What changed in this filing

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Item 1. Business

2024-03-22 compared with 2023-03-17 · 86 added, 83 removed, 432 unchanged (28% of the section changed)

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

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

The following discussion contains references to fiscal years 2023 and 2022, which refer to our fiscal years ended January 28, 2024 and January 29, 2023, respectively.

Fiscal years 2023 and 2022 were 52-week periods.

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

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

We offer products nationwide through our website.

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In 2021, the Company completed a comprehensive review of current operations, logistics networks, marketing and technology capabilities, and unique brands and products.

The Company formulated the “Big Dam Blueprint”, which management believes will unlock the Company’s full potential for long-term, sustainable grow growth.

The Company formulated the “Big Dam Blueprint”, which management believes will unlock the Company’s full potential for long-term, sustainable growth.

 Begin with a digital-first mindset that integrates technology into all areas of the business, fundamentally changing how we operate and deliver value to customers.

 Intensify efforts to optimize Duluth Trading’s owned retail channels by increasing focus and investments in our direct channel as our primary growth vehicle.

We are conducting strategic research that will inform decisions on future stores regarding new locations and market share potential, size and layout.

 Evolve the Company’s multi-brand platform as a new pathway to grow the business.

Create unique brand positions, across men’s and women’s, for Duluth, AKHG and Buck Naked to address customer needs for various occasions including work, outdoor recreation, casual lifestyle, and first layer.

Invest in the evolution of the Duluth Trading platform to enable the integration of new brands, expand our offerings and broaden our customer base.

 Carefully test and learn to unlock long-term growth potential.

We are conducting strategic research that will inform decisions on future stores regarding new locations and market share potential, size, format, and assortment.

 Evolve the Company’s platform to grow into a multi-brand and multi-channel business.

Create unique brand positions, across men’s and women’s, for Duluth and AKHG, as well as for our important Buck Naked franchise to address customer needs for various occasions including work, outdoor recreation, casual lifestyle, and first layer.

Invest in the evolution of the Duluth Trading platform to enable the integration of new brands and channels, expand our product offering and broaden our customer base.

 Prioritize test and learn to unlock long-term growth potential.

Explore new opportunities to engage current and potential customers through products, services and touchpoints that they expect and value.

 Increase and, in some areas, accelerate investments to future proof the business.

Areas under analysis include greater automation across the logistics network;

technology that will improve operations, generate positive impact and sustainable returns;

support growth through multiple brands and seamlessly integrate new brands into the portfolio, and attract the talent, skillsets and expertise needed to scale the business.

 Future proof the business through investments in capabilities and infrastructure.

Including logistics, operations, and planning systems, processes, and talent needed to scale the business and enable a multi-brand and multi-channel strategy.

Our omnichannel business strategy allows our sales channels to work in synergy to seamlessly deliver a consistent brand experience to the customer, including consistent marketing, pricing and product presentation.

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We believe these local community elements help promote customer loyalty and drive repeat purchases.

We offer a comprehensive line of innovative, durable and functional casual wear, workwear and accessories for both men and women.

Our product assortment includes shirts, pants, underwear, outerwear, footwear, accessories and hard goods.

We offer a comprehensive line of innovative, durable and functional workwear, casual wear, outdoor apparel and accessories for both men and women.

Our product assortment includes shirts, pants, shorts, underwear, outerwear, footwear, accessories and hard goods.

Our products feature proprietary designs and distinct names, such as our Longtail T® shirts, Buck Naked TM underwear, Fire Hose® work pants and No-Yank TM Tank.

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These efforts include display advertising, digital video advertising, search engine marketing and optimization and targeted email, which we send to customers to introduce new products and offer promotions on select merchandise.

 Television .

We advertise on cable and broadcast television networks to build brand awareness for both men’s and women’s products and to reach a large, national audience.

These advertisements feature both our animated characters and female models, and are intended to be humorous, irreverent and quirky in order to grab the viewer’s

attention, while highlighting the particularly innovative, solution-based features of our core products and the Duluth Trading name.

 Television and Radio .

We advertise in online video channels, streaming television, on cable and broadcast television networks, as well as through streaming and on-demand audio channels to build brand awareness for both men’s and women’s products and to reach a large, national audience.

These advertisements feature both our

animated characters and female models, and are intended to be humorous, irreverent and quirky in order to grab the viewer’s attention, while highlighting the particularly innovative, solution-based features of our core products and the Duluth Trading name.

 Social Media .

We have an engaged social media community, which allows us to personally connect with our customers online, and we believe further raises brand awareness.

We maintain a social media presence on Facebook, Instagram, Pinterest, YouTube and Twitter.

We maintain a social media presence on Facebook, Instagram, Pinterest, YouTube and X (formerly known as Twitter).

Our catalogs are an important part of our heritage and represent a tangible vehicle for our authentic and humorous storytelling.

 E-Commerce .

Our website is an integral part of our marketing strategy where we use humor and authentic storytelling to engage our customers.

Customer Service

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We have built strong, long-term relationships with our vendors.

In fiscal 2022, 56% of our purchases came from our largest supplier, an agent partner in Hong Kong who manages multiple factories across Asia and Latin America, including Vietnam, Indonesia, Cambodia, Bangladesh, Pakistan, China, Mexico and Egypt.

We believe sourcing inventory through these agents allows us to leverage the agents’ purchasing power with multiple factories, as well as transportation and logistics capabilities, allowing our internal team to focus on our core competencies of product development, storytelling and serving customers, rather than factory and mill management or logistics.

In fiscal 2023, 59% of our purchases came from our largest supplier, an agent partner in Hong Kong who manages multiple factories across Asia and Latin America, including Bangladesh, Cambodia, China, Egypt, Honduras, Indonesia, Mexico, Pakistan, and Vietnam.

Our sourcing strategy focuses on identifying and employing vendors that provide quality materials and fine craftsmanship that our customers expect of our brand.

To ensure that our high standards of quality and timely delivery of merchandise are met, we work closely with our third-party agent partners.

To ensure that our high standards of quality and timely delivery of merchandise are met, we work closely with our third-party partners.

All of our products are produced according to our specifications, and we require all of our manufacturers to adhere to strict regulatory compliance and standards of conduct.

We seek to ensure the consistent quality by employing Duluth Trading-certified factory auditors to selectively examine pre-production samples, conduct periodic site visits to certain of our vendors’ production facilities and inspect inbound shipments at our fulfillment centers.

We seek to ensure the consistent product quality by training Duluth Trading-certified factory auditors to selectively examine pre-production samples, conduct periodic site visits to certain of our vendors’ production facilities and inspect inbound shipments at our fulfillment centers.

Fulfillment Centers

We operate fulfillment centers located in Belleville, Wisconsin, Dubuque, Iowa and Salt Lake City, Utah.

We also have a fulfillment center in Adairsville, Georgia with operations scheduled to begin in fiscal 2023.

We operate fulfillment centers located in Belleville, Wisconsin, Dubuque, Iowa, Salt Lake City, Utah and Adairsville, Georgia.

The approximate square footage of each facility is included in Item 2 of Part I of this report.

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We own or have the rights to use certain trademarks, service marks and trade names that are registered with the U.S.

Patent and Trademark Office, trademark offices in other jurisdictions, or exist under common law in the United States and other jurisdictions.

Patent and Trademark Office, trademark offices in other jurisdictions,

or exist under common law in the United States and other jurisdictions.

The “Duluth Trading Co” trade name and trademark is used both in the United States and internationally and is material to our business.

Trademarks that are important in identifying and distinguishing our products and services are Alaskan Hardgear ® , Armachillo ® , Ballroom ® , Cab Commander ® , Crouch Gusset ® , Dry on the Fly ® , Duluth Trading Co ® , Duluthflex ® , Fire Hose ® , Longtail T ® , No Polo Shirt ® , No Yank ® and Wild Boar Mocs ® .

Trademarks that are important in identifying and distinguishing our products and services are AKHG ® , Alaskan Hardgear ® Armachillo ® , Ballroom ® , Buck Naked ® , Bullpen ® , Cab Commander ® , Crouch Gusset ® , Dang Soft ® , Dry on the Fly ® , Duluth Trading Co ® , DuluthFlex ® , Fire Hose ® , Flexpedition ® , Longtail T ® , NoGA ® ,No Polo Shirt ® , No Yank ® , Spit & Polish ® , and Wild Boar ® .

Our rights to some of these trademarks may be limited to select markets.

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Our net sales and net income are generally highest in the fourth fiscal quarter, which includes the holiday sales period.

The following table presents net sales and net income for the fourth quarter as a percentage of the fiscal year.

4Q Net Income

% of Fiscal year

% of Fiscal Year

(in thousands)

As a result, our quarterly operating results and working capital requirements fluctuate significantly from quarter to quarter.

Further, the impact of certain unusual or non-recurring items, economic conditions, weather or other factors affecting our operations may vary from one year to the next.

Regulation and Legislation

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feel a personal connection with the Duluth Trading brand, which could result in the loss of customers and materially adversely affect our business, results of operations and growth prospects.

We may face risks and new challenges associated with our geographic expansion.

Our expansion into new geographic markets could result in increased competitive, merchandising, distribution and other challenges.

We may face risks and challenges if we pursue further geographic expansion.

Our expansion into new geographic markets could result in increased competition and merchandising, distribution and other challenges.

We may encounter difficulties in attracting customers in our new retail store locations due to a lack of customer familiarity with our brand, our lack of familiarity with local customer preferences, competition with new competitors or with existing competitors with a large, established market presence and seasonal differences in the market.

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For example, our national television advertising campaigns are expensive and may not result in the cost-effective acquisition of customers.

Furthermore, as our brand becomes more widely known in the market, future marketing campaigns may not result in the acquisition of new customers at the same rate as past campaigns.

Furthermore, as our brand has become more widely known in the market, our marketing campaigns have not resulted in acquisition of new customers at the same rate as past campaigns, and this trend may continue in the future.

We also use other paid and non-paid advertising.

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Additionally, digital advertising costs may continue to rise and as our usage of these channels expands, such costs may impact our ability to acquire new customers in a cost-effective manner.

If the level of usage of these channels by our customer base

does not grow as expected, we may suffer a decline in customer growth or net sales.

A significant decrease in the level of usage or customer growth would have a material adverse effect on our business, financial condition and operating results.

As usage of these channels by our customer base has not grown

as expected, we have suffered a decline in customer growth and net sales.

A continued decrease in the level of usage or customer growth may have a material adverse effect on our business, financial condition and operating results.

We cannot assure you that the net profit from new customers we acquire will ultimately exceed the cost of acquiring those customers.

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Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could harm our operations and financial results.

If we fail to achieve our growth strategy, our business, financial condition and operating results could be harmed.

To achieve our growth strategy, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people, information systems and facilities and expand, train and manage our employee base.

To support continued growth, we must effectively integrate, develop and motivate a large number of employees.

Failure to improve and expand our infrastructure of employees may have a material adverse effect on our business, financial condition and operating results.

Additionally, the growth strategy of our business places significant demands on our management and other employees.

The growth of our business may require significant additional resources to meet these daily demands, which may not scale in a cost-effective manner or may negatively affect the quality of our website, retail stores, fulfillment centers, call center and other aspects of the customer experience.

We are also required to manage relationships with a growing number of suppliers, customers and other third parties.

Our information technology systems and our internal controls and procedures may not be adequate to support future growth of these relationships.

If we are unable to achieve the growth strategy of our organization, our business, financial condition and operating results may be materially adversely affected.

Operational Risks

Economic uncertainties may continue to adversely affect our business operations, store traffic, employee availability, financial condition, liquidity, and cash flow for an extended period of time.

The ongoing economic uncertainty following the pandemic of the Coronavirus (“COVID-19”) continues to affect our business operations and it is impossible to predict the effect and ultimate impact of ongoing economic uncertainties.

Business activities continue to face economic uncertainties, including but not limited to increased inflation and interest rates, the prolonged COVID-19 pandemic, and global chain constraints.

Economic uncertainties may continue to adversely affect our business operations, store and website traffic, employee availability, financial condition, liquidity, and cash flow for an extended period of time.

The ongoing economic uncertainty continues to affect our business operations and it is impossible to predict the effect and ultimate impact of ongoing economic uncertainties.

Business activities continue to face economic uncertainties, including but not limited to increased inflation and interest rates and global supply chain constraints.

The economic uncertainties may continue for an extended period and have adversely impacted, and may continue to impact, our business.

As inflationary periods continue, consumer fear may adversely affect traffic to our stores.

Reductions in customer visits to, and spending at, our stores caused by economic uncertainties would result in further loss of retail store sales and profits and other material adverse effects.

As inflationary periods continue, consumer fear may adversely affect traffic to our stores and website.

Reductions in customer visits to, and spending at, our stores and website caused by economic uncertainties have resulted in a loss of retail store sales and profits and other material adverse effects.

The extent of the impact on our business, financial results, liquidity and cash flows will depend largely on future developments, all of which are highly uncertain and cannot be predicted.

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 changes in U.S.

laws (or changes in the enforcement of those laws) affecting the importation and taxation of goods, including disallowance of tax deductions for imported merchandise, imposition of unilateral

tariffs on imported goods, duties, quotas, enhanced security measures at U.S.

laws (or changes in the enforcement of those laws) affecting the importation and taxation of goods, including disallowance of tax deductions for imported merchandise, imposition of unilateral tariffs on imported goods, duties, quotas, enhanced security measures at U.S.

ports or imposition of new legislation relating to import quotas;

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We cannot control all of the various factors that might affect timely and effective procurement of supplies of product from our third-party suppliers and delivery of merchandise to our customers.

A majority of the products that we purchase must be shipped to our fulfillment centers in Wisconsin, Iowa and Utah.

A majority of the products that we purchase must be shipped to our fulfillment centers in Wisconsin, Iowa, Georgia and Utah.

While our reliance on a limited number of fulfillment centers provides certain efficiencies, it also makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health pandemics, or other unforeseen causes that could delay or impair our ability to fulfill customer orders and/or ship merchandise to our stores, which could adversely affect sales.

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Our use of imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, risks of damage, destruction or confiscation of products while in transit to a fulfillment center or at points of export or import, organized labor strikes and work stoppages, transportation and other delays in shipments, including as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, unexpected or significant port congestion, lack of freight availability and freight cost increases.

In addition, if we experience a shortage of a popular item, we may be required to arrange for additional quantities of the item, if available, to be delivered through airfreight, which is significantly more expensive than standard shipping by sea.

In addition, as has happened in the past, if we experience a shortage of a popular item, we may be required to arrange for additional quantities of the item, if available, to be delivered through airfreight, which is significantly more expensive than standard shipping by sea.

We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive merchandise from suppliers or deliver products to customers in a timely and cost-effective manner.

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Further declines in shipping and handling revenues may have a material adverse effect on our gross profit and gross profit margin, as well as our Adjusted EBITDA to the extent there are not commensurate declines, or if there are increases, in our shipping and handling expense.

We rely on third-party service providers, such as UPS and the United States Postal Service (“USPS”), to deliver products purchased through our direct-to-consumer channel to our customers and our business could be negatively impacted by disruptions in the operations of these third-party service providers.

We rely on third-party service providers to deliver products purchased through our direct-to-consumer channel to our customers and our business could be negatively impacted by disruptions in the operations of these third-party service providers.

Relying on third-party service providers puts us at risk from disruptions in their operations, such as employee strikes, inclement weather and their inability to meet our shipping demands.

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 threats to the computer systems that operate our website and related support systems, including viruses, malware and other malicious code, misconfiguration, systems failure or inadequacy, compromise or unauthorized access and similar disruptions.

Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales, increase our costs, diminish our growth prospects, and damage our brand, which could negatively impact our business, financial condition and results of operations.

Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales, increase our costs, diminish our growth prospects, and damage our brand and reputation, which could negatively impact our business, financial condition and results of operations.

Increases in the price of raw materials, fuel and labor, or their reduced availability, could increase our cost of goods and cause delays.

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Consumers and employees continue to have significant concerns about the security of personal information, especially when transmitted over the Internet, and the use, retention, disclosure, and privacy of such information.

We continually evaluate and upgrade our information systems, security measures, and practices to combat the ever-evolving cyber risks and to comply with our legal and regulatory obligations, and we provide cybersecurity awareness training around phishing, social engineering, and other cyber risks to our employees, in an effort to elevate our cybersecurity posture and give our workforce the skills to both avoid and report cyber threats.

risks to our employees, in an effort to elevate our cybersecurity posture and give our workforce the skills to both avoid and report cyber threats.

Despite our risk management efforts, vendor due diligence, and security measures, our facilities and systems and those of our third-party service providers, are subject to increasingly complex cyber risks, including cyber extortion, data breaches, unauthorized access, denial of service, vendor or employee misconduct, ransomware and other malicious software, and data exfiltration.

We and our employees and customers could suffer significant harm if any personal, financial, or credit card information was accessed or disclosed by an unauthorized third party, or our information technology systems or those of our third party providers were compromised or subject to data loss, exfiltration, corruption, or disruption.

Any security incident or data breach could severely damage our reputation and our relationships with customers, business partners and employees, cause us to incur significant costs and expenses to investigate, remediate and notify affected individuals, and expose us to an increased risk of litigation, regulatory enforcement, fines and penalties, and other losses and

In addition, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become more complex and uncertain due to recent high-profile privacy and security incidents and legislative efforts across the globe.

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Many of our strategic initiatives require that we hire and/or develop associates with appropriate experience.

Attracting and retaining a sufficient number of qualified employees to meet our staffing needs may be difficult, since the competition for these types of personnel is intense.

Attracting and retaining a sufficient number of qualified employees to meet our staffing needs may be difficult, because the competition for these types of personnel is intense.

Many of our staffing needs in our stores, fulfillment centers and call center are entry-level or part-time positions with historically high rates of turnover.

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Our business is subject to seasonal influences, with increased net sales and net income realized during the fourth quarter of our fiscal year, which includes the holiday season.

See Part I, Item 1 Business, under the heading “ Seasonality ,” for our net sales and net income realized during the fourth quarter of our fiscal year for each of the past two fiscal years.

We must maintain sufficient inventory levels to operate our business successfully, but we must also avoid accumulating excess inventory, which increases working capital needs and potentially lowers gross margins.

We obtain substantially all of our inventory from suppliers located outside the United States.

Some of these suppliers often require lengthy advance notice of order requirements in order to be able to manufacture and supply products in the quantities requested.

Some of these suppliers often require lengthy advance notice of

order requirements in order to be able to manufacture and supply products in the quantities requested.

This usually requires us to order our products, and enter into commitments for the purchase of our products, well in advance of the time these products will be offered for sale.

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If we do not stock or restock popular products in amounts sufficient to meet customer demand, it could significantly affect our revenue and our future growth.

If we overstock products, we may be required to take significant inventory markdowns or write-offs and incur

commitment costs, which could reduce profitability.

If we overstock products, we may be required to take significant inventory markdowns or write-offs and incur commitment costs, which could reduce profitability.

We may experience an increase in our net shipping cost due to complimentary upgrades, split-shipments and additional long-zone shipments necessary to ensure timely delivery for the holiday season.

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Inventories, accounts payable and borrowings under our revolving line of credit then typically decline steadily during the holiday season, resulting in our cash typically reaching its highest level, and borrowings under our revolving line of credit reaching their lowest level, typically near December 31 of each year.

If we fail to manage our growth effectively, our business, financial condition and operating results could be harmed.

To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people, information systems and facilities and expand, train and manage our employee base.

To support continued growth, we must effectively integrate, develop and motivate a large number of employees.

Failure to improve and expand our infrastructure of employees may have a material adverse effect on our business, financial condition and operating results.

Additionally, the growth of our business places significant demands on our management and other employees.

We are also required to manage relationships with a growing number of suppliers, customers and other third parties.

Our information technology systems and our internal controls and procedures may not be adequate to support future growth of these relationships.

If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected.

Financial Risks

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The success of our business depends on consumer spending.

There are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, interest rates, consumer credit availability, unemployment, stock market performance, extreme weather conditions, energy prices and tax rates in the national, regional and local markets where we sell our products.

There are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, interest rates, inflation, consumer credit availability, unemployment, stock market performance, extreme weather conditions, energy prices and tax rates in the national, regional and local markets where we sell our products.

A decline in actual or perceived economic conditions or other factors could negatively impact the level of consumer spending and have a material adverse impact on our business and results of operations.

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As we expand our business, we will need significant amounts of cash to pay our existing and future lease obligations, purchase inventory, pay personnel and invest in our infrastructure and facilities.

If our business does not generate sufficient cash flow from operations to fund these activities and sufficient funds are not otherwise available from our existing revolving credit facility or future credit facilities, we may need additional equity or debt financing.

If our business does not generate sufficient cash flow from operations to fund these activities and

sufficient funds are not otherwise available from our existing revolving credit facility or future credit facilities, we may need additional equity or debt financing.

If such financing is not available to us on satisfactory terms, our ability to operate and expand our business or to respond to competitive pressures would be limited and we could be required to delay, curtail or eliminate planned investments and other activities.

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Any debt financing we may incur may impose on us covenants that restrict our operations and will require interest payments that would create additional cash demands and financial risk for us.

We may be unable to accurately forecast our operating results and growth rate, and our growth rate may decline over time.

We may be unable to accurately forecast our operating results and growth rate.

We may not be able to accurately forecast our operating results and growth rate.

We use a variety of factors in our forecasting and planning processes, including historical results, recent history and assessments of economic and market conditions, among other things.

The growth rates in net sales and profitability that we have experienced historically may not be sustainable as our customer base expands and we achieve higher market penetration rates, and our percentage growth rates may decrease.

The growth of our sales and profitability depends on the continued growth of demand for the products we offer, and our business is affected by general economic and business conditions.

A softening of demand, whether caused by changes in customer preferences or a weakening of the economy or other factors, may result in decreased net sales or growth.

The growth rates in net sales and profitability that we forecast may not be achieved.

The growth of our sales and profitability depends on the growth of demand for the products we offer, and our business is affected by general economic and business conditions.

A softening of demand, whether caused by changes in customer preferences or a weakening of the economy or other factors, may result in decreased net sales.

In addition, we experience seasonal trends in our business, and this variability may make it difficult to predict net sales and could result in significant fluctuations in our operating results from period to period.

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If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates.

Legal, Tax, Compliance, Reputable and Other Risks

Legal, Tax, Compliance, Reputation and Other Risks

We may be subject to increased labor costs due to external factors, including changes in laws and regulations, and we may be subject to unionization, work stoppages or slowdowns.

Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, actions by our competitors with respect to compensation levels and changing demographics.

Currently none of our employees are represented by a union, but our employees have the right to under the National Labor Relations Act.

Currently none of our employees are represented by a union, but our employees have the right to be under the National Labor Relations Act.

Changes that adversely impact our ability to meet our labor needs in a cost-effective manner could adversely affect our operating results.

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Similarly, sales of our fall and winter products, which are traditionally weighted toward outerwear, are adversely affected by mild, dry or warm weather.

Severe weather events may impact our ability to supply our

retail stores, deliver orders to customers on schedule and staff our retail stores, fulfillment centers and call center, which could have an adverse effect on our business and results of operations.

Severe weather events may impact our ability to supply our retail stores, deliver orders to customers on schedule and staff our retail stores, fulfillment centers and call center, which could have an adverse effect on our business and results of operations.

Our product designs are not protected by substantial intellectual property rights.

Due to the rapid pace of change in the apparel, footwear and accessories industry, the length of time it takes to obtain patents and the expense and uncertainty of obtaining patent protection, we have not taken steps to obtain patent protection for our innovative product designs.

Competitors have attempted to copy our product designs in the past, and we expect that if we are able to raise our national profile, our products may be subject to greater imitation by existing and new competitors.

If we are not able to continue rapid innovation of new products and product features, our brand may be harmed and our results of operations may be materially adversely affected.

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A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest.

The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us and decrease our future sales, which could have an impact on our business, financial condition and results of operations.

The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional

administrative burdens for us and decrease our future sales, which could have an impact on our business, financial condition and results of operations.

We may become involved in a number of legal proceedings and audits, and outcomes of such legal proceedings and audits could adversely affect our business, financial condition and results of operations.

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Given the greater number of votes per share attributed to our Class A common stock, our Chairman, Stephen L.

Schlecht, who is our only Class A shareholder, beneficially owns shares representing more than 50% of the voting power of our outstanding capital stock.

Schlecht, who through his voting trust is our only Class A shareholder, beneficially owns shares representing more than 50% of the voting power of our outstanding capital stock.

As a result of our dual class ownership structure, Mr.

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 announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments;

 changes in operating performance and stock market valuations of other technology or retail companies generally, or those in our industry in particular;

 changes in operating performance and stock market valuations of other retail companies generally, or those in our industry in particular;

 price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

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If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect our business, financial condition and operating results.

A material weakness in our system of internal control over financial reporting was identified.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control.

As a public company, we are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal control over financial reporting, beginning with this Annual Report on Form 10-K for the year ended January 28, 2024.

We must also include a report issued by our independent registered public accounting firm based on their audit of our internal controls over financial reporting.

In connection with our assessment of internal control over financial reporting for the fiscal year, we determined that we did not maintain effective internal control over financial reporting because the Company did not perform effective risk

assessment related to the mapping of general ledger accounts to the consolidated financial statements resulting in manual controls in the financial reporting process that were not designed to sufficiently mitigate the risk of incorrect presentation of certain general ledger accounts in the consolidated financial statements.

While the control deficiency did not result in a material misstatement to the consolidated financial statements, there is a reasonable possibility that a material misstatement of our consolidated financial statements may not have been prevented or detected on a timely basis.

We have initiated the appropriate steps to remediate the control deficiency contributing to the material weakness to ensure these controls are designed, implemented and operating effectively.

The occurrence of, or failure to remediate, a material weakness and any future material weaknesses in our internal control over financial reporting or determination that our disclosure controls and procedures are ineffective may have other consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock, potential actions or investigations by regulatory authorities, adverse legal action by stakeholders, or a loss of investor confidence and damage to our reputation.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

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 establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at annual or special shareholder meetings.

These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing

the members of our management.

In addition, because we are incorporated in Wisconsin, the Wisconsin control share acquisition statute and Wisconsin’s “business combination” provisions would apply and limit the ability of an acquiring person to engage in certain transactions or to exercise full voting power of acquired shares under certain circumstances.

As a result, offers to acquire us, which may represent a premium over the available market price of our Class B common stock, may be withdrawn or otherwise fail to be realized.

UNRESOLVED STAFF COMMENTS

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-K

Item 1. Business