Duluth Holdings raises guidance for strong third quarter

Duluth Holdings Inc., the parent company of Duluth Trading, raised its guidance for the year sharply after reporting third quarter profits tripled year over year with record margins. Sales are up 7.2%.

Highlights for the third quarter ended October 31, 2021

  • Net sales increased 7.2% to $ 145.3 million from $ 135.5 million in the third quarter of 2020 and increased 21.3% compared to the same period in 2019;
  • Gross margin improved 520 basis points to 57.6 percent from 52.4 percent in the third quarter of the previous year;
  • Operating income increased $ 2.0 million to $ 4.9 million from $ 2.9 million in the third quarter of last year;
  • Net income was $ 2.8 million, or $ 0.09 per diluted share, compared to net income of $ 0.9 million, or $ 0.03 per diluted share in the third quarter of last year ; and
  • Adjusted EBITDA increased 15.3% to $ 13.2 million from $ 11.4 million in the third quarter of the prior year.

Management commentary
President and CEO Sam Sato commented, “Our third quarter results reflect continued strength in customer demand for our core product offering and strong operational performance in the face of supply chain disruptions. . Despite transportation network congestion, our company was able to maneuver and generate healthy sales growth of 7.2% and net profit growth of over 200%, thanks to a significant improvement in gross profit margin. We are encouraged by the holiday sales trends to date and plan to end the year strong.

“As we approach the end of 2021 and look into 2022 and beyond, I am excited by the progress we have made in developing our long-term master plan for large dams and the information that will inform our strategic growth opportunities. The building blocks of the plan will guide critical long-term investments in our business, many of which are underway today and will be incorporated into our short-term plans. Above all, the investments we make will be thought out and targeted, corresponding to the growth and needs of the company. The fundamental pillars of our strategic plans are:

  • Lead with a digital and customer-centric mindset in all aspects of our strategic initiatives;
  • Intensify our efforts to optimize our owned DTC channels by truly understanding how our customer wants to engage with Duluth;
  • Evolve our multi-brand platform to enable long-term growth through the development of products that meet the end use of our customers;
  • Continuously test and learn in alternative channels that can lead to incremental growth on top of our goal of reaching $ 1 billion in sales by 2025; and
  • Invest in the empowerment and sustainability of our business through thoughtful, value-creating investments in supply chain and digital capabilities.

Results of operations for the third quarter ended October 31, 2021
Net sales increased 7.2% to $ 145.3 million from $ 135.5 million in the same period a year ago and were up 21.3% from the third quarter of 2019. Retail store net sales increased 22.3% to $ 60.1 million, a significant increase from the third quarter of last year. quarter when in-store traffic was affected by the pandemic. For a more normalized comparison, retail store sales increased 3.3% from the third quarter of 2019. Net direct sales to consumers were down 1.4% to $ 85.2 million from third quarter of last year, when online shopping was boosted by larger discounts. and customer traffic to stores was low due to covid issues. For a more normalized comparison, direct-to-consumer sales increased 38.4% from the third quarter of fiscal 2019.

Net sales in store markets increased 10.5 percent to $ 103.0 million from $ 93.6 million for the same period a year ago. This increase is due to a continued acceleration in store traffic and positive conversion trends compared to the previous year. Net sales in non-store markets edged up 0.7% to $ 41.1 million.

Men’s clothing net sales growth increased 7.5% on year-round workwear growth, while women’s clothing net sales increased 5.6% on strong sales. woven stockings and flannels.

Gross margin increased 17.8 percent to $ 83.6 million, or 57.6 percent of net sales, from $ 71.0 million, or 52.4 percent of net sales, during the corresponding period of the previous year. The increase in gross margin is due to a higher combination of full-price sales due to lower clearance inventory and a successful reduction in promotional activity.

Selling, general and administrative expenses increased 15.5% to $ 78.8 million, from $ 68.2 million for the same period a year ago. As a percentage of net sales, selling, general and administrative expenses increased to 54.2%, compared to 50.3% in the corresponding period last year.

The increase in selling, general and administrative expenses is mainly due to the increase in personnel costs, associated with the increase in advertising expenses as we fell back the previous year due to our uncertainty about the demand of the customers resulting from the pandemic.

The effective tax rate related to the majority stake was 25%, compared to 29% for the corresponding period of the previous year.

Balance sheet and liquidity
The company ended the quarter with a cash balance of approximately $ 20.4 million, an inventory balance of $ 165.1 million, net working capital of $ 89.9 million and no outstanding balances on its $ 150.0 million revolving senior credit facility.

Updated outlook for fiscal year 2021
The company has updated its outlook for fiscal 2021 as follows:

  • Net sales between $ 700 million and $ 715 million;
  • Adjusted EBITDA between $ 73 million and $ 75 million;
  • EPS between $ 0.81 and $ 0.86 per diluted share; and
  • Capital expenditure, including software hosting implementation costs, approximately $ 18 million.

The preliminary perspectives requested:

  • Net sales in the range of $ 610.0 million to $ 620.0 million;
  • Adjusted EBITDA in the range of $ 51.0 million to $ 55.0 million;
  • EPS between $ 0.60 and $ 0.66 per diluted share;
  • Capital expenditure of $ 38.0 million to $ 42.0 million; and
  • 15 new store openings, adding approximately 215,000 additional gross square feet.

Photo courtesy of Duluth Trading

Comments are closed.