Release Date: June 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Duluth Holdings Inc (DLTH, Financial) is focusing on brand awareness by reinvigorating its distinctive voice and storytelling capabilities to drive customer acquisition and retention.
- The company is implementing a 20% reduction of SKUs by spring 2026 to create productivity gains and enhance inventory efficiency.
- Duluth Holdings Inc (DLTH) has initiated an expense savings initiative expected to result in annualized savings of approximately $15 million, with at least $10 million realized in the current fiscal year.
- The direct-to-factory sourcing initiative is yielding positive results, reducing costs of goods and enabling faster market innovation.
- The company has successfully transitioned its line of credit to an asset-based lending agreement, extending to 2030 with improved borrowing rates and increased flexibility.
Negative Points
- First quarter 2025 net sales declined by 12% compared to the previous year.
- The company reported an EPS loss of $0.45 and an adjusted EPS loss of $0.32 for the first quarter.
- Gross profit margin rate declined by 80 basis points due to greater clearance penetration and deeper discounting.
- Inventory levels increased by 29% year-on-year, with a significant portion in core year-round products.
- The company is facing macroeconomic uncertainties and potential top line headwinds, impacting its financial performance.
Q & A Highlights
Q: Could you elaborate on your strategy for building brand awareness and how marketing will be approached going forward?
A: Stephanie Pugliese, President and CEO, explained that Duluth Holdings is focusing on the marketing funnel, particularly the upper part, to drive brand awareness. They are investing in opportunities to extend their reach, such as being featured on Good Morning America. The company is testing strategies in the second quarter to increase visits to their website and stores. As they find savings in other areas, they plan to reinvest in marketing to improve returns.
Q: How are consumers responding to the reduction in promotions, and what are your expectations regarding price increases?
A: Stephanie Pugliese noted that there has been sequential improvement in gross margin rates, particularly in March and April, due to reduced promotions. The company is balancing promotional activities with customer retention and acquisition. They are implementing selective price increases to mitigate tariff impacts, focusing on unique products with pricing elasticity. The goal is to maintain value pricing while offering innovative, high-quality products.
Q: What trends are you observing as you reduce the depth and frequency of promotions?
A: Heena Agrawal, CFO, reported positive trends in conversion rates and higher full-price sales, especially in retail stores. As they refine promotional frequency, they are seeing better sequential trends from March to May, indicating improved top-line and profitability.
Q: Can you provide more details on the financial outlook for fiscal year 2025?
A: Heena Agrawal stated that Duluth Holdings is maintaining its adjusted EBITDA guidance of $20 million to $25 million. They are offsetting tariff impacts with price increases and vendor negotiations, reducing expenses to protect against top-line headwinds, and revitalizing their store portfolio. The company is also managing inventory levels to normalize in the second half of the year.
Q: How is Duluth Holdings managing its inventory and capital expenditures?
A: Heena Agrawal mentioned that inventory levels are expected to normalize by the end of the year, with a reduction in capital expenditures by $3 million to approximately $17 million. The focus is on store openings, fulfillment software, and regular maintenance. The company has transitioned its credit facility to an asset-based lending agreement, providing improved borrowing rates and flexibility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
