What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-06-09 compared with 2025-12-17 · 60 added, 93 removed, 148 unchanged (51% of the section changed)

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The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year.

Fiscal 2025 is a 52-week period and ends on February 1, 2026.

Fiscal 2026 is a 52-week period and ends on January 31, 2027.

Fiscal 2025 was a 52-week period and ended on February 1, 2026.

The three months of fiscal 2025 and fiscal 2024 represent our 13-week periods ended November 2, 2025 and October 27, 2024, respectively.

The three months of fiscal 2026 and fiscal 2025 represent our 13-week periods ended May 3, 2026 and May 4, 2025, respectively.

Unless the context indicates otherwise, the terms the “Company,” “Duluth,” “Duluth Trading,” “we,” “our,” or “us” are used to refer to Duluth Holdings Inc.

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You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.

These statements may include words such as “anticipate,” “could,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements.

All forward-looking statements are subject to risks and uncertainties that could cause performance or actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2024 Form 10-K, and other SEC filings, which factors are incorporated by reference herein.

These statements may include words such as “anticipate,” “could,” “design,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements.

All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2025 Form 10-K, and other SEC filings, which factors are incorporated by reference herein.

These risks and uncertainties include, but are not limited to, the following:

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the prolonged effects of economic uncertainties on store and website traffic;

the susceptibility of the price and availability of our merchandise to international trade conditions, including tariffs;

changes in 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 employees;

disruptions to our distribution network, supply chains and operations;

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the inability to maintain the performance of our maturing store portfolio;

our inability to deploy marketing tactics to strengthen brand awareness and attract new customers in a cost effective manner;

our inability to deploy marketing tactics and commit adequate resources to support marketing in order to retain and attract new customers;

our ability to successfully open new stores;

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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 including tariffs;

failure of our vendors and their manufacturing sources to use acceptable labor or other practices;

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the impact of governmental laws and regulations and the outcomes of legal proceedings;

changes in 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 employees;

failure to comply with data privacy regulations;

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We undertake no obligation to update or revise these forward-looking statements, except as required under the federal securities laws.

We are a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through our own omnichannel platform.

We offer products nationwide through our website and catalog.

We are a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories sold primarily through our own omnichannel platform.

We offer products nationwide through our website and direct mail.

In 2010, we initiated our omnichannel platform with the opening of our first store.

Since then, we have expanded our retail presence, and as of November 2, 2025, we operated 63 retail stores and three outlet stores.

We offer a comprehensive line of innovative, durable and functional products, such as our Longtail T ® shirts, Buck Naked TM underwear, Fire Hose ® work pants, and No-Yank ® Tank, which reflect our position as the Modern, Self-Reliant American Lifestyle brand.

Since then, we have expanded our retail presence, and as of May 3, 2026, we operated 63 retail stores and three outlet stores.

We offer a comprehensive line of innovative, durable and functional products, such as our Longtail T ® shirts, Buck Naked ® underwear, Fire Hose ® work pants, and No-Yank ® Tank, which reflect our position as the Modern, Self-Reliant American Lifestyle brand.

Our brand has a heritage in workwear that transcends tradesmen and appeals to a broad demographic for everyday and on-the-job use.

From our heritage as a catalog for those working in the building trades, Duluth Trading has become a widely recognized brand and proprietary line of innovative and functional apparel and gear.

Over the last decade, we have created strong brand awareness, built a loyal customer base and generated sales momentum.

Over the last decade, we have created strong brand awareness, built a loyal customer base and generated sales growth.

We have done so by sticking to our roots of “there’s gotta be a better way” and through our relentless focus on providing our customers with quality, functional products.

A summary of our financial results is as follows:

• Net sales decreased by 9.6% over the prior year third quarter to $114.9 million, and net sales in the first nine months of fiscal 2025 decreased by 9.4% over the first nine months of the prior year to $349.3 million;

• Net loss of $10.1 million in fiscal 2025 third quarter compared to the prior year third quarter net loss of $28.2 million, and net loss in the first nine months of fiscal 2025 of $24.0 million compared to a net loss in the first nine months of fiscal 2024 of $38.1 million;

• Adjusted EBITDA increased to ($0.7) million in fiscal 2025 third quarter compared to the prior year third quarter Adjusted EBITDA of ($6.2) million, and Adjusted EBITDA in the first nine months of fiscal 2025 of $7.5 million compared to $6.1 million over the first nine months of fiscal 2024.

See the “Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S.

• Net sales decreased by 4.0% over the prior year first quarter to $98.6 million;

• Net loss decreased to $10.0 million in fiscal 2026 first quarter compared to the prior year first quarter net loss of $15.3 million;

• Adjusted EBITDA increased to $2.6 million in fiscal 2026 first quarter compared to the prior year first quarter Adjusted EBITDA of ($3.8) million.

See the “Reconciliation of Net (Loss) Income to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our net loss to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S.

GAAP financial measures.

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Economic Conditions

The macroeconomic environment is experiencing inflation, tariff and recessionary concerns and general uncertainty regarding the future economic environment and therefore we cannot predict the ultimate impact of these economic conditions on our operational and financial performance.

The macroeconomic environment is experiencing inflation, including rising transportation costs, and recessionary concerns and general uncertainty regarding the future economic environment and therefore we cannot predict the ultimate impact of these economic conditions on our operational and financial performance.

Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand.

However, we expect that our operations will continue to be impacted by these macroeconomic headwinds, including tariffs, which may increase our merchandise costs, affect merchandise availability, and impact our financial performance.

However, we expect that our operations will continue to be impacted by these macroeconomic headwinds, which may increase our merchandise costs, affect merchandise availability, and impact our financial performance.

On February 20, 2026, the U.S.

Supreme Court issued a ruling relating to tariffs imposed under the International Emergency Economic Powers Act ("IEEPA").

Following the ruling, the U.S.

Customs and Border Protection and other federal agencies issued additional guidance and took actions affecting the assessment, collection, refund, and/or protest of certain tariffs.

We are evaluating the impact of these developments on previously paid tariffs and related matters, including the potential for refunds or other recovery.

At this time, we cannot reasonably estimate the amount or timing of any recovery, if any, or the ultimate impact of these developments on our condensed consolidated financial statements.

How We Assess the Performance of Our Business

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Net sales reflect our sale of merchandise plus shipping and handling revenue collected from our customers, less returns and discounts.

Direct-to-consumer sales are recognized upon shipment of the product and store sales are recognized at the point of sale.

Direct-to-consumer sales are recognized upon shipment to a customer, while store sales are recognized at the point of sale.

Gross profit is equal to our net sales less cost of goods sold.

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inbound freight;

and freight from our distribution centers to our retail stores.

and freight from our fulfillment centers to our retail stores.

The primary drivers of the costs of individual goods are raw material costs.

Depreciation and amortization are excluded from gross profit.

We expect gross profit to increase to the extent that we successfully grow our net sales.

Shipping and handling revenue is also reflected in our gross profit and gross profit margin.

Our gross profit may not be comparable to other retailers, as we do not include distribution network and store occupancy expenses in calculating gross profit, but instead we include them in selling, general and administrative expenses.

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Selling, general and administrative expenses include all operating costs not included in cost of goods sold.

These expenses include all payroll and payroll-related expenses and occupancy expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization and distribution network expenses.

They also include marketing expense, which primarily includes digital and television advertising, catalog production, mailing and print advertising costs, as well as all logistics costs associated with shipping product to our customers, consulting and software expenses and professional services fees.

They also include marketing expense, which primarily includes television, digital and social media advertising, print production, mailing and print advertising costs, as well as all logistics costs associated with shipping product to our customers, consulting and software expenses and professional services fees.

Selling, general and administrative expenses as a percentage of net sales is usually higher in lower-volume quarters and lower in higher-volume quarters because a portion of the costs are relatively fixed.

While we expect these expenses to increase as we continue to increase brand awareness and invest in infrastructure to support our business, we believe these expenses will decrease as a percentage of sales over time.

Our shipping and handling expenses typically increase during the second half of the year due to additional surcharges during our peak selling season.

Adjusted EBITDA

We believe Adjusted EBITDA is a useful measure of operating performance, as it provides a clearer picture of operating results by excluding the effects of financing and investing activities by eliminating the effects of interest and depreciation costs and eliminating expenses that are not reflective of underlying business performance.

We believe Adjusted EBITDA is a useful measure of operating performance, as it provides a clearer picture of operating results by excluding the effects of financing and investing activities by eliminating the effects of interest, taxes, and depreciation and amortization costs and eliminating expenses that are not reflective of underlying business performance.

We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business.

We define Adjusted EBITDA as consolidated net income before depreciation and amortization, interest expense and provision for income taxes adjusted for the impact of certain items, including non-cash, restructuring expenses and other items we do not consider representative of our ongoing operating performance.

We define Adjusted EBITDA as consolidated net (loss) income before depreciation and amortization, and interest expense, including non-cash and other items we do not consider representative of our ongoing operating performance.

We believe Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other items.

We also use Adjusted EBITDA as one of the key financial metrics in determining bonus compensation for our employees.

This non-GAAP measure may not be comparable to similarly titled measures used by other companies.

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Three Months Ended

Nine Months Ended

November 2, 2025

October 27, 2024

November 2, 2025

October 27, 2024

% of Net Sales

(in thousands)

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Selling, general and administrative expenses

Impairment of long-lived assets

Restructuring expense

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Net loss attributable to controlling interest

Percentage of Net sales:

Cost of goods sold (excluding depreciation and

amortization)

Three Months Ended May 3, 2026, Compared to Three Months Ended May 4, 2025

The decrease in net sales for the three months ended May 3, 2026 was primarily driven by a decline in direct-to-consumer net sales resulting from declines in web traffic and web conversion due to reduced promotional activity partially offset by higher average order values.

The decline in direct-to-consumer net sales was partially offset by an increase in store net sales driven by improved shopper conversion and higher average order values.

The increase in gross profit and gross margin rate for the three months ended May 3, 2026 was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expense and as a percentage of net sales for the three months ended May 3, 2026 was mainly driven by leverage on outbound shipping costs due to higher average order values coupled with a reduction in personnel and marketing related expenses.

Impairment of Long-Lived Assets

The impairment charge recorded during the three months ended May 3, 2026 related to the closure of our Salt Lake City fulfillment center and corresponding leasehold improvements, which is discussed in further detail in Note 2 of our Notes to Condensed Consolidated Financial Statements.

The impairment charge recorded during the three months ended May 4, 2025 related to certain software that was no longer utilized in our operations.

Restructuring Expense

Operating loss

The restructuring expenses incurred for the three months ended May 3, 2026 related to the closure of our Salt Lake City fulfillment center.

Refer to Note 13 of our Notes to Condensed Consolidated Financial Statements for further information on the closure of the fulfillment center.

Interest Expense

Other (loss) income, net

Loss before income taxes

Income tax expense

Net income attributable to noncontrolling interest

Net loss attributable to controlling interest

Three Months Ended November 2, 2025, Compared to Three Months Ended October 27, 2024

Net sales decreased $12.2 million, or 9.6%, to $114.9 million in the three months ended November 2, 2025 compared to $127.1 million in the three months ended October 27, 2024.

The decrease in net sales was primarily driven by declines in web traffic due to reduced promotional activity.

Gross profit decreased $4.6 million, or 6.9%, to $61.8 million in the three months ended November 2, 2025 compared to $66.4 million in the three months ended October 27, 2024.

The decrease in gross profit was partially driven by the $3 million impact of tariffs.

As a percentage of net sales, gross margin increased to 53.8% in the three months ended November 2, 2025, compared to 52.3% of net sales in the three months ended October 27, 2024.

The increase in gross margin rate was primarily driven by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $11.6 million, or 14.1%, to $70.1 million in the three months ended November 2, 2025 compared to $82.3 million in the three months ended October 27, 2024.

Selling, general and administrative expenses as a percentage of net sales decreased to 61.5% in the three months ended November 2, 2025, compared to 64.8% in the three months ended October 27, 2024.

The decrease in selling, general and administrative expense as a percentage of net sales was mainly driven by leverage on outbound shipping costs due to higher average order values coupled with a reduction in personnel and depreciation expenses.

Income tax expense was $0.0 million in the three months ended November 2, 2025, compared to income tax expense of $4.9 million in the three months ended October 27, 2024.

The change was primarily driven by the valuation allowance established in the third quarter of 2024.

Net Loss Attributable to Controlling Interest

Net loss attributable to controlling interest was $10.1 million, in the three months ended November 2, 2025 compared to net loss of $28.2 million in the three months ended October 27, 2024.

Nine Months Ended November 2, 2025, Compared to Nine Months Ended October 27, 2024

Net sales decreased $36.1 million, or 9.4%, to $349.3 million in the nine months ended November 2, 2025 compared to $385.4 million in the nine months ended October 27, 2024.

The decrease in net sales was primarily driven by decline in web traffic due to reduced promotional activity.

Gross profit decreased $14.8 million, or 7.3%, to $187.2 million in the nine months ended November 2, 2025 compared to $202.0 million in the nine months ended October 27, 2024.

As a percentage of net sales, gross margin increased to 53.6% of net sales in the nine months ended November 2, 2025, compared to 52.4% of net sales in the nine months ended October 27, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $21.7 million, or 9.6%, to $205.1 million in the nine months ended November 2, 2025 compared to $226.9 million in the nine months ended October 27, 2024.

Selling, general and administrative expenses as a percentage of net sales decreased to 58.7% in the nine months ended November 2, 2025, compared to 58.9% in the nine months ended October 27, 2024.

Income tax expense was $0.8 million in the nine months ended November 2, 2025, compared to income tax expense of $2.4 million in the nine months ended October 27, 2024.

The provision for third quarter of fiscal 2024 and fiscal 2025 reflected a valuation allowance which was established against the net amount of deferred tax assets as well as a pre-tax loss in the previous fiscal year.

Net Loss Attributable to Controlling Interest

Net loss attributable to controlling interest was $24.1 million, in the nine months ended November 2, 2025 compared to net loss of $38.1 million in the nine months ended October 27, 2024.

Interest expense decreased for the three months ended May 3, 2026 due to a lower average balance on our outstanding line of credit.

The decrease was primarily driven by the additional valuation allowance established in the first quarter of 2025.

Reconciliation of Net Loss to EBITDA and EBITDA to Adjusted EBITDA

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Three Months Ended

Nine Months Ended

November 2, 2025

October 27, 2024

November 2, 2025

October 27, 2024

(in thousands)

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Adjusted EBITDA

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $5.5 million to ($0.7) million in the three months ended November 2, 2025 compared to ($6.2) million in the three months ended October 27, 2024.

As a percentage of net sales, Adjusted EBITDA increased to (0.6%) of net sales in the three months November 2, 2025 compared to (4.9%) of net sales in the three months ended October 27, 2024.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $1.4 million to $7.5 million in the nine months ended November 2, 2025 compared to $6.1 million in the nine months ended October 27, 2024.

As a percentage of net sales, Adjusted EBITDA increased to 2.1% of net sales in the nine months ended November 2, 2025 compared to 1.6% of net sales in the nine months ended October 27, 2024.

The increase in Adjusted EBITDA was primarily due to leverage across our cost of goods sold and operating expenses as discussed above in the “Results of Operations” section.

Liquidity and Capital Resources

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The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities.

At November 2, 2025, our net working capital was $51.1 million, including $8.2 million of cash and cash equivalents.

We expect to spend approximately $17.0 million in fiscal 2025 on capital expenditures, inclusive of software hosting implementation costs, primarily due to investments in two new stores and information technology.

Due to the seasonality of our business, the fourth quarter typically has the most significant impact on our amount of cash from operating activities.

At May 3, 2026, our net working capital was $62.3 million, including $6.1 million of cash and cash equivalents.

In April 2025, we entered into a credit agreement, which was subsequently amended throughout 2025 and provides us with borrowings of up to $100.0 million that are available under an asset-based revolving senior credit facility with a $10.0 million sublimit for the issuance of standby letters of credit.

Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year.

During the first three quarters of our fiscal year, we typically are net users of cash in our operating activities through funding received on our line of credit as we acquire inventory in anticipation of our peak selling season, which typically occurs in the fourth quarter of our fiscal year.

We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

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A summary of operating, investing and financing activities is shown in the following table.

Nine Months Ended

November 2, 2025

October 27, 2024

Three Months Ended

(in thousands)

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Operating activities consist primarily of net loss adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in operating assets and liabilities.

For the nine months ended November 2, 2025, net cash used in operating activities was $31.1 million, which primarily consisted of cash used in operating assets and liabilities of $30.2 million and a $24.0 million net loss for the nine months ended November 2, 2025 partially offset by depreciation of $19.5 million.

The cash used in operating assets and liabilities of $30.2 million was primarily due to a $25.7 million decrease in inventory.

For the nine months ended October 27, 2024, net cash used in operating activities was $58.1 million, which primarily consisted of cash used in operating assets and liabilities of $49.4 million and a $38.1 million net loss for the nine months ended October 27, 2024 partially offset by depreciation of $24.7 million.

The cash used in operating assets and liabilities of $49.4 million was primarily due to a $105.7 million increase in inventory, partially offset by a $53.2 million increase in trade accounts payable.

The decrease in cash used in operating activities for the three months ended May 3, 2026 was primarily due to the increase in gross margin rate, decrease in selling, general and administrative expenses as discussed in further detail above, and decreased trade payables and accrued expenses primarily from improved inventory management.

Net Cash Used in Investing Activities

Investing activities consist primarily of capital expenditures related to investments in infrastructure, retail stores and information technology.

For the nine months ended November 2, 2025 and October 27, 2024, net cash used in investing activities was $5.7 million.

The increase in cash used in investing activities was primarily driven by an increase in purchases of property and equipment.

Net Cash Provided by Financing Activities

Financing activities consist primarily of borrowings and payments related to our revolving line of credit as well as payments on finance lease obligations.

For the nine months ended November 2, 2025, net cash provided by financing activities was $41.6 million compared to net cash provided by financing activities of $41.0 million for nine months ended October 27, 2024.

The decrease in cash provided by financing activities for the three months ended May 3, 2026 was primarily due to lower proceeds from our line of credit as a result of lower use of cash in our operations.

Contractual Obligations

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis