Duluth Holdings Inc. (dba, Duluth Trading Company) (“Duluth Trading” or the “Company”) (NASDAQ: DLTH), a lifestyle brand of men’s and women’s casual wear, workwear and accessories, today announced its financial results for the financial 1st quarter finished May 5, 2k19.
Highlights for the 1st Quarter Finished May 5, 2k19
- Net sales raised 14.0 percent(%) to $114.2(M) compared to $100.2(M) in the previous-year 1st quarter
- Gross margin declined 250 basis points to 53.3 percent(%) compared to 55.8 percent(%) in the previous-year 1st quarter
- Operating loss of $9.7(M) compared to operating loss of $0.3(M) in the previous-year 1st quarter
- Net loss of $7.6(M), or $0.23 per diluted share, compared to a net loss of $0.7(M), or $0.02 per diluted share, in the previous-year 1st quarter
- Adjusted EBITDA1of $(4.4)(M) compared to $2.6(M) in the previous-year 1st quarter
- The Company opened five retail stores in Friendswood, TX; Katy, TX; Wichita, KS; Spokane Valley, WA; and Jacksonville, FL, totaling approximately 78,000 gross square feet
- 37th consecutive quarter of raised net sales Y-o-Y
1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.
“We achieved our 37th consecutive quarter of raised net sales Y-o-Y. Our 14 percent(%) top-line development was driven by new stores, the ongoing expansion of the women’s business, and new product introductions, with direct sales in established omnichannel store markets, continuing to outpace that of non-store markets,” said Stephanie Pugliese, Chief Executive Officer of Duluth Trading.
“From a market perspective, the softer demand trends we experienced at the end of the 4th quarter persisted through May. In response, our entire Duluth team is focused on the areas of improvement that are in our control.
They include better product selection with deeper inventory in new styles, driving higher traffic to our stores and website through more targeted spend in marketing, and refining our investments to improve productivity. We are executing on these areas and expect to see improving results in the back half of the year.”
Operating Results for the 1st Quarter Finished May 5, 2k19
Net sales raised 14.0 percent(%) to $114.2(M), compared to $100.2(M) in a similar period a year ago. The net sales raise was driven by a 42.8 percent(%) development in retail net sales, offset by a 0.8 percent(%) decline in direct net sales, with raises in both the men’s and women’s businesses.
The decline in direct net sales has continued into the 1st five weeks of the 2nd quarter. The raise in retail net sales was driven by new stores with 51 stores in the 1st quarter of 2k19 as compared to 33 stores in the similar period a year ago, partially offset by existing stores.
Gross profit raised 8.9 percent(%) to $60.9(M), or 53.3 percent(%) of net sales, compared to $55.9(M), or 55.8 percent(%) of net sales, in the corresponding previous-year period. The 250-basis point decline in gross margin was primarily attributable to a decline in product margins due to product mix on recent clearance activity, coupled with a slight decline in shipping revenues.
Selling, general and administrative costs raised 25.6 percent(%) to $70.6(M), compared to $56.2(M) in a similar period a year ago.
As a percentage of net sales, selling, general and administrative costs raised 570 basis points to 61.8 percent(%), compared to 56.1 percent(%) in the corresponding previous-year period. As a percentage of net sales, advertising and marketing costs declined 50 basis points to 21.1 percent(%), compared to 21.6 percent(%) in the corresponding previous-year period, primarily due to advertising leverage gained from a higher mix of retail sales as a percentage of net sales.
As a percentage of net sales, selling costs raised 50 basis points to 16.6 percent(%), compared to 16.1 percent(%) in the corresponding previous-year period, primarily due to an raise in customer service expense as a result of the development in retail, partially offset by a decline in shipping costs due to leverage from an raise in the proportion of retail net sales.
As a percentage of net sales, general and administrative costs raised 570 basis points to 24.1 percent(%), compared to 18.4 percent(%) in the corresponding previous-year period, primarily due to an raise in occupancy and equipment cost due to development in the number of retail stores, an raise in depreciation expense due to investments in technology and corporate facilities, and an raise in personnel cost due to an raise in headcount to support the development of the business.
Balance Sheet and Liquidity
The Company finished the quarter with a cash balance of $1.0(M), net working capital of $63.4(M), and $39.2(M) outstanding on its $130.0(M) revolving line of credit.
Financial 2k19 Outlook
The Company reaffirmed its financial 2k19 outlook as follows:
- Net sales in the range of $645.0(M) to $655.0(M)
- Adjusted EBITDA1in the range of $60.0(M) to $64.0(M)
- EPS in the range of $0.74 to $0.80 per diluted share
- Capital expenditures of $40.0(M) to $45.0(M)2
- 15 new store openings, adding 230,000 to 240,000 of additional gross square footage
|1See Reconciliation of forecasted net income to forecasted EBITDA and forecasted EBITDA to forecasted Adjusted EBITDA in the accompanying financial tables.|
|2Financial 2k19 capital expenditures primarily include the opening of 15 retail stores, investments in technology and infrastructure improvements.|
The table below recaps the Company’s financial 2k19 stores opened and signed new store leases and the anticipated opening timeframe.
|Friendswood, TX||Opened March 7, 2k19||16,026|
|Katy, TX||Opened March 8, 2k19||16,000|
|Wichita, KS||Opened March 21, 2k19||15,385|
|Spokane Valley, WA||Opened April 11, 2k19||15,656|
|Jacksonville, FL||Opened May 2, 2k19||14,557|
|Rogers, AR||Opened May 16, 2k19||15,656|
|Danbury, CT||Opened May 23, 2k19||9,792|
|Madison, AL||Opened June 6, 2k19||15,656|
|Kennesaw, GA||Q2 Financial 2k19||19,620|
|Round Rock, TX||Q3 Financial 2k19||15,536|
|Sandy, UT||Q3 Financial 2k19||15,602|
|Hoover, AL||Q3 Financial 2k19||15,656|
|Knoxville, TN||Q4 Financial 2k19||15,385|
Conference Call Information
A conference call and audio webcast with analysts and investors will be held on Thursday, June 13, 2k19 at 9:30 am Eastern Time, to discuss the results and answer questions.
- Live conference call: 844-875-6915 (domestic) or 412-317-6711 (international)
- Conference call replay available through June 27, 2k19: 877-344-7529 (domestic) or 412-317-0088 (international)
- Replay access code: 10132045