Release Date: March 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Duluth Holdings Inc (NASDAQ:DLTH) experienced record sales during the Black Friday to Cyber Monday period, showcasing strong consumer demand.
• The company's Adairsville fulfillment center processes over 60% of total volume at a significantly lower cost per unit, enhancing operational efficiency.
• Mobile sales have grown 4% year over year, with mobile now accounting for nearly 70% of site visits and 58% of digital sales.
• Duluth Holdings Inc (NASDAQ:DLTH) has successfully completed the closure of its Dubuque facility, generating approximately $5 million in annual cost savings.
• The company ended 2024 with no debt and $103 million in liquidity, providing financial flexibility for future operations.

Negative Points

• Fourth quarter results fell short of expectations due to processing delays at the legacy fulfillment center, impacting net sales.
• Retail store sales decreased by 6.9% due to declining foot traffic, affecting overall sales performance.
• Gross margin contracted by 410 basis points in Q4, driven by a decline in average unit retail prices.
• The company reported a net loss for the fourth quarter, with adjusted EPS showing a loss of $0.04.
• Inventory levels increased by 32% year over year, raising concerns about inventory management and potential overstock.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with DLTH.

Q: Can you elaborate on the challenges faced with the fulfillment centers during the fourth quarter? A: Samuel Sato, President and CEO, explained that the processing delays at the Belleville fulfillment center were due to a surge in demand over the Black Friday weekend, which depleted inventory at the Adairsville center. This led to a backlog at Belleville, which has less processing capacity. Enhanced operational protocols have since been implemented to optimize inventory distribution across the network.

Q: What strategic initiatives are being prioritized for fiscal 2025? A: Samuel Sato highlighted the focus on enhancing inventory management, improving logistics and fulfillment capabilities, and continuing the transformation journey with product development and sourcing initiatives. The company aims to drive higher quality sales and improve financial results through these efforts.

Q: How is Duluth Holdings addressing the decline in retail sales? A: Samuel Sato noted that the company is revitalizing its retail store portfolio by evaluating locations for remodel, relocation, or exit based on enhanced performance standards. Two new stores are planned for the second half of 2025, and the omnichannel strategy remains crucial, as customers shopping across multiple channels tend to purchase more frequently.

Q: What are the financial expectations for fiscal 2025? A: Heena Agrawal, CFO, stated that net sales are projected to be between $570 million and $595 million. The company anticipates a 300 basis point gross margin expansion due to increased direct sourcing, targeted promotions, and improved inventory control. Adjusted EBITDA is expected to be between $20 million and $25 million.

Q: What are the key product innovations planned for 2025? A: Samuel Sato mentioned several new product launches, including expansions in the Duluth Men's armadillo cooling technology, new outdoor wear lines, and collaborations with brands like Leinenkugels. The women's collection will see new offerings in the heirloom and NoGA collections, focusing on comfort and performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.