What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-09-04 compared with 2026-06-09 · 92 added, 41 removed, 167 unchanged (44% of the section changed)

5 unchanged sentences

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

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

The three months of fiscal 2026 and fiscal 2025 represent our 13-week periods ended August 2, 2026 and August 3, 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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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 May 3, 2026, we operated 63 retail stores and three outlet stores.

Since then, we have expanded our retail presence, and as of August 2, 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.

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A summary of our financial results is as follows:

• 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.

• Net sales decreased by 7.8% over the prior year second quarter to $121.4 million, and net sales decreased by 6.2% in the first six months of the year to $220.0 million;

• Net income of $18.4 million in fiscal 2026 second quarter compared to the prior year second quarter net income of $1.3 million, and net income in the first six months of fiscal 2026 of $8.4 million compared to a net loss in the first six months of fiscal 2025 of $14.0 million.

Net income includes the impact of $16.3 million in tariff refunds for the three and six months ended August 2, 2026;

• Adjusted EBITDA increased to $27.0 million in fiscal 2026 second quarter compared to the prior year second quarter Adjusted EBITDA of $12.0 million, and Adjusted EBITDA in the first six months of fiscal 2026 of $29.7 million compared to $8.2 million in the first six months of fiscal 2025.

Adjusted EBITDA includes the impact of $16.3 million in tariff refunds for the three and six months ended August 2, 2026.

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.

GAAP financial measures.

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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.

In March 2026, the U.S.

Court of International Trade issued an additional ruling stating that importers that have paid tariffs under IEEPA are due refunds.

We submitted our refund request in the first quarter of 2026 for reimbursement in the amount of $12.5 million, which reflected the amount of IEEPA tariffs we determined were paid while such tariffs were in effect from February 2025 through February 2026.

As of August 2, 2026, we collected tariff refunds of approximately $12.8 million, inclusive of an insignificant amount of interest.

In addition, we recorded a receivable for additional refunds due from vendors from previously passed through tariff costs, and we have recorded an accrual for the reimbursement of certain vendors for tariff charges that we previously passed through to those vendors.

Refer to the Results of Operations section for further discussion of the impact of refunds on our operations for the three and six months ended August 2, 2026.

We are continuing to evaluate the impact of these developments on previously paid tariffs and related matters, including the potential for additional recovery.

At this time, we cannot reasonably estimate the amount or timing of any further 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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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 (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 define Adjusted EBITDA as consolidated net income (loss) before depreciation and amortization, and interest expense, including non-cash items, and other charges or benefits resulting from transactions or events that are highly variable, significant in size, and that we do not believe are indicative of ongoing or future business operations.

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

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Selling, general and administrative expenses

Restructuring expense

Operating income (loss)

Interest expense

Other income (loss), net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to controlling interest

Six Months Ended

% of Net Sales

(in thousands)

Cost of goods sold (excluding depreciation and

amortization)

Selling, general and administrative expenses

Impairment of long-lived assets

Restructuring expense

Operating loss

Operating income (loss)

Interest expense

Other (loss) income, net

Loss before income taxes

Income tax expense

Other income (loss), net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income attributable to noncontrolling interest

Net loss attributable to controlling interest

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.

Net income (loss) attributable to controlling interest

Three Months Ended August 2, 2026, Compared to Three Months Ended August 3, 2025

The decrease in net sales for the three months ended August 2, 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 increase in gross profit and gross margin rate for the three months ended August 2, 2026 was primarily driven by a net reduction of cost of goods sold of $16.0 million related to refunds of previously incurred tariff charges as discussed in further detail above.

The gross margin rate was also favorably impacted 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.

Excluding the impact of tariff refunds, gross margin was 59.6% for the three months ended August 2, 2026, compared to 54.7% for the three months ended August 3, 2025.

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.

The increase in selling, general and administrative expense and as a percentage of sales for the three months ended August 2, 2026 was mainly driven by an increase in advertising and shipping expenses, which was partially offset by leverage in variable expenses in our fulfillment centers and stores coupled with lower overhead expenses.

Restructuring Expense

The restructuring expenses incurred for the three months ended August 3, 2025 related to a reduction in force to right-size our expense structure.

Interest Expense

Interest expense decreased for the three months ended August 2, 2026 due to a lower average balance on our outstanding line of credit.

Other Income (Loss), Net

Net other income increased for the three months ended August 2, 2026 primarily due to interest received on the tariffs refunded as discussed in further detail above.

Income tax expense increased for the three months ended August 2, 2026 primarily due to the net income generated during the period.

Six Months Ended August 2, 2026, Compared to Six Months Ended August 3, 2025

The decrease in net sales for the six months ended August 2, 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 increase in gross profit and gross margin rate for the six months ended August 2, 2026 was primarily driven by a net reduction of cost of goods sold of $16.0 million related to refunds of previously incurred tariff charges as discussed in further detail above.

Gross profit and gross margin rate were also favorably impacted 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.

Excluding the impact of tariff refunds, gross margin was 58.7% for the six months ended August 2, 2026, compared to 53.5% for the six months ended August 3, 2025.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expense for the six months ended August 2, 2026 was mainly driven by leverage in variable expenses in our fulfillment centers and stores coupled with lower overhead expenses, which was partially offset by an increase in advertising 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.

The impairment charge recorded during the six months ended August 2, 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 six months ended August 3, 2025 related to certain software that was no longer utilized in our operations.

Restructuring Expense

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.

The restructuring expenses incurred for the six months ended August 2, 2026 related to the closure of our Salt Lake City fulfillment center.

The restructuring expenses incurred for the six months ended August 3, 2025 related to a reduction in force to right-size our expense structure.

Refer to Note 13 of our Notes to Condensed Consolidated Financial Statements for further information on the restructuring expenses incurred.

Interest Expense

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

The following table presents reconciliations of net loss to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S.

Interest expense decreased for the six months ended August 2, 2026 due to a lower average balance on our outstanding line of credit.

Other Income (Loss), Net

Net other income increased for the six months ended August 2, 2026 primarily due to interest received on the tariffs refunded as discussed in further detail above.

Income tax expense decreased for the six months ended August 2, 2026 primarily due to the recognition of additional valuation allowance in the first quarter of 2025.

Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA

The following table presents reconciliations of net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S.

GAAP financial measures, for the periods indicated below.

1 unchanged sentence

Three Months Ended

Six Months Ended

August 2, 2026

August 3, 2025

August 2, 2026

August 3, 2025

(in thousands)

Net income (loss)

Depreciation and amortization

2 unchanged sentences

Interest expense

Income tax expense

Income tax expense (benefit)

Long-term incentive expense

2 unchanged sentences

Adjusted EBITDA

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.

The increase in Adjusted EBITDA was primarily due to tariff refunds received in the second quarter of 2026 along with 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 May 3, 2026, our net working capital was $62.3 million, including $6.1 million of cash and cash equivalents.

As of August 2, 2026, our net working capital was $85.7 million, including $26.8 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.

5 unchanged sentences

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

Three Months Ended

Six Months Ended

August 2, 2026

August 3, 2025

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents

Net Cash Used in Operating Activities

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.

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 provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

Operating Activities

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

The increase in cash provided by operating activities for the six months ended August 2, 2026 was primarily due to the tariff refunds received, increase in gross margin rate, lower net outflows on trade payables and accrued expenses, and a decrease in selling, general and administrative expenses as discussed in further detail above.

Investing Activities

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

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

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

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.

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.

The decrease in cash provided by financing activities for the six months ended August 2, 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

12 unchanged sentences

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