What changed in this filing

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Item 1. Financial Statements

2024-08-30 compared with 2024-05-31 · 120 added, 71 removed, 458 unchanged (29% of the section changed)

3 unchanged sentences

(Amounts in thousands)

April 28, 2024

July 28, 2024

January 28, 2024

15 unchanged sentences

(Amounts in thousands)

April 28, 2024

July 28, 2024

January 28, 2024

15 unchanged sentences

10,000 shares authorized;

‎ issued or outstanding as of April 28, 2024 and January 28, 2024

‎ issued or outstanding as of July 28, 2024 and January 28, 2024

Common stock (Class A), no par value;

10,000 shares authorized;

‎ issued and outstanding as of April 28, 2024 and January 28, 2024

issued and outstanding as of July 28, 2024 and January 28, 2024

Common stock (Class B), no par value;

200,000 shares authorized;

‎ 31,945 shares issued and 31,710 shares outstanding as of April 28, 2024 and

31,979 shares issued and 31,715 shares outstanding as of July 28, 2024 and

31,178 shares issued and 31,023 shares outstanding as of January 28, 2024

Treasury stock, at cost;

235 and 155 shares as of April 28, 2024 and

264 and 155 shares as of July 28, 2024 and

‎ January 28, 2024, respectively

11 unchanged sentences

Three Months Ended

April 28, 2024

April 30, 2023

Six Months Ended

July 28, 2024

July 30, 2023

July 28, 2024

July 30, 2023

Cost of goods sold (excluding depreciation and amortization)

Selling, general and administrative expenses

Restructuring expense

Operating loss

16 unchanged sentences

Three Months Ended

April 28, 2024

April 30, 2023

Six Months Ended

July 28, 2024

July 30, 2023

July 28, 2024

July 30, 2023

Other comprehensive loss

Securities available-for sale:

Unrealized security loss arising during the period

Income tax benefit

Other comprehensive loss

Unrealized security gain (loss) arising during the period

Income tax expense (benefit)

Other comprehensive income (loss)

Comprehensive loss

6 unchanged sentences

(Amounts in thousands)

Three Months Ended April 28, 2024

Six Months Ended July 28, 2024

Noncontrolling

3 unchanged sentences

shareholders'

(loss) income

Balance at January 28, 2024

6 unchanged sentences

Balance at April 28, 2024

Issuance of common stock

Stock-based compensation

Restricted stock forfeitures

Restricted stock surrendered for taxes

Other comprehensive income

Net (loss) income

Balance at July 28, 2024

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Three Months Ended April 30, 2023

Six Months Ended July 30, 2023

Noncontrolling

10 unchanged sentences

Balance at April 30, 2023

Issuance of common stock

Stock-based compensation

Restricted stock forfeitures

Restricted stock surrendered for taxes

Other comprehensive income

Balance at July 30, 2023

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Three Months Ended

April 28, 2024

April 30, 2023

Six Months Ended

July 28, 2024

July 30, 2023

Cash flows from operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

21 unchanged sentences

Payments of tax withholding on vested restricted shares

Net cash provided by (used in) financing activities

Net cash used in financing activities

Decrease in cash and cash equivalents

31 unchanged sentences

Fiscal 2023 was a 52-week period and ended on January 28, 2024.

The three months of fiscal 2024 and fiscal 2023 represent the Company’s 13-week periods ended April 28, 2024 and April 30, 2023, respectively.

The accompanying condensed consolidated financial statements as of and for the three months ended April 28, 2024 and April 30, 2023 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

The three months of fiscal 2024 and fiscal 2023 represent the Company’s 13-week periods ended July 28, 2024 and July 30, 2023, respectively.

The accompanying condensed consolidated financial statements as of and for the three and six months ended July 28, 2024 and July 30, 2023 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such SEC rules and regulations as of and for the three months ended April 28, 2024 and April 30, 2023.

GAAP have been condensed or omitted pursuant to such SEC rules and regulations as of and for the three and six months ended July 28, 2024 and July 30, 2023.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the fiscal year ended January 28, 2024.

Impairment Analysis

As of April 28, 2024 and for the three months ended, no triggering events or indicators of asset impairment were noted.

Inventory, consisting of purchased product, is valued at the lower of cost or net realizable value, under the first-in, first-out method.

The significant estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or market reserves) and estimates of inventory shrinkage.

Both estimates have calculations that require the Company to make assumptions and apply judgment regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends.

Inventory is adjusted periodically to reflect current market conditions, which requires management’s judgment that may significantly affect the ending inventory valuation, as well as gross margin.

The reserve for inventory shrinkage is adjusted to reflect the trend of historical physical inventory count results.

Inventory consists of finished goods stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out valuation method.

The Company records an inventory reserve for the anticipated loss associated with selling inventories below cost.

Inventory reserve for excess and obsolete items was $ 1.0 million and $ 1.4 million as of July 28, 2024 and January 28, 2024, respectively.

The reserve for retail inventory shrinkage is adjusted to reflect the trend of historical physical inventory count results.

The Company performs its retail store physical inventory counts in July and the difference between actual and estimated shrinkage, recorded in Cost of goods sold, may cause fluctuations in second fiscal quarter results.

Due to the timing of the inventory counts, an insignificant retail inventory shrinkage reserve was outstanding as of July 28, 2024, compared to $ 0.5 million as of January 28, 2024.

DULUTH HOLDINGS INC.

2 unchanged sentences

Prepaid expenses and other assets consist of the following:

April 28, 2024

July 28, 2024

January 28, 2024

37 unchanged sentences

Three Months Ended

Six Months Ended

of Operations

April 28, 2024

April 30, 2023

July 28, 2024

July 30, 2023

July 28, 2024

July 30, 2023

(in thousands)

20 unchanged sentences

Other information related to leases were as follows:

Three Months Ended

April 28, 2024

April 30, 2023

Six Months Ended

July 28, 2024

July 30, 2023

(in thousands)

11 unchanged sentences

Operating leases

Future minimum lease payments under the non-cancellable leases are as follows as of April 28, 2024:

Future minimum lease payments under the non-cancellable leases are as follows as of July 28, 2024:

(in thousands)

3 unchanged sentences

Lease liability

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

DEBT AND CREDIT AGREEMENT

Debt consists of the following:

April 28, 2024

July 28, 2024

January 28, 2024

3 unchanged sentences

TRI long-term debt

Duluth Line of credit

current maturities

Duluth long-term debt

TRI Holdings, LLC

2 unchanged sentences

See Note 6 “Variable Interest Entities” for further information.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

TRI entered into a promissory note (“TRI Note”) with an original balance of $ 3.5 million.

12 unchanged sentences

and (iv) reduce the commitment fee in some instances.

As of April 28, 2024 and for the three months then ended, the Company was in compliance with all financial and non-financial covenants contained within the Credit Agreement and the First Amendment.

As of July 28, 2024 and for the six months then ended, the Company was in compliance with all financial and non-financial covenants contained within the Credit Agreement and the First Amendment.

DULUTH HOLDINGS INC.

2 unchanged sentences

Accrued expenses and other current liabilities consist of the following:

April 28, 2024

July 28, 2024

January 28, 2024

18 unchanged sentences

Treasury yield curve, credit information and an estimate of future cash flows.

During the three months ended April 28, 2024, certain changes in the inputs did impact the fair value of the available-for-sale security.

During the six months ended July 28, 2024, certain changes in the inputs did impact the fair value of the available-for-sale security.

The calculated fair value is based on estimates that are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, cannot be determined with precision.

1 unchanged sentence

The amortized cost and fair value of the Company’s money market account and available-for-sale security and the corresponding amount of gross unrealized gains and losses recognized in accumulated other comprehensive income are as follows:

April 28, 2024

July 28, 2024

(in thousands)

13 unchanged sentences

The Company reviews its securities on a quarterly basis to monitor its exposure to other-than-temporary impairment.

No other-than-temporary impairment was recorded in the unaudited condensed consolidated statements of operations for the three months ended April 28, 2024 or April 30, 2023 .

The following table presents future principal receipts related to the Company’s available-for-sale security by contractual maturity as of April 28, 2024.

No other-than-temporary impairment was recorded in the unaudited condensed consolidated statements of operations for the three months ended July 28, 2024 or July 30, 2023 .

The following table presents future principal receipts related to the Company’s available-for-sale security by contractual maturity as of July 28, 2024.

(in thousands)

4 unchanged sentences

The carrying values and fair values of other financial instruments in the Consolidated Balance Sheets are as follows:

April 28, 2024

July 28, 2024

January 28, 2024

12 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company has determined that it was the primary beneficiary of one variable interest entity (“VIE”) as of April 28, 2024 and January 28, 2024.

The Company has determined that it was the primary beneficiary of one VIE as of July 28, 2024 and January 28, 2024.

The Company leases the Company’s headquarters in Mt.

5 unchanged sentences

The Company does not consolidate the trust as the Company is not the primary beneficiary.

The condensed consolidated balance sheets include the following amounts as a result of the consolidation of TRI as of April 28, 2024 and January 28, 2024:

April 28, 2024

The condensed consolidated balance sheets include the following amounts as a result of the consolidation of TRI as of July 28, 2024 and January 28, 2024:

July 28, 2024

January 28, 2024

13 unchanged sentences

Three Months Ended

April 28, 2024

April 30, 2023

Six Months Ended

July 28, 2024

July 30, 2023

July 28, 2024

July 30, 2023

(in thousands, except per share data)

5 unchanged sentences

Loss per share (Class A and Class B)

The computation of diluted loss per share excluded 0.3 million of unvested restricted stock for the three months ended April 28, 2024 and April 30, 2023, because their inclusion would be anti-dilutive due to a net loss.

The computation of diluted loss per share excluded ( 0.4 ) million and ( 0.2 ) million of unvested restricted stock for the three months ended July 28, 2024 and July 30, 2023, because their inclusion would be anti-dilutive due to a net loss.

The computation of diluted loss per share excluded ( 0.0 ) million and ( 0.1 ) million of unvested restricted stock for the six months ended July 28, 2024 and July 30, 2023, because their inclusion would be anti-dilutive due to a net loss.

DULUTH HOLDINGS INC.

2 unchanged sentences

The Company accounts for its stock-based compensation plan in accordance with ASC 718, Stock Compensation , which requires the Company to measure all share-based payments at grant date fair value and recognize the cost over the requisite service period of the award.

Total stock compensation expense associated with restricted stock recognized by the Company was $ 1.4 million and $ 1.0 million for the three months ended April 28, 2024 and April 30, 2023, respectively.

Total stock compensation expense associated with restricted stock recognized by the Company was $ 1.0 million and $ 2.4 million for the three and six months ended July 28, 2024, respectively.

The Company’s total stock compensation expense is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.

A summary of the activity in the Company’s unvested restricted stock during the three months ended April 28, 2024 is as follows:

A summary of the activity in the Company’s unvested restricted stock during the six months ended July 28, 2024 is as follows:

Outstanding at January 28, 2024

Outstanding at April 28, 2024

At April 28, 2024, the Company had unrecognized compensation expense of $ 8.7 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 3.0 years.

Outstanding at July 28, 2024

At July 28, 2024, the Company had unrecognized compensation expense of $ 7.6 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 2.9 years.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

April 28, 2024

July 28, 2024

January 28, 2024

18 unchanged sentences

Three Months Ended

April 28, 2024

April 30, 2023

Six Months Ended

July 28, 2024

July 30, 2023

July 28, 2024

July 30, 2023

(in thousands)

6 unchanged sentences

Contract assets and liabilities on the Company’s consolidated balance sheets are presented in the following table:

April 28, 2024

July 28, 2024

January 28, 2024

6 unchanged sentences

The following table provides the reconciliation of the contract liability related to gift cards for the three months ended:

April 28, 2024

April 30, 2023

July 28, 2024

July 30, 2023

(in thousands)

4 unchanged sentences

Balance as of end of period

For the three months ended April 28, 2024, the Company has utilized the discrete effective tax rate method as allowed by Accounting Standards Codification ("ASC") 740-270-30-18, Income Taxes – Interim Reporting to calculate its interim tax provision.

The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis.

The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method.

The provision for income taxes for the interim period is based on an estimate of the annual effective tax rate adjusted to reflect the impact of discrete items.

Management judgment is required in projecting ordinary income to estimate the Company’s annual effective tax rate.

The effective tax rate related to controlling interest was 21 % and 22 % for the six months ended July 28, 2024 and July 30, 2023, respectively.

The income from TRI was excluded from the calculation of the Company’s effective tax rate, as TRI is a limited liability company and not subject to income taxes.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The effective tax rate related to controlling interest was 21 % and 27 % for the three months ended April 28, 2024 and April 30, 2023, respectively.

The income from TRI was excluded from the calculation of the Company’s effective tax rate, as TRI is a limited liability company and not subject to income taxes.

RESTRUCTURING

As part of the Company’s in-depth review of the retail portfolio strategy, fulfillment center network, and benchmarking to identify structural opportunities to improve operating margin, working capital, and asset efficiency, the Company began phase two of its fulfillment center network plan to maximize productivity and capacity.

This was initiated in the second quarter of 2024 and is expected to continue beyond this fiscal year as we implement further structural changes.

On July 12, 2024 (the “Effective Date”), as a result of the phase two analysis of the fulfillment center network, the Company voluntarily entered into a lease amendment for one of its legacy fulfillment center leases in Dubuque, Iowa.

The amended lease accelerated the lease expiration date from September 30, 2030 to October 27, 2024 .

The amended lease requires Duluth to pay an aggregate of $ 3.7 million (the “Termination Penalty”) in consideration of accelerating the lease termination date, which will be paid in four equal quarterly installments from October 2024 through August 2025.

The Company is amortizing the loss from the Termination Penalty, as well as the net loss from writing off the right-of-use asset and lease liability over the modified remaining lease term.

In addition, the Company is accelerating the depreciation of the non-transferrable fixed assets to have no remaining net book value by the modified lease expiration date.

The Company expects to recognize total restructuring expenses related to this lease amendment of $ 7.4 million during the second and third quarter of 2024.

During the three months ended July 28, 2024, the Company recognized restructuring charges of $ 1.6 million.

Three Months Ended

July 28, 2024

(in thousands)

Early contract termination expense

Lease remeasurement expense

Accelerated depreciation expense

Total restructuring expenses

CONTINGENCIES

In the second quarter of 2024, in conjunction with ongoing state sales tax audits the Company began a review of its sales tax positions.

As a result of the review, the Company determined that sales in a state were subject to certain local sales tax and that the Company had not sufficiently assessed such sales tax on sales to customers in prior fiscal years.

The Company concluded that some payment to the state is probable.

As of July 28, 2024, the Company recorded an estimated sales tax expense accrual of $ 2.4 million that is reflected in Selling, general and administrative expenses within the Consolidated Statements of Operations.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

RECENT ACCOUNTING PRONOUNCEMENTS

25 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 1. Financial Statements