter |
| • | Strength of the women’s business continued with 12% sales growth |
| • | Net Income of $7.0 million; diluted EPS of $0.21 |
| • | Adjusted EBITDA1 increased to $21.1 million compared to $20.6 million in the prior-year |
Highlights for the Fiscal Year Ended January 28, 2024
| • | Net sales of $646.7 million compared to $653.3 million in the prior year |
| • | Net Loss of ($9.4) million; diluted EPS of ($0.28) |
| • | Adjusted EBITDA1 of $33.4 million; reflects 5.2% of net sales |
| • | Healthy inventory composition with 90% in current products and a 30% decrease in clearance items |
1 See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
| Management Commentary |
| |
| President and CEO Sam Sato commented, “While fiscal 2023 was a challenging year as consumers remained selective in their discretionary spend, our fourth quarter was highlighted by growth in both the Duluth and AKHG brands driven by our women’s business which registered year-over-year growth of 12%. Our Black Friday sales were the strongest in our Company’s history demonstrating the strength of our brands and demand for the innovative and problem-solving products we offer. |
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| ||
| During our peak season, within our core categories and AKHG brand, we introduced more newness than ever before, including a new addition to our iconic Fire Hose pant collection, featuring the strongest flex fabric on the market with a lighter weight than our original Fire Hose. We also launched our first ever fitness apparel category, AKHG Fitness, with an assortment of tanks, shorts, hybrid jackets and after-sweat sweats for both women and men. The customer excitement we are seeing showcases our ability to develop, design and deliver innovative and unique first-to-market fabrications and features that set Duluth apart in the marketplace.” |
Sato concluded, “We remain steadfast on our commitment to the pillars outlined in the Big Dam Blueprint and I am extremely proud of the tremendous progress we have made on related key strategic initiatives. We went live with our new highly automated fulfillment center and are achieving our ramp-up plan to process up to 60% of all online orders and store replenishment volume through this facility. We also meaningfully advanced our sourcing and product innovation functions and expect benefits from this initiative to materialize in 2024 and continue to build over time. These foundational initiatives represent examples of significant enablers to future proof and scale long-term profitable growth.”
Operating Results for the Fourth Quarter Ended January 28, 2024
Net sales increased 1.6% to $245.6 million, compared to $241.8 million in the same period a year ago. Direct-to-consumer net sales increased by 8.9% to $172.2 million compared to the fourth quarter last year driven by higher conversion rates and greater penetration of mobile. Mobile net sales grew 20.0% during the quarter and now represents our largest sales channel. Retail store net sales decreased by 12.2% to $73.4 million.
Women’s apparel net sales increased 12.4% with double digit growth across both Duluth and AKHG brands, while men’s apparel net sales were flat to the prior year.
Gross profit decreased 4.4% to $118.4 million, or 48.2% of net sales, compared to $123.8 million, or 51.2% of net sales, in the corresponding prior-year period. The decrease in gross profit margin rate was primarily due to a lower mix of full price sales.
Selling, general and administrative expenses decreased 3.8% to $108.8 million, compared to $113.2 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses decreased to 44.3%, compared to 46.8% in the corresponding prior-year period.
The decrease in selling, general and administrative expenses was partially due to lower advertising costs and variable expenses primarily due to efficiencies across the fulfillment center network, partially offset by higher depreciation from strategic investments.
The effective tax rate related to controlling interest was 23% and 25% in the current period and prior comparable period, respectively.
2
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of approximately $32.2 million, net working capital of $78.5 million and no outstanding Duluth Trading bank debt. Fiscal 2023 capital expenditures were $53.2 million, inclusive of $2.7 million of investments in software hosting implementation costs, which are included in Prepaid expenses & other current assets on the Company’s Consolidated Balance Sheets.
Fiscal 2024 Outlook
The Company provided the following fiscal 2024 outlook:
| • | Net sales in the range of $640 million to $660 million |
| • | Adjusted EBITDA1 in the range of $39 million to $45 million |
| • | EPS in the range of ($0.22) to ($0.07) per diluted share |
| • | Capital expenditures, inclusive of software hosting implementation costs, of approximately $25 million |
1 See Reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the accompanying financial tables.
Conference Call Information
A conference call and audio webcast with analysts and investors will be held on Thursday, March 7, 2024 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 March 14, 2024: 877-344-7529 (domestic) or 412-317-0088 (international) |
| • | Replay access code: 9707034 |
| • | 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 https://dpregister.com/sreg/10185439/fb5294b5e7 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 lifestyle brand for the Modern, Self-Reliant American. Based in Mount Horeb, Wisconsin, we offer high quality, solution-based casual wear, workwear, outdoor apparel 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 http://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,
3
depreciation and amortization (EBITDA), Free Cash Flow and Forecasted Adjusted EBITDA. See attached table “Reconciliation of Net (Loss) Income to EBITDA and EBITDA to Adjusted EBITDA,” for a reconciliation of net (loss) income to EBITDA and EBITDA to Adjusted EBITDA for the three months and fiscal year ended January 28, 2024, versus the three months and fiscal year ended January 29, 2023, “Free Cash Flow” as a liquidity measure for the fiscal years ended January 28, 2024 and January 29, 2023 and “Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA” for a forecasted reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA for the fiscal year ended January 28, 2024.
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.
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 measurements are not intended to replace the Company’s GAAP financial results and should be read in conjunction with those GAAP results.
4
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 2024 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 SEC on March 17, 2023 and other factors as may be periodically described in Duluth Trading’s subsequent filings with the SEC. These risks and uncertainties include, but are not limited to, the following: the impact of inflation and measures to control inflation on our results of operations; the prolonged effects of economic uncertainties on store traffic and disruptions to our distribution network, supply chains and operations; our ability to maintain and enhance a strong brand and sub-brand image; adapting to declines in consumer confidence, inflation and decreases in consumer spending; effectively adapting to new challenges associated with our expansion into new geographic markets; our ability to meet customer delivery time expectations; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating adequate cash from our existing stores and direct sales to support our growth; the impact of changes in corporate tax regulations and sales tax; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; effectively relying on sources for merchandise located in foreign markets; transportation delays and interruptions, including port congestion; inability to timely and effectively obtain shipments of products from our suppliers and deliver merchandise to our customers; the inability to maintain the performance of a maturing store portfolio; our inability to deploy marketing tactics to strengthen brand awareness and attract new customers in a cost effective manner; our ability to successfully open new stores; competing effectively in an environment of intense competition; our ability to adapt to significant changes in sales due to the seasonality of our business; price reductions or inventory shortages resulting from failure to purchase the appropriate amount of inventory in advance of the season in which it will be sold due to global market constraints; the potential for further increases in price and availability of raw materials; our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices; the susceptibility of the price and availability of our merchandise to international trade conditions; failure of our vendors and their manufacturing sources to use acceptable labor or other practices; our dependence upon key executive management or our inability to hire or retain the talent required for our business; increases in costs of fuel or other energy, transportation or utility costs and in the costs of labor and employment; failure of our information technology systems to support our current and growing business, before and after our planned upgrades; disruptions in our supply chain and fulfillment centers; our inability to protect our trademarks or other intellectual property rights; infringement on the intellectual property of third parties; acts of war, terrorism or civil unrest; the impact of governmental laws and regulations and the outcomes of legal proceedings; changes in U.S. and non-U.S. laws affecting the importation and taxation of goods, including imposition of unilateral tariffs on imported goods; our ability to secure the personal and/or financial information of our customers and comply with the security standards for the credit card industry; and other factors that may be disclosed in our SEC filings or otherwise. Forward-looking statements speak only as
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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:
ICR, Inc.
(646) 277-1200
DuluthIR@icrinc.com
(Tables Follow)
***
6
DULUTH HOLDINGS INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
| January 28, 2024 | January 29, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 32,157 | $ | 45,548 | ||||
| Receivables |
5,955 | 6,041 | ||||||
| Income taxes receivable |
617 | — | ||||||
| Inventory, net |
125,757 | 154,922 | ||||||
| Prepaid expenses & other current assets |
16,488 | 15,154 | ||||||
|
|
|
|
|
|||||
| Total current assets |
180,974 | 221,665 | ||||||
| Property and equipment, net |
128,755 | 112,564 | ||||||
| Operating lease right-of-use assets |
121,430 | 131,753 | ||||||
| Finance lease right-of-use assets, net |
44,278 | 47,206 | ||||||
| Available-for-sale security |
4,986 | 5,539 | ||||||
| Other assets, net |
9,020 | 8,727 | ||||||
| Deferred tax asset |
1,010 | — | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 490,453 | $ | 527,454 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 51,122 | $ | 56,547 | ||||
| Accrued expenses and other current liabilities |
30,930 | 40,815 | ||||||
| Income tax payable |
— | 1,761 | ||||||
| Current portion of operating lease liabilities |
16,401 | 15,571 | ||||||
| Current portion of finance lease liabilities |
3,149 | 2,842 | ||||||
| Current maturities of TRI long-term debt1 |
847 | 768 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
102,449 | 118,304 | ||||||
| Operating lease liabilities, less current portion |
106,413 | 117,366 | ||||||
| Finance lease liabilities, less current portion |
34,276 | 37,425 | ||||||
| TRI long-term debt, less current maturities1 |
25,141 | 25,913 | ||||||
| Deferred tax liabilities |
— | 1,249 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
268,279 | 300,257 | ||||||
| Treasury stock |
(1,738 | ) | (1,459 | ) | ||||
| Capital stock |
103,579 | 98,842 | ||||||
| Retained earnings |
123,816 | 133,172 | ||||||
| Accumulated other comprehensive income |
(427 | ) | (148 | ) | ||||
|
|
|
|
|
|||||
| Total shareholders’ equity of Duluth Holdings Inc. |
225,230 | 230,407 | ||||||
| Noncontrolling interest |
(3,056 | ) | (3,210 | ) | ||||
|
|
|
|
|
|||||
| Total shareholders’ equity |
222,174 | 227,197 | ||||||
|
|
|
|
|
|||||
| Total liabilities and shareholders’ equity |
$ | 490,453 | $ | 527,454 | ||||
|
|
|
|
|
|||||
1 Represents debt of the variable interest entity, TRI Holdings, LLC, that is consolidated in accordance with ASC 810, Consolidation. Duluth Trading Company is not the guarantor nor the obligor of this debt.
7
DULUTH HOLDING INC.
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share figures)
| Three Months Ended | Fiscal Year Ended | |||||||||||||||
| January 28, 2024 | January 29, 2023 | January 28, 2024 | January 29, 2023 | |||||||||||||
| Net sales |
$ | 245,613 | $ | 241,766 | $ | 646,681 | $ | 653,307 | ||||||||
| Cost of goods sold (excluding depreciation and amortization) |
127,180 | 117,923 | 321,710 | 309,872 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit |
118,433 | 123,843 | 324,971 | 343,435 | ||||||||||||
| Selling, general and administrative expenses |
108,846 | 113,160 | 333,804 | 337,204 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
9,587 | 10,683 | (8,833 | ) | 6,231 | |||||||||||
| Interest expense |
1,123 | 930 | 4,156 | 3,653 | ||||||||||||
| Other income, net |
619 | 196 | 923 | 376 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
9,083 | 9,949 | (12,066 | ) | 2,954 | |||||||||||
| Income tax expense (benefit) |
2,093 | 2,478 | (2,693 | ) | 708 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
6,990 | 7,471 | (9,373 | ) | 2,246 | |||||||||||
| Less: Net income (loss) attributable to noncontrolling interest |
7 | 24 | (17 | ) | (58 | ) | ||||||||||
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|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to controlling interest |
$ | 6,983 | $ | 7,447 | $ | (9,356 | ) | $ | 2,304 | |||||||
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|
|
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|
|
|
|
|||||||||
| Basic earnings per share (Class A and Class B): |
||||||||||||||||
| Weighted average shares of common stock outstanding |
33,007 | 32,811 | 32,955 | 32,772 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) per share attributable to controlling interest |
$ | 0.21 | $ | 0.23 | $ | (0.28 | ) | $ | 0.07 | |||||||
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|
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|
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|||||||||
| Diluted earnings per share (Class A and Class B): |
||||||||||||||||
| Weighted average shares and equivalents outstanding |
33,007 | 32,811 | 32,955 | 32,991 | ||||||||||||
|
|
|
|
|
|
|
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|
|||||||||
| Net income (loss) per share attributable to controlling interest |
$ | 0.21 | $ | 0.23 | $ | (0.28 | ) | $ | 0.07 | |||||||
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8
DULUTH HOLDINGS INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
| Fiscal Year Ended | ||||||||
| January 28, 2024 | January 29, 2023 | |||||||
| Cash flows from operating activities: |
||||||||
| Net (loss) income |
$ | (9,373 | ) | $ | 2,246 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
32,159 | 30,810 | ||||||
| Stock-based compensation |
4,195 | 2,711 | ||||||
| Deferred income taxes |
(2,166 | ) | (1,403 | ) | ||||
| Loss on disposal of property and equipment |
130 | 1,392 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Receivables |
86 | (586 | ) | |||||
| Income taxes receivable |
(617 | ) | — | |||||
| Inventory |
29,165 | (32,250 | ) | |||||
| Prepaid expense & other assets |
(1,675 | ) | 5,101 | |||||
| Software hosting implementation costs, net |
(216 | ) | (6,121 | ) | ||||
| Deferred catalog costs |
— | 10 | ||||||
| Trade accounts payable |
(5,449 | ) | 12,685 | |||||
| Income taxes payable |
(1,761 | ) | (5,053 | ) | ||||
| Accrued expenses and deferred rent obligations |
(5,141 | ) | (11,768 | ) | ||||
| Other |
58 | (365 | ) | |||||
| Noncash lease impacts |
(722 | ) | 1,195 | |||||
|
|
|
|
|
|||||
| Net cash provided by (used in) operating activities |
38,673 | (1,396 | ) | |||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(49,086 | ) | (27,065 | ) | ||||
| Principal receipts from available-for-sale security |
181 | 164 | ||||||
| Change in other assets |
16 | 28 | ||||||
| Changes in the TRI Holdings, LLC consolidation |
171 | — | ||||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(48,718 | ) | (26,873 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from line of credit |
56,000 | — | ||||||
| Payments on line of credit |
(56,000 | ) | — | |||||
| Proceeds from delayed draw term loan |
— | 25,000 | ||||||
| Payments on delayed draw term loan |
— | (25,000 | ) | |||||
| Payments on TRI long term debt |
(767 | ) | (692 | ) | ||||
| Payments on finance lease obligations |
(2,842 | ) | (2,701 | ) | ||||
| Shares withheld for tax payments on vested restricted stock |
(279 | ) | (457 | ) | ||||
| Other |
542 | 616 | ||||||
|
|
|
|
|
|||||
| Net cash used in financing activities |
(3,346 | ) | (3,234 | ) | ||||
|
|
|
|
|
|||||
| Decrease in cash and cash equivalents |
(13,391 | ) | (31,503 | ) | ||||
| Cash and cash equivalents at beginning of period |
45,548 | 77,051 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents at end of period |
$ | 32,157 | $ | 45,548 | ||||
|
|
|
|
|
|||||
9
DULUTH HOLDINGS INC.
Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA
(Unaudited)
(Amounts in thousands)
| Three Months Ended | Fiscal Year Ended | |||||||||||||||
| January 28, 2024 | January 29, 2023 | January 28, 2024 | January 29, 2023 | |||||||||||||
| Net (loss) income |
$ | 6,990 | $ | 7,471 | $ | (9,373 | ) | $ | 2,246 | |||||||
| Depreciation and amortization |
8,725 | 7,864 | 32,159 | 30,810 | ||||||||||||
| Amortization of internal-use software hosting subscription implementation costs |
1,314 | 1,189 | 4,961 | 3,392 | ||||||||||||
| Interest expense |
1,123 | 930 | 4,156 | 3,653 | ||||||||||||
| Income tax expense (benefit) |
2,093 | 2,478 | (2,693 | ) | 708 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| EBITDA (non-GAAP) |
$ | 20,245 | $ | 19,932 | $ | 29,210 | $ | 40,809 | ||||||||
| Stock based compensation |
890 | 711 | 4,195 | 2,711 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA (non-GAAP) |
$ | 21,135 | $ | 20,643 | $ | 33,405 | $ | 43,520 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
DULUTH HOLDINGS INC.
Free Cash Flow
(Unaudited)
(Amounts in thousands)
| Fiscal Year Ended | ||||||||
| January 28, 2024 | January 29, 2023 | |||||||
| (in thousands) |
||||||||
| Net cash provided by (used in) operating activities |
$ | 38,673 | $ | (1,396 | ) | |||
| Purchases of property and equipment |
(49,086 | ) | (27,065 | ) | ||||
|
|
|
|
|
|||||
| Free Cash Flow (non-GAAP) |
$ | (10,413 | ) | $ | (28,461 | ) | ||
|
|
|
|
|
|||||
DULUTH HOLDINGS INC.
Reconciliation of Forecasted Net Loss to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA
For the Fiscal Year Ended January 28, 2024
(Unaudited)
(Amounts in thousands)
| Low | High | |||||||
| Forecasted |
||||||||
| Net loss |
$ | (7,400 | ) | $ | (2,300 | ) | ||
| Depreciation and amortization |
34,000 | 34,000 | ||||||
| Amortization of internal-use software hosting subscription implementation costs |
5,000 | 5,000 | ||||||
| Interest expense |
5,550 | 4,800 | ||||||
| Income tax expense |
(2,400 | ) | (750 | ) | ||||
|
|
|
|
|
|||||
| EBITDA (non-GAAP) |
$ | 34,750 | $ | 40,750 | ||||
| Stock based compensation |
4,250 | 4,250 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA (non-GAAP) |
$ | 39,000 | $ | 45,000 | ||||
|
|
|
|
|
|||||
10
Exhibit 99.2 Investor Presentation Fourth Quarter 2023 March 7, 2024
Disclaimer Forward-Looking Statements This presentation dated March 7, 2024 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 presentation, including statements concerning Duluth Holdings Inc.'s (dba Duluth Trading Company) (“Duluth Trading” or the “Company”) 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 its ability to execute on its growth strategies. 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 Part 1, Item 1A “Risk Factors” in Duluth Trading’s Annual Report on Form 10-K filed with the SEC on March 17, 2023, 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. 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 presentation, reference is made to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and Free Cash Flow. See Appendix Table “Adjusted EBITDA,” for a reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA and “Free Cash Flow” for a reconciliation of Net cash provided by operating activities to Free Cash Flow. 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, such as stock-based compensation. 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. March 7, 2024 2
OUR GREATER PURPOSE “Celebrating the can-do spirit by enabling anyone who takes on life with their own two hands.” OUR MISSION STATEMENT “We build high-quality, solution-based products for work, play and every day. We craft our raw materials – unique brands, durable products, standout customer service, and a No Bull Guarantee – into industry-leading consumer experiences. Job done right means we never forget that “there’s gotta be a better way.”
Secret Sauce Better Brands A brood of sub-brands all bonded by the belief that you can accomplish anything that you put your own mind and own two hands to Better Innovation Long, colorful history of product innovation and solution-based design Better Marketing Distinctive marketing made to break through the clutter and drive buying Better Customer Experiences Outstanding and engaging customer experience March 7, 2024 5
FINANCIAL REVIEW
Year Ended January 28, 2024 Summary ● Net sales of $646.7M compared to $653.3M in the prior year ● Net loss of ($9.4M); diluted EPS of ($0.28) ● Adjusted EBITDA of $33.4M reflects 5.2% of sales ● Healthy inventory composition with 90% in current products and a 30% decrease in clearance items March 7, 2024 7
Three Months Ended January 28, 2024 (4.4)% 1.6% $245.6 $241.8 $124 2.4% $118 $73 $84 $21 $21 $7 $7 $172 $158 2022 2023 2022 2023 2022 2023 2022 2023 (1/29/2023) (1/28/2024) (1/29/2023) (1/28/2024) (1/29/2023) (1/28/2024) (1/29/2023) (1/28/2024) Retail Direct 1 2 Net Sales Gross Profit Adjusted EBITDA Net Loss ($ in millions) ($ in millions) ($ in millions) ($ in millions) 1 Adjusted to reflect the add-back of stock compensation expense. 2 Excludes net income (loss) attributable to noncontrolling interest. March 7, 2024 8
Twelve Months Ended January 28, 2024 (5.4)% (1.0)% $653.3 (23.2)% $646.7 $343 $44 $2 $325 $241 $221 $33 $426 $412 $(9) 2022 2023 2022 2023 2022 2023 2022 2023 (1/29/2023) (1/28/2024) (1/29/2023) (1/28/2024) (1/29/2023) (1/28/2024) (1/29/2023) (1/28/2024) Retail Direct 1 2 Net Sales Gross Profit Adjusted EBITDA Net Loss ($ in millions) ($ in millions) ($ in millions) ($ in millions) 1 Adjusted to reflect the add-back of stock compensation expense. 2 Excludes net income (loss) attributable to noncontrolling interest. March 7, 2024 9
Strong Balance Sheet, Liquidity and FCF (1,2) Debt to Capital Free Cash Flow ($ in millions) As of January 28, 2024 Cash $32.2 Debt: Line of Credit 0.0 $(10.4) Term Loan 0.0 Total Debt 0.0 Total Shareholders’ Equity $225.2 $(28.5) Total Capitalization $257.4 2022 2023 Debt to Capital ratio 0.0% (January 26, 2023) (January 28, 2024) 1 Debt balances do not include TRI Holdings, LLC, a variable interest entity that is consolidated for reporting purposes 2 The New Credit Agreement matures on July 8, 2027 and provides for borrowings of up to $200.0 million that are available under a revolving senior credit facility. March 7, 2024 10
Fiscal 2024 Financial Guidance ($ in millions) 2023 2024 Guidance Reconciliation to 2024 Forecasted Adj. EBITDA Fiscal Year Ended February 2, 2025 Net Sales $646.7 $640 to $660 Forecasted ($ in millions) Low High (1.0)% to 2.1% Net Loss $(7.4) $(2.3) (+) Depreciation and amortization 34.0 34.0 Adj. $33.4 $39 to $45 (+) Amortization of internal-use software 16.8% to 34.7% EBITDA 5.0 5.0 hosting subscription implementation costs (+) Interest expense 5.6 4.8 (+) Income tax expense (2.4) (0.8) EPS $(0.28) $(0.22) to $(0.07) EBITDA $34.8 $40.8 (+) Stock based compensation 4.3 4.3 1 CAPEX $53.2 ~$25 Adjusted EBITDA $39.0 $45.0 1 2023 and 2024 include $6.7M and ~$11M, respectively, of additional investments in implementation costs to enhance the value of hosting arrangements, which are included in Prepaid expenses & other current assets on the Company’s Consolidated Balance Sheets. March 7, 2024 11
Net Sales and Adjusted EBITDA 1 Net Sales Adjusted EBITDA ($ in millions) ($ in millions) 77 699 653 647 639 616 55 568 52 52 44 33 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 1 Adjusted to reflect the add-back of stock compensation expense. March 7, 2024 12
Investment Highlights ● Growing lifestyle platform of sub-brands with well-established digitally-led omnichannel business ● Multiple revenue growth opportunities led through five strategic pillars ● Strategic investments support long-term EBITDA margin expansion ● Strong balance sheet and ample liquidity March 7, 2024 13
Capital Expenditures $53M $53M $32M $31M $25M $16M $15M 2018 2019 2020 2021 2022 2023 2024 Outlook 15 New 15 New 4 New Salt Lake Adairsville FC Stores Stores Stores City FC Website re- Belleville FC 1 New Store Technology Roadmap platform March 7, 2024 14 Initiatives Capital Expenditures
Big Dam Blueprint Growth Drivers 1. Lead With a Digital Mindset 2. Intensify Our Efforts to Optimize Our Owned DTC Channels 3. Evolve the Company’s Platform to Grow Into a Multi-brand and Multi-channel Business 4. Prioritize Test and Learn to Unlock Long-term Growth 5. Future Proof the Business Through Investments in Capabilities and Infrastructure March 7, 2024 16
THANK YOU
Appendix Reconciliation to 2023 Adjusted EBITDA and Free Cash Flow Adjusted EBITDA Free Cash Flow 3 Months Ended 12 Months Ended 12 Months Ended January January January January January January ($ in millions) ($ in millions) 28, 2024 29, 2023 28, 2024 29, 2023 28, 2024 29, 2023 Net cash provided by operating Net income (loss) $7.0 $7.5 $(9.4) $2.2 $38.7 $(1.4) activities Purchases of property and (+) Depreciation and amortization 8.7 7.9 32.2 30.8 (49.1) (27.1) equipment (+) Amortization of internal-use Free Cash Flow (non-GAAP) $(10.4) $(28.5) software hosting subscription 1.3 1.2 5.0 3.4 implementation costs (+) Interest expense 1.1 0.9 4.2 3.6 (+) Income tax expense (benefit) 2.1 2.5 (2.7) 0.7 EBITDA $20.2 $19.9 $29.2 $40.8 (+) Stock based compensation 0.9 0.7 4.2 2.7 Adjusted EBITDA $21.1 $20.6 $33.4 $43.5 March 7, 2024 18