News Release
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Highlights for the Second Quarter Ended August 4, 2019
- Net sales increased 10.2% to
$122.0 million compared to$110.7 million in the prior-year second quarter - Gross margin decreased 310 basis points to 53.1% compared to 56.2% in the prior-year second quarter
- Operating income of
$3.7 million compared to operating income of$9.9 million in the prior-year second quarter - Net income of
$1.9 million , or$0.06 per diluted share, compared to net income of$6.4 million , or$0.20 per diluted share, in the prior-year second quarter - Adjusted EBITDA1 of
$9.6 million compared to$13.1 million in the prior-year second quarter - The Company opened four retail stores in
Rogers, AR ;Danbury, CT ;Madison, AL ; andKennesaw, GA ; totaling approximately 61,000 gross square feet - 38th 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
“Since reassuming the role of CEO following the resignation of
Schlecht added, “I also want to recognize that we have had some growing pains over the past year and a half. In response, we plan to slow down the pace of our retail expansion in 2020 and direct our focus to improving asset productivity and thus our operating margin rate. We have made a number of improvements in our business that are expected to bear fruit in 2020, and we have a strong team in place focused on the long-term success of our Company.”
Operating Results for the Second Quarter Ended August 4, 2019
Net sales increased 10.2%, to
Gross profit increased 4.1%, to
Selling, general and administrative expenses increased 16.7% to
Balance Sheet and Liquidity
The Company ended the quarter with a cash balance of
Updated Fiscal 2019 Outlook
The Company updated its fiscal 2019 outlook as follows:
- Net sales in the range of
$610.0 million to $620.0 million - Adjusted EBITDA1 in the range of
$51.0 million to $55.0 million - EPS in the range of
$0.60 to $0.66 per diluted share - Capital expenditures of
$38.0 million to $42.0 million 2 - 15 new store openings, adding approximately 215,000 of additional gross square footage
1See Reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the accompanying financial tables.
2Fiscal 2019 capital expenditures primarily include the opening of 15 retail stores, investments in technology and infrastructure improvements.
The table below recaps the Company’s fiscal 2019 stores opened and signed new store leases and the anticipated opening timeframe.
Gross | ||||
Location | Timing | Square Footage | ||
Friendswood, TX | Opened March 7, 2019 | 16,026 | ||
Katy, TX | Opened March 8, 2019 | 16,000 | ||
Wichita, KS | Opened March 21, 2019 | 15,385 | ||
Spokane Valley, WA | Opened April 11, 2019 | 15,656 | ||
Jacksonville, FL | Opened May 2, 2019 | 14,557 | ||
Rogers, AR | Opened May 16, 2019 | 15,656 | ||
Danbury, CT | Opened May 23, 2019 | 9,792 | ||
Madison, AL | Opened June 6, 2019 | 15,656 | ||
Kennesaw, GA | Opened June 28, 2019 | 19,620 | ||
Round Rock, TX | Opened September 5, 2019 | 15,536 | ||
Hoover, AL | Q3 Fiscal 2019 | 15,656 | ||
Sandy, UT | Q3 Fiscal 2019 | 15,602 | ||
Bloomington, MN | Q4 Fiscal 2019 | 1,663 | ||
Franklin, TN | Q4 Fiscal 2019 | 11,940 | ||
Knoxville, TN | Q4 Fiscal 2019 | 15,385 | ||
Richmond, VA | Q1 Fiscal 2020 | 16,828 |
Conference Call Information
A conference call and audio webcast with analysts and investors will be held on Thursday, September 12, 2019 at
- Live conference call: 844-875-6915 (domestic) or 412-317-6711 (international)
- Conference call replay available through
September 19, 2019 : 877-344-7529 (domestic) or 412-317-0088 (international) - Replay access code: 10134140
- 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/10134140 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 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 six months ended August 4, 2019, versus the three and six months ended July 29, 2018. 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 “Updated Fiscal 2019 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)
DULUTH HOLDINGS INC. Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands) |
||||||||
August 4, 2019 | February 3, 2019 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 3,468 | $ | 731 | ||||
Accounts receivable | 372 | 28 | ||||||
Other receivables | 5,992 | 4,611 | ||||||
Inventory, net | 114,849 | 97,685 | ||||||
Prepaid expenses & other current assets | 12,225 | 12,640 | ||||||
Prepaid catalog costs | 568 | 2,503 | ||||||
Total current assets | 137,474 | 118,198 | ||||||
Property and equipment, net | 136,427 | 167,109 | ||||||
Operating lease right-of-use assets | 115,053 | — | ||||||
Finance lease right-of-use assets | 32,872 | — | ||||||
Restricted cash | 2,688 | 2,354 | ||||||
Available-for-sale security | 6,239 | 6,295 | ||||||
Goodwill | 402 | 402 | ||||||
Other intangible asset, net | 292 | 306 | ||||||
Other assets, net | 2,648 | 641 | ||||||
Total assets | $ | 434,095 | $ | 295,305 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 36,255 | $ | 25,363 | ||||
Accrued expenses and other current liabilities | 23,693 | 26,530 | ||||||
Income taxes payable | — | 218 | ||||||
Current portion of operating lease liabilities | 9,825 | — | ||||||
Current portion of finance lease liabilities | 1,072 | — | ||||||
Current maturities of long-term debt | 525 | 500 | ||||||
Total current liabilities | 71,370 | 52,611 | ||||||
Long-term line of credit | 45,000 | 16,542 | ||||||
Finance lease obligations under build-to-suit leases | — | 23,034 | ||||||
Operating lease liabilities, less current maturities | 101,173 | — | ||||||
Finance lease liabilities, less current maturities | 26,208 | — | ||||||
Deferred rent obligations, less current maturities | — | 5,003 | ||||||
Deferred tax liabilities | 9,028 | 9,722 | ||||||
Long-term debt, less current maturities | 28,016 | 28,283 | ||||||
Total liabilities | 280,795 | 135,195 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
Treasury stock | (405 | ) | (92 | ) | ||||
Capital stock | 91,075 | 89,849 | ||||||
Retained earnings | 63,032 | 70,592 | ||||||
Total shareholders' equity of Duluth Holdings Inc. | 153,702 | 160,349 | ||||||
Noncontrolling interest | (402 | ) | (239 | ) | ||||
Total shareholders' equity | 153,300 | 160,110 | ||||||
Total liabilities and shareholders' equity | $ | 434,095 | $ | 295,305 |
DULUTH HOLDING INC. Consolidated Statements of Operations (Unaudited) (Amounts in thousands, except per share figures) |
||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
August 4, 2019 | July 29, 2018 | August 4, 2019 | July 29, 2018 | |||||||||||
Net sales | $ | 121,963 | $ | 110,653 | $ | 236,207 | $ | 210,860 | ||||||
Cost of goods sold (excluding depreciation and amortization) | 57,159 | 48,413 | 110,485 | 92,680 | ||||||||||
Gross profit | 64,804 | 62,240 | 125,722 | 118,180 | ||||||||||
Selling, general and administrative expenses | 61,069 | 52,344 | 132,091 | 108,541 | ||||||||||
Operating income (loss) | 3,735 | 9,896 | (6,369 | ) | 9,639 | |||||||||
Interest expense | 1,203 | 1,234 | 1,631 | 2,055 | ||||||||||
Other (loss) income, net | (8 | ) | 2 | 196 | 165 | |||||||||
Income (loss) before income taxes | 2,524 | 8,664 | (7,804 | ) | 7,749 | |||||||||
Income tax expense (benefit) | 678 | 2,212 | (2,005 | ) | 1,980 | |||||||||
Net income (loss) | 1,846 | 6,452 | (5,799 | ) | 5,769 | |||||||||
Less: Net (loss) income attributable to noncontrolling interest | (90 | ) | 75 | (163 | ) | 83 | ||||||||
Net income (loss) attributable to controlling interest | $ | 1,936 | $ | 6,377 | $ | (5,636 | ) | $ | 5,686 | |||||
Basic earnings (loss) per share (Class A and Class B): | ||||||||||||||
Weighted average shares of common stock outstanding | 32,288 | 32,065 | 32,253 | 32,056 | ||||||||||
Net income (loss) per share attributable to controlling interest | $ | 0.06 | $ | 0.20 | $ | (0.17 | ) | $ | 0.18 | |||||
Diluted earnings (loss) per share (Class A and Class B): | ||||||||||||||
Weighted average shares and equivalents outstanding | 32,399 | 32,414 | 32,253 | 32,439 | ||||||||||
Net income (loss) per share attributable to controlling interest | $ | 0.06 | $ | 0.20 | $ | (0.17 | ) | $ | 0.18 |
DULUTH HOLDINGS INC. Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands) |
||||||||
Six Months Ended | ||||||||
August 4, 2019 | July 29, 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (5,799 | ) | $ | 5,769 | |||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization | 9,405 | 5,069 | ||||||
Stock based compensation | 1,029 | 858 | ||||||
Deferred income taxes | (694 | ) | (323 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (344 | ) | 6 | |||||
Other receivables | (1,381 | ) | (63 | ) | ||||
Inventory | (17,164 | ) | (12,130 | ) | ||||
Prepaid expense & other current assets | 1,508 | (2,265 | ) | |||||
Deferred catalog costs | 1,935 | (1,483 | ) | |||||
Trade accounts payable | 10,766 | 818 | ||||||
Income taxes payable | (218 | ) | (5,544 | ) | ||||
Accrued expenses and deferred rent obligations | (7,088 | ) | (3,297 | ) | ||||
Net cash used in operating activities | (8,045 | ) | (12,585 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (13,773 | ) | (26,798 | ) | ||||
Capital contributions towards build-to-suit stores | (3,013 | ) | — | |||||
Principal receipts from available-for-sale security | 56 | — | ||||||
Change in other assets | 17 | (527 | ) | |||||
Net cash used in investing activities | (16,713 | ) | (27,325 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from line of credit | 104,871 | 57,093 | ||||||
Payments on line of credit | (76,413 | ) | (22,093 | ) | ||||
Payments on long term debt | (240 | ) | (39 | ) | ||||
Payments on finance lease obligations | (273 | ) | (2 | ) | ||||
Change in bank overdrafts | — | 481 | ||||||
Proceeds from finance lease obligations | — | 941 | ||||||
Shares withheld for tax payments on vested restricted shares | (313 | ) | (35 | ) | ||||
Other | 197 | 58 | ||||||
Net cash provided by financing activities | 27,829 | 36,404 | ||||||
Increase (decrease) in cash and restricted cash | 3,071 | (3,506 | ) | |||||
Cash and restricted cash at beginning of period | 3,085 | 7,083 | ||||||
Cash and restricted cash at end of period | $ | 6,156 | $ | 3,577 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 1,712 | $ | 1,925 | ||||
Income taxes paid | $ | 562 | $ | 7,852 | ||||
Supplemental disclosure of non-cash information: | ||||||||
Property and equipment acquired under build-to-suit leases | $ | — | $ | 12,907 | ||||
Unpaid liability to acquire property and equipment | $ | 509 | $ | 2,452 |
DULUTH HOLDINGS INC. Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA (Unaudited) (Amounts in thousands) |
|||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
August 4, 2019 | July 29, 2018 | August 4, 2019 | July 29, 2018 | ||||||||||
Net income (loss) | $ | 1,846 | $ | 6,452 | $ | (5,799 | ) | $ | 5,769 | ||||
Depreciation and amortization | 5,013 | 2,760 | 9,405 | 5,069 | |||||||||
Interest expense | 1,203 | 1,234 | 1,631 | 2,055 | |||||||||
Amortization of build-to-suit leases capital contribution |
265 | — | 479 | — | |||||||||
Income tax expense (benefit) | 678 | 2,212 | (2,005 | ) | 1,980 | ||||||||
EBITDA | $ | 9,005 | $ | 12,658 | $ | 3,711 | $ | 14,873 | |||||
Stock based compensation | 555 | 449 | 1,029 | 858 | |||||||||
Adjusted EBITDA | $ | 9,560 | $ | 13,107 | $ | 4,740 | $ | 15,731 |
DULUTH HOLDINGS INC. Segment Information (Unaudited) (Amounts in thousands) |
|||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
August 4, 2019 | July 29, 2018 | August 4, 2019 | July 29, 2018 | ||||||||||||
Net sales | |||||||||||||||
Direct | $ | 60,267 | $ | 60,833 | $ | 125,968 | $ | 127,045 | |||||||
Retail | 61,696 | 49,820 | 110,239 | 83,815 | |||||||||||
Total net sales | $ | 121,963 | $ | 110,653 | $ | 236,207 | $ | 210,860 | |||||||
Operating income (loss) | |||||||||||||||
Direct | $ | (4,146 | ) | $ | 1,123 | $ | (16,825 | ) | $ | (1,005 | ) | ||||
Retail | 7,881 | 8,773 | 10,456 | 10,644 | |||||||||||
Total operating income (loss) | 3,735 | 9,896 | (6,369 | ) | 9,639 | ||||||||||
Interest expense | 1,203 | 1,234 | 1,631 | 2,055 | |||||||||||
Other (loss) income, net | (8 | ) | 2 | 196 | 165 | ||||||||||
Income (loss) before income taxes | $ | 2,524 | $ | 8,664 | $ | (7,804 | ) | $ | 7,749 |
DULUTH HOLDINGS INC. Net Sales by Business (Unaudited) (Amounts in thousands) |
||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
August 4, 2019 | July 29, 2018 | August 4, 2019 | July 29, 2018 | |||||||||
Net sales | ||||||||||||
Men's | $ | 80,090 | $ | 75,434 | $ | 155,890 | $ | 143,354 | ||||
Women's | 35,742 | 29,625 | 67,915 | 56,785 | ||||||||
Hard goods/other | 6,131 | 5,594 | 12,402 | 10,721 | ||||||||
Total net sales | $ | 121,963 | $ | 110,653 | $ | 236,207 | $ | 210,860 |
DULUTH HOLDINGS INC. Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDA to Forecasted Adjusted EBITDA For the Fiscal Year Ending February 2, 2020 (Unaudited) (Amounts in thousands) |
||||||
Low | High | |||||
Forecasted | ||||||
Net income | $ | 19,500 | $ | 21,500 | ||
Depreciation and amortization | 18,700 | 19,700 | ||||
Interest expense | 4,100 | 3,900 | ||||
Amortization of build-to-suit leases capital contribution | 1,000 | 1,300 | ||||
Income tax expense | 7,000 | 7,700 | ||||
EBITDA | $ | 50,300 | $ | 54,100 | ||
Stock based compensation | 700 | 900 | ||||
Adjusted EBITDA | $ | 51,000 | $ | 55,000 |
Source: Duluth Trading Company