What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-06-06 compared with 2024-12-06 · 56 added, 91 removed, 160 unchanged (48% of the section changed)

1 unchanged sentence

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the financial statements and related notes of Duluth Holdings Inc.

included in Item 1of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 (“2023 Form 10-K”).

included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2025 (“2024 Form 10-K”).

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

The three months of fiscal 2024 and fiscal 2023 represent our 13-week periods ended October 27, 2024 and October 29, 2023, respectively.

Fiscal 2024 was a 53-week period and ended on February 2, 2025.

The three months of fiscal 2025 and fiscal 2024 represent our 13-week periods ended May 4, 2025 and April 28, 2024, 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.

9 unchanged sentences

the impact of inflation and measures to control inflation on our results of operations;

the prolonged effects of economic uncertainties on store and website traffic and disruptions to our distribution network, supply chains and operations;

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

disruptions to our distribution network, supply chains and operations;

failure to effectively manage inventory levels;

1 unchanged sentence

adapting to declines in consumer confidence, inflation and decreases in consumer spending;

disruptions in our e-commerce platform;

effectively adapting to new challenges associated with our expansion into new geographic markets;

disruptions to our e-commerce platform;

our ability to meet customer delivery time expectations;

our ability to properly allocate inventory throughout our distribution network to fulfill customer demand;

our failure to meet our debt covenant ratios;

natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events;

5 unchanged sentences

transportation delays and interruptions, including port congestion;

inability to timely and effectively obtain shipments of products from our suppliers and deliver merchandise to our customers;

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

our inability to timely and effectively obtain shipments of products from our suppliers and deliver merchandise to our customers;

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 ability to successfully open new stores;

competing effectively in an environment of intense competition;

effectively adapting to new challenges associated with our expansion into new geographic markets;

competing effectively in an environment of intense competition or elevated promotions;

our ability to adapt to significant changes in sales due to the seasonality of our business;

price reductions or inventory shortages resulting from failure to purchase the appropriate amount of inventory in advance of the season in which it will be sold;

the potential for further increases in price and availability of raw materials;

the potential for further increases in price and lack of availability of raw materials;

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;

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;

10 unchanged sentences

our ability to secure the personal and/or financial information of our customers and employees;

failure to comply with data privacy regulations;

our ability to comply with the security standards for the credit card industry;

2 unchanged sentences

and other factors that may be disclosed in our SEC filings or otherwise.

business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

Moreover , we operate in an evolving environment, n ew risk factors and uncertainties emerge from time to time and it is not possible for management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

We qualify all of our forward-looking statements by these cautionary statements.

3 unchanged sentences

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 October 27, 2024, we operated 62 retail stores and three outlet stores.

Since then, we have expanded our retail presence, and as of May 4, 2025, we operated 62 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.

4 unchanged sentences

A summary of our financial results is as follows:

 Net sales decreased by 8.1% over the prior year third quarter to $127.1 million, and net sales in the first nine months of fiscal 2024 decreased by 3.9% over the first nine months of the prior year to $385.4 million;

 Net loss of $28.5 million in fiscal 2024 third quarter compared to the prior year third quarter net loss of $10.5 million, and net loss in the first nine months of fiscal 2024 of $40.1 million compared to a net loss in the first nine months of fiscal 2023 of $16.4 million;

 Adjusted EBITDA decreased to ($6.8) million in fiscal 2024 third quarter compared to the prior year third quarter Adjusted EBITDA of ($1.6) million, and adjusted EBITDA in the first nine months of fiscal 2024 of $5.7 million compared to $12.3 million over the first nine months of fiscal 2023.

 Net sales decreased by 12.0% over the prior year first quarter to $102.7 million;

 Net loss of $15.3 million in fiscal 2025 first quarter compared to the prior year first quarter net loss of $7.9 million;

 Adjusted EBITDA decreased to ($3.8) million in fiscal 2025 first quarter compared to the prior year first quarter Adjusted EBITDA of $1.8 million.

See the “Reconciliation of Net Loss 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.

6 unchanged sentences

Economic Conditions

The macroeconomic environment is experiencing inflation, 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, 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.

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

29 unchanged sentences

Three Months Ended

Nine Months Ended

October 27, 2024

October 29, 2023

October 27, 2024

October 29, 2023

April 28, 2024

(in thousands)

1 unchanged sentence

Selling, general and administrative expenses

Restructuring expense

Operating loss

Interest expense

Other income, net

Other (loss) income, net

Loss before income taxes

6 unchanged sentences

Selling, general and administrative expenses

Restructuring expense

Operating loss

Interest expense

Other income, net

Other (loss) income, net

Loss before income taxes

2 unchanged sentences

Net loss attributable to controlling interest

Three Months Ended October 27, 2024 , Compared to Three Months Ended October 29, 2023

Net sales decreased $11.2 million, or 8.1%, to $127.1 million in the three months ended October 27, 2024 compared to $138.2 million in the three months ended October 29, 2023.

The decrease in net sales was primarily driven by lower web conversion and a decline in store traffic.

Store market net sales decreased $7.9 million, or 9.3%, to $88.7 million in the three months ended October 27, 2024 compared to $96.6 million in the three months ended October 29, 2023.

Non-store market net sales decreased by $3.7 million, or 9.8%, to $37.1 million in the three months ended October 27, 2024 compared to $40.8 million in the three months ended October 29, 2023.

Gross profit decreased $3.0 million, or 4.3%, to $66.4 million in the three months ended October 27, 2024 compared to $69.4 million in the three months ended October 29, 2023.

As a percentage of net sales, gross margin increased to 52.3% of net sales in the three months ended October 27, 2024, compared to 50.2% of net sales in the three months ended October 29, 2023.

The increase in gross margin percentage was primarily driven by our sourcing initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1.0 million, or 1.2%, to $82.9 million in the three months ended October 27, 2024 compared to $81.8 million in the three months ended October 29, 2023.

Selling, general and administrative expenses as a percentage of net sales increased to 65.2% in the three months ended October 27, 2024, compared to 59.2% in the three months ended October 29, 2023.

The increase in selling, general and administrative expense as a percentage of net sales was mainly driven by increased advertising spend, partially offset by optimization in our outbound shipping network.

Income tax expense was $4.7 million in the three months ended October 27, 2024, compared to income tax benefit of $3.1 million in the three months ended October 29, 2023.

The provision for third quarter of fiscal 2024 reflected the establishment of a valuation allowance of $10.1 million established against the net amount of deferred tax assets as well as pre-tax loss in the current year.

Net Loss Attributable to Controlling Interest

Net loss attributable to controlling interest was $28.5 million, in the three months ended October 27, 2024 compared to net loss of $10.5 million in the three months ended October 29, 2023.

In addition to the factors addressed above, $6.2 million in restructuring expense contributed to the net loss in the current period.

Nine Months Ended October 27, 2024 Compared to Nine Months Ended October 29, 2023

Net sales decreased $15.7 million, or 3.9%, to $385.4 million in the nine months ended October 27, 2024 compared to $401.1 million in the nine months ended October 29, 2023 .

Store market net sales decreased $14.8 million, or 5.3%, to $264.7 million in the nine months ended October 27, 2024 compared to $279.6 million in the nine months ended October 29, 2023 .

The decrease was driven by slower store traffic compared to the prior year.

Non-store market net sales decreased by $6.0 million, or 5.1%, to $112.8 million in the nine months ended October 27, 2024 compared to $118.8 million in the nine months ended October 29, 2023 .

Gross profit decreased $4.5 million, or 2.2%, to $202.0 million in the nine months ended October 27, 2024 compared to $206.5 million in the nine months ended October 29, 2023 .

As a percentage of net sales, gross margin increased to 52.4% of net sales in the nine months ended October 27, 2024, compared to 51.5% of net sales in the nine months ended October 29, 2023 .

The increase in gross margin rate was primarily driven by our sourcing initiatives.

Three Months Ended May 4, 2025 , Compared to Three Months Ended April 28, 202 4

Net sales decreased $14.0 million, or 12.0%, to $102.7 million in the three months ended May 4, 2025 compared to $116.7 million in the three months ended April 28, 2024.

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

Store market net sales decreased $6.4 million, or 8.2%, to $71.6 million in the three months ended May 4, 2025 compared to $78.1 million in the three months ended April 28, 2024.

Non-store market net sales decreased by $5.5 million, or 16.5%, to $28.0 million in the three months ended May 4, 2025 compared to $33.6 million in the three months ended April 28, 2024.

Gross profit decreased $8.3 million, or 13.4%, to $53.4 million in the three months ended May 4, 2025 compared to $61.6 million in the three months ended April 28, 2024.

As a percentage of net sales, gross margin decreased to 52.0% of net sales in the three months ended May 4, 2025, compared to 52.8% of net sales in the three months ended April 28, 2024.

The decrease in gross margin percentage was primarily driven by higher clearance penetration, partially offset by improvement in product costs from our direct to factory sourcing initiative.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $4.8 million, or 2.1%, to $229.7 million in the nine months ended October 27, 2024 compared to $224.9 million in the nine months ended October 29, 2023 .

Selling, general and administrative expenses as a percentage of net sales increased to 59.6% in the nine months ended October 27, 2024, compared to 56.1% in the nine months ended October 29, 2023 .

The increase in selling, general and administrative expenses included a $2.4 million non-recurring estimated sales tax expense.

Excluding this non-recurring expense, selling, general and administrative expenses increased $2.4 million to $227.3 million, representing 59.0% of net sales.

The increase in selling, general and administrative expense as a percentage of net sales, excluding the aforementioned non-recurring estimated sales tax expense accrual, was primarily due to higher fixed costs from foundational strategic investments.

Income tax expense was $1.6 million in the nine months ended October 27, 2024, compared to income tax benefit of $4.8 million in the nine months ended October 29, 2023.

Selling, general and administrative expenses decreased $4.9 million, or 6.9%, to $65.7 million in the three months ended May 4, 2025 compared to $70.6 million in the three months ended April 28, 2024.

Selling, general and administrative expenses as a percentage of net sales increased to 64.0% in the three months ended May 4, 2025, compared to 60.5% in the three months ended April 28, 2024.

The increase in selling, general and administrative expense as a percentage of net sales was mainly driven by decrease in net sales, partially offset by a decrease in advertising spend.

Income tax expense was $1.3 million in the three months ended May 4, 2025, compared to income tax benefit of $2.1 million in the three months ended April 28, 2024.

The provision for first quarter of fiscal 2025 reflected an addition to valuation allowance of $4.1 million which was established against the net amount of deferred tax assets as well as pre-tax loss in the previous fiscal year.

Net Loss Attributable to Controlling Interest

Net loss attributable to controlling interest was $40.2 million in the nine months ended October 27, 2024 compared to net loss of $16.3 million in the nine months ended October 29, 2023 .

In addition to the factors addressed above, $7.7 million in restructuring expense contributed to the net loss in the current period.

Net loss attributable to controlling interest was $15.3 million, in the three months ended May 4, 2025 compared to net loss of $7.9 million in the three months ended April 28, 2024.

Reconciliation of Net Loss to EBITDA and EBITDA to Adjusted EBITDA

3 unchanged sentences

Three Months Ended

Nine Months Ended

October 27, 2024

October 29, 2023

October 27, 2024

October 29, 2023

April 28, 2024

(in thousands)

4 unchanged sentences

Income tax expense (benefit)

Stock based compensation

Restructuring expense

Sales tax expense accrual

Long-term incentive expense

Impairment expense

Adjusted EBITDA

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $5.2 million to ($6.8) million in the three months ended October 27, 2024 compared to ($1.6) million in the three months ended October 29, 2023 .

As a percentage of net sales, Adjusted EBITDA decreased to (5.3%) of net sales in the three months October 27, 2024 compared to (1.1%) of net sales in the three months ended October 29, 2023 .

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $6.6 million to $5.7 million in the nine months ended October 27, 2024 compared to $12.3 million in the nine months ended October 29, 2023 .

As a percentage of net sales, Adjusted EBITDA decreased to 1.5% of net sales in the nine months ended October 27, 2024 compared to 3.1% of net sales in the nine months ended October 29, 2023.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $5.6 million to ($3.8) million in the three months ended May 4, 2025 compared to $1.8 million in the three months ended April 28, 2024.

As a percentage of net sales, Adjusted EBITDA decreased to (3.7%) of net sales in the three months May 4, 2025 compared to 1.6% of net sales in the three months ended April 28, 2024.

Liquidity and Capital Resources

2 unchanged sentences

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

At October 27, 2024, our net working capital was $60.6 million, including $9.3 million of cash and cash equivalents.

At May 4, 2025, our net working capital was $54.2 million, including $8.6 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 logistics optimization, including investments in the fulfillment network and information technology.

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.

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

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

2 unchanged sentences

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

Nine Months Ended

October 27, 2024

October 29, 2023

Three Months Ended

April 28, 2024

(in thousands)

2 unchanged sentences

Net cash provided by financing activities

Decrease in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Net Cash Used in Operating Activities

Operating activities consist primarily of net income 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 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 $47.3 million and a $40.1 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 $47.3 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 increase in inventory and trade accounts payable was primarily related to three main drivers.

The first was an increase in in-transit inventory as we moved from purchasing through an agent to buying directly from factories.

Another third was due to higher inventory receipts on core year-round products to mitigate low in-stock post Black Friday week.

Lastly, fall winter orders arrived on time but suffered delayed sales with the unusually warmer weather.

For the nine months ended October 29, 2023, net cash used in operating activities was $31.0 million, which primarily consisted of cash used in operating assets and liabilities of $36.6 million and a $16.4 million net loss for the nine months ended October 29, 2023 partially offset by depreciation of $23.4 million.

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 three months ended May 4, 2025, net cash used in operating activities was $56.5 million, which primarily consisted of cash used in operating assets and liabilities of $50.3 million and a $15.3 million net loss for the three months ended May 4, 2025 partially offset by depreciation of $6.7 million.

The cash used in operating assets and liabilities of $50.3 million was primarily due to a $28.2 million decrease in accounts payable and $9.6 million increase in inventory.

For the three months ended April 28, 2024, net cash used in operating activities was $33.7 million, which primarily consisted of cash used in operating assets and liabilities of $33.2 million and a $7.9 million net loss for the three months ended April 28, 2024 partially offset by depreciation of $8.3 million.

The cash used in operating assets and liabilities of $33.2 million was primarily due to a $10.7 million increase in inventory and $13.2 million decrease in trade accounts payable.

Net Cash Used in Investing Activities

Investing activities consist primarily of capital expenditures for growth related to investments in infrastructure and information technology.

For the nine months ended October 27, 2024 and October 29, 2023, net cash used in investing activities was $5.7 million and $39.8 million, respectively.

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

For the three months ended May 4, 2025 and April 28, 2024 , net cash used in investing activities was $1.3 million and $1.5 million, respectively.

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 October 27, 2024, net cash used in financing activities was $41.0 million and $33.5 million, respectively.

For the three months ended May 4, 2025 and April 28, 2024 , net cash provided by financing activities was $63.0 million and $9.8 million, respectively, primarily consisting of net borrowings under our revolving line of credit.

Contractual Obligations

There have been no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.

There have been no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the fiscal year ended February 2, 2025.

Off-Balance Sheet Arrangements

10 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