News Release
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Highlights for the First Quarter Ended
- Net sales decreased 3.8% to
$109.9 million compared to$114.2 million in the prior-year first quarter - Retail store net sales decreased 51.8% due to the temporary closure of all stores for approximately seven weeks due to the COVID-19 pandemic
- Website and catalog net sales increased 31.7%, including a 69.0% increase in website and catalog sales since the stores closed on
March 20, 2020 as compared to the same six-week period in the prior year - April total net sales exceeded last year by 5.3%, while stores were closed
- Gross margin decreased to 47.6% compared to 53.3% in the prior-year first quarter
- Operating loss of
$19.0 million compared to operating loss of$9.7 million in the prior-year first quarter - Net loss of
$15.1 million , or$0.47 per diluted share, compared to a net loss of$7.6 million , or$0.23 per diluted share, in the prior-year first quarter. The current quarter net loss included$1.6 million , or$0.05 per diluted share of non-recurring COVID-19 related expenses - Adjusted EBITDA1 of
$(11.6) million compared to$(4.4) million in the prior-year first quarter - The Company opened one retail store in
Short Pump (Richmond ),VA adding approximately 17,000 gross square feet - All stores were closed
March 20, 2020 and began to re-openMay 3, 2020 . As ofJune 4, 2020 , we have re-opened 58 of our 62 retail stores in some capacity
1See Reconciliation of net loss to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
Management Commentary
“I am proud of our Duluth team’s resiliency and swift call to action during this major shock to the system from the COVID-19 pandemic. We were able to seamlessly pivot our resources to support the direct business and fill customer demand at levels we don’t typically see outside of the peak holiday season. As people sheltered in place, the surge we saw in online demand was significant and it drove direct product sales to increase 32% year-over-year in Q1. While our stores were closed during the month of April, total company sales for April exceeded last year by over 5%,” said
Operating Results for the First Quarter Ended
Net sales decreased 3.8%, to
Net sales in store markets decreased
Women’s business net sales increased 9.9% driven by the garden collection, comfortable basics, plus line and Mother’s Day gift webpage. Men’s business net sales decreased 8.7% due to the stores being closed with impacts to the core Duluth categories, partially offset by growth in Alaskan Hardgear.
Gross profit decreased 14.1%, to
Selling, general and administrative expenses increased 1.0% to
The increase in selling, general and administrative expense was due to the aforementioned
Balance Sheet and Liquidity
During the quarter, the Company amended its credit agreement to include an incremental delayed draw term loan of
The Company ended the quarter with a cash balance of
Fiscal 2020 Outlook
Given the unpredictability of the effects of the COVID-19 pandemic on, among other things, consumer behavior, store traffic, store closings, production capabilities, timing of deliveries, our people, economic activity and the market generally in the coming weeks and months, the Company is unable to provide specific earnings guidance at this time.
In response to expected impacts to sales plans, the Company has reduced its planned capital spend levels by 50% to approximately
The following table recaps the Company’s fiscal 2020 stores opened as well as signed new store leases and the anticipated opening timeframes, which reflects the Company’s plan to reduce fiscal 2020 store openings to four.
| Location | Timing | Square Footage | ||
| Opened |
16,828 | |||
| Q3 Fiscal 2020 | 20,388 | |||
| Q3 Fiscal 2020 | 10,000 | |||
| Q3 Fiscal 2020 | 11,441 | |||
| Fiscal 2021 | 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
June 18, 2020 : 877-344-7529 (domestic) or 412-317-0088 (international) - Replay access code: 10144458
- 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/10144458 and enter your contact information. You will then be issued a personalized phone number and pin to dial into the live conference call. Investors can pre-register any time prior to the start of the conference call.
About Duluth Trading
Duluth Trading is a growing lifestyle brand for the Modern, Self-Reliant American. Based in
Non-GAAP Measurements
Management believes that non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Within this release, including the tables attached hereto, reference is made to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). See attached Table “Reconciliation of Net Loss to EBITDA and EBITDA to Adjusted EBITDA,” for a reconciliation of net loss to EBITDA and EBITDA to Adjusted EBITDA for the three months ended
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, and statements under the heading “Fiscal 2020 Outlook.” 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
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 8,854 | $ | 2,189 | ||||
| Receivables | 3,459 | 1,470 | ||||||
| Inventory, net | 175,037 | 147,849 | ||||||
| Prepaid expenses & other current assets | 9,473 | 9,503 | ||||||
| Prepaid catalog costs | 167 | 1,181 | ||||||
| Total current assets | 196,990 | 162,192 | ||||||
| Property and equipment, net | 137,253 | 137,071 | ||||||
| Operating lease right-of-use assets | 117,330 | 120,431 | ||||||
| Finance lease right-of-use assets, net | 46,469 | 46,677 | ||||||
| Restricted cash | 446 | 51 | ||||||
| Available-for-sale security | 5,701 | 6,432 | ||||||
| Other assets, net | 1,423 | 1,196 | ||||||
| Total assets | $ | 505,612 | $ | 474,050 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 34,421 | $ | 33,053 | ||||
| Accrued expenses and other current liabilities | 35,525 | 29,464 | ||||||
| Income taxes payable | — | 3,427 | ||||||
| Current portion of operating lease liabilities | 10,433 | 10,674 | ||||||
| Current portion of finance lease liabilities | 1,638 | 1,600 | ||||||
| Current maturities of TRI long-term debt1 | 573 | 557 | ||||||
| Total current liabilities | 82,590 | 78,775 | ||||||
| Operating lease liabilities, less current maturities | 104,112 | 106,120 | ||||||
| Finance lease liabilities, less current maturities | 37,361 | 37,434 | ||||||
| Duluth long-term debt, less current maturities | 84,750 | 39,332 | ||||||
| TRI long-term debt, less current maturities1 | 27,646 | 27,778 | ||||||
| Deferred tax liabilities | 8,302 | 8,505 | ||||||
| Total liabilities | 344,761 | 297,944 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| (514 | ) | (407 | ) | |||||
| Capital stock | 91,451 | 90,902 | ||||||
| Retained earnings | 72,454 | 87,589 | ||||||
| Accumulated other comprehensive income, net | (330 | ) | 188 | |||||
| Total shareholders' equity of |
163,061 | 178,272 | ||||||
| Noncontrolling interest | (2,210 | ) | (2,166 | ) | ||||
| Total shareholders' equity | 160,851 | 176,106 | ||||||
| Total liabilities and shareholders' equity | $ | 505,612 | $ | 474,050 | ||||
1 Represents debt of the variable interest entity,
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share figures)
| Three Months Ended | ||||||||
| Net sales | $ | 109,917 | $ | 114,244 | ||||
| Cost of goods sold (excluding depreciation and amortization) | 57,585 | 53,326 | ||||||
| Gross profit | 52,332 | 60,918 | ||||||
| Selling, general and administrative expenses | 71,306 | 70,609 | ||||||
| Operating loss | (18,974 | ) | (9,691 | ) | ||||
| Interest expense | 1,350 | 841 | ||||||
| Other income, net | 59 | 204 | ||||||
| Loss before income taxes | (20,265 | ) | (10,328 | ) | ||||
| Income tax benefit | 5,086 | 2,683 | ||||||
| Net loss | (15,179 | ) | (7,645 | ) | ||||
| Less: Net loss attributable to noncontrolling interest | (44 | ) | (73 | ) | ||||
| Net loss attributable to controlling interest | $ | (15,135 | ) | $ | (7,572 | ) | ||
| Basic loss per share (Class A and Class B): | ||||||||
| Weighted average shares of common stock outstanding | 32,372 | 32,281 | ||||||
| Net loss per share attributable to controlling interest | $ | (0.47 | ) | $ | (0.23 | ) | ||
| Diluted loss per share (Class A and Class B): | ||||||||
| Weighted average shares and equivalents outstanding | 32,372 | 32,281 | ||||||
| Net loss per share attributable to controlling interest | $ | (0.47 | ) | $ | (0.23 | ) | ||
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
| Three Months Ended | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (15,179 | ) | $ | (7,645 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 6,689 | 4,392 | ||||||
| Stock based compensation | 463 | 474 | ||||||
| Deferred income taxes | (21 | ) | (302 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | (1,989 | ) | (4,012 | ) | ||||
| Inventory | (27,188 | ) | (6,604 | ) | ||||
| Prepaid expense & other current assets | 2,196 | 2,577 | ||||||
| Deferred catalog costs | 1,014 | 2,301 | ||||||
| Trade accounts payable | (1,842 | ) | 1,221 | |||||
| Income taxes payable | (3,427 | ) | (218 | ) | ||||
| Accrued expenses and deferred rent obligations | 5,126 | (5,295 | ) | |||||
| Noncash lease impacts | 667 | — | ||||||
| Net cash used in operating activities | (33,491 | ) | (13,111 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (4,059 | ) | (8,015 | ) | ||||
| Capital contributions towards build-to-suit stores | (74 | ) | (1,788 | ) | ||||
| Principal receipts from available-for-sale security | 31 | 28 | ||||||
| Change in other assets | — | 13 | ||||||
| Net cash used in investing activities | (4,102 | ) | (9,762 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from line of credit | 37,484 | 70,172 | ||||||
| Payments on line of credit | (21,816 | ) | (47,474 | ) | ||||
| Proceeds from other borrowings | 30,000 | — | ||||||
| Payments on other borrowings | (250 | ) | — | |||||
| Payments on TRI long term debt | (116 | ) | (119 | ) | ||||
| Payments on finance lease obligations | (392 | ) | (37 | ) | ||||
| Shares withheld for tax payments on vested restricted shares | (107 | ) | (277 | ) | ||||
| Other | (150 | ) | 93 | |||||
| Net cash provided by financing activities | 44,653 | 22,358 | ||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 7,060 | (515 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 2,240 | 3,085 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 9,300 | $ | 2,570 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | 1,447 | $ | 986 | ||||
| Income taxes paid | $ | 37 | $ | 2,179 | ||||
| Supplemental disclosure of non-cash information: | ||||||||
| Unpaid liability to acquire property and equipment | $ | 2,000 | $ | 846 | ||||
Reconciliation of Net Loss to EBITDA and EBITDA to Adjusted EBITDA
(Unaudited)
(Amounts in thousands)
| Three Months Ended | ||||||||
| Net loss | $ | (15,179 | ) | $ | (7,645 | ) | ||
| Depreciation and amortization | 6,689 | 4,392 | ||||||
| Interest expense | 1,350 | 841 | ||||||
| Amortization of build-to-suit operating leases capital contribution |
199 | 214 | ||||||
| Income tax benefit | 5,086 | 2,683 | ||||||
| EBITDA | $ | (12,027 | ) | $ | (4,881 | ) | ||
| Stock based compensation | 463 | 474 | ||||||
| Adjusted EBITDA | $ | (11,564 | ) | $ | (4,407 | ) | ||
Source: Duluth Trading Company