What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-05 compared with 2025-06-06 · 83 added, 55 removed, 161 unchanged (46% of the section changed)

5 unchanged sentences

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.

The three months of fiscal 2025 and fiscal 2024 represent our 13-week periods ended August 3, 2025 and July 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.

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

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

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

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

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

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

changes in U.S.

laws affecting the importation and taxation of goods, including imposition of unilateral tariffs on imported goods;

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

disruptions to our distribution network, supply chains and operations;

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our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices;

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

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

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

changes in U.S.

laws affecting the importation and taxation of goods, including imposition of unilateral tariffs on imported goods;

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

failure to comply with data privacy regulations;

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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 4, 2025, we operated 62 retail stores and three outlet stores.

Since then, we have expanded our retail presence, and as of August 3, 2025, we operated 61 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.

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A summary of our financial results is as follows:

 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.

 Net sales decreased by 7.0% over the prior year second quarter to $131.7 million, and net sales in the first six months of fiscal 2025 decreased by 9.2% over the first six months of the prior year to $234.4 million;

 Net income of $1.3 million in fiscal 2025 second quarter compared to the prior year second quarter net loss of $2.0 million, and net loss in the first six months of fiscal 2025 of $14.0 million compared to a net loss in the first six months of fiscal 2024 of $9.8 million;

 Adjusted EBITDA increased to $12.0 million in fiscal 2025 second quarter compared to the prior year second quarter Adjusted EBITDA of $10.5 million, and adjusted EBITDA in the first six months of fiscal 2025 of $8.2 million compared to $12.3 million over the first six months of fiscal 2024.

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

GAAP financial measures.

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Three Months Ended

April 28, 2024

Six Months Ended

August 3, 2025

July 28, 2024

August 3, 2025

July 28, 2024

(in thousands)

1 unchanged sentence

Selling, general and administrative expenses

Operating loss

Restructuring expense

Operating income (loss)

Interest expense

Other (loss) income, net

Loss before income taxes

Income tax expense (benefit)

Net income (loss) attributable to noncontrolling interest

Net loss attributable to controlling interest

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to controlling interest

Percentage of Net sales:

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Selling, general and administrative expenses

Operating loss

Restructuring expense

Operating income (loss)

Interest expense

Other (loss) income, net

Loss before income taxes

Income tax expense (benefit)

Net income (loss) attributable to noncontrolling interest

Net loss attributable to controlling interest

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.

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to controlling interest

Three Months Ended August 3, 2025 , Compared to Three Months Ended July 28, 2024

Net sales decreased $9.9 million, or 7.0%, to $131.7 million in the three months ended August 3, 2025 compared to $141.6 million in the three months ended July 28, 2024.

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

Gross profit decreased $2.0 million, or 2.7%, to $72.0 million in the three months ended August 3, 2025 compared to $74.0 million in the three months ended July 28, 2024.

As a percentage of net sales, gross margin increased to 54.7% in the three months ended August 3, 2025, compared to 52.3% of net sales in the three months ended July 28, 2024.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $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.

Selling, general and administrative expenses decreased $5.2 million, or 7.1%, to $68.8 million in the three months ended August 3, 2025 compared to $74.0 million in the three months ended July 28, 2024.

Selling, general and administrative expenses as a percentage of net sales remained decreased to 52.2% in the three months ended August 3, 2025, compared to 52.3% in the three months ended July 28, 2024.

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

Income tax benefit was $0.4 million in the three months ended August 3, 2025, compared to income tax benefit of $0.5 million in the three months ended July 28, 2024.

Net Income (Loss) Attributable to Controlling Interest

Net income attributable to controlling interest was $1.3 million, in the three months ended August 3, 2025 compared to net loss of $2.0 million in the three months ended July 28, 2024.

Six Months Ended August 3, 2025 , Compared to Six Months Ended July 28, 2024

Net sales decreased $23.9 million, or 9.2%, to $234.4 million in the six months ended August 3, 2025 compared to $258.3 million in the six months ended July 28, 2024.

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

Gross profit decreased $10.2 million, or 7.6%, to $125.4 million in the six months ended August 3, 2025 compared to $135.6 million in the six months ended July 28, 2024.

As a percentage of net sales, gross margin increased to 53.5% of net sales in the six months ended August 3, 2025, compared to 52.5% of net sales in the six months ended July 28, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $10.1 million, or 7.0%, to $134.5 million in the six months ended August 3, 2025 compared to $144.6 million in the six months ended July 28, 2024.

Selling, general and administrative expenses as a percentage of net sales increased to 57.4% in the six months ended August 3, 2025, compared to 56.0% in the six months ended July 28, 2024.

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

Income tax expense was $0.8 million in the six months ended August 3, 2025, compared to income tax benefit of $2.6 million in the six months ended July 28, 2024.

The provision for second quarter of fiscal 2025 reflected a valuation allowance 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 $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

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

Net loss attributable to controlling interest was $14.0 million, in the six months ended August 3, 2025 compared to net loss of $9.9 million in the six months ended July 28, 2024.

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.

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Three Months Ended

April 28, 2024

Six Months Ended

August 3, 2025

July 28, 2024

August 3, 2025

July 28, 2024

(in thousands)

Net income (loss)

Depreciation and amortization

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Interest expense

Income tax expense (benefit)

Income tax (benefit) expense

Long-term incentive expense

Impairment expense

Restructuring expense

Adjusted EBITDA

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.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $1.5 million to $12.0 million in the three months ended August 3, 2025 compared to $10.5 million in the three months ended July 28, 2024.

As a percentage of net sales, Adjusted EBITDA increased to 9.1% of net sales in the three months August 3, 2025 compared to 7.4% of net sales in the three months ended July 28, 2024.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $4.1 million to $8.2 million in the six months ended August 3, 2025 compared to $12.3 million in the six months ended July 28, 2024.

As a percentage of net sales, Adjusted EBITDA decreased to 3.5% of net sales in the six months August 3, 2025 compared to 4.8% of net sales in the six months ended July 28, 2024.

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 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.

At August 3, 2025, our net working capital was $56.9 million, including $5.7 million of cash and cash equivalents.

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

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

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

Three Months Ended

April 28, 2024

Six Months Ended

August 3, 2025

July 28, 2024

(in thousands)

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Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

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

For the 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.

For the six months ended August 3, 2025, net cash used in operating activities was $24.4 million, which primarily consisted of cash used in operating assets and liabilities of $27.0 million and a $14.0 million net loss for the six months ended August 3, 2025 partially offset by depreciation of $13.3 million.

The cash used in operating assets and liabilities of $27.0 million was primarily due to a $30.7 million decrease in accounts payable and an $18.5 million decrease in inventory.

For the six months ended July 28, 2024, net cash used in operating activities was $17.1 million, which primarily consisted of cash used in operating assets and liabilities of $21.9 million and an $9.8 million net loss for the six months ended July 28, 2024 partially offset by depreciation of $16.3 million.

The cash used in operating assets and liabilities of $21.9 million was primarily due to a $43.0 million increase in inventory, partially offset by a $26.6 million increase in trade accounts payable.

Net Cash Used in Investing Activities

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

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

For the six months ended August 3, 2025 and July 28, 2024, net cash used in investing activities was $3.5 million and $3.1 million, respectively.

Net Cash Provided by (Used in) 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 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.

For the six months ended August 3, 2025, net cash provided by financing activities was $30.3 million compared to net cash used in financing activities of $2.2 million for six months ended July 28, 2024.

Contractual Obligations

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis