DLTH
$4.69
Duluth Hld Cl B
($.49)
(9.46%)
Earnings Details
Quarter January 2020
Thursday, March 19, 2020 8:30:00 AM
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Summary

Duluth Hld Cl B Misses

Duluth Hld Cl B (DLTH) reported Quarter January 2020 earnings of $0.75 per share on revenue of $259.6 million. The consensus earnings estimate was $0.79 per share on revenue of $262.4 million. The Earnings Whisper number was $0.77 per share. Revenue grew 3.6% on a year-over-year basis.

Results
Reported Earnings
$0.75
Earnings Whisper
$0.77
Consensus Estimate
$0.79
Reported Revenue
$259.6 Mil
Revenue Estimate
$262.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Duluth Holdings Inc. Announces Fourth Quarter and Fiscal 2019 Financial Results

MOUNT HOREB, Wis., March 19, 2020 (GLOBE NEWSWIRE) -- 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 fiscal fourth quarter and fiscal year ended February 2, 2020.

Highlights for the Fourth Quarter Ended February 2, 2020 (13 weeks compared to 14 weeks last year)

  • Net sales increased 3.6% to $259.6 million compared to $250.5 million in the prior-year fourth quarter, which included $7.7 million of net sales from the 14th week
  • Gross margin increased to 52.8% compared to 52.4% in the prior-year fourth quarter
  • Operating income increased 10.1% to $33.1 million, or 12.8% of net sales, compared to $30.1 million, or 12.0% of net sales in the prior-year fourth quarter
  • Net income was $24.4 million, or $0.75 per diluted share, compared to $20.6 million, or $0.64 per diluted share in the prior-year fourth quarter
  • Adjusted EBITDA1 increased 13.7% to $39.9 million compared to $35.1 million in the prior-year fourth quarter
  • The Company opened three new retail stores in Bloomington, MN; Franklin, TN and Knoxville, TN, totaling approximately 29,000 gross square feet
  • 40th consecutive quarter of increased net sales year-over-year

1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.

Highlights for the Fiscal Year Ended February 2, 2020 (52 weeks compared to 53 weeks last year)

  • Net sales increased 8.4% to $615.6 million compared to $568.1 million in the prior year, which included $7.7 million of net sales from the 53rd week
  • Gross margin decreased to 53.3% compared to 54.6% in the prior year
  • Operating income decreased to $28.1 million, or 4.6% of net sales, compared to $37.2 million, or 6.5% of net sales in the prior year
  • Net income was $18.9 million, or $0.58 per diluted share, compared to $23.2 million, or $0.72 per diluted share in the prior year
  • Adjusted EBITDA1 was flat compared to the prior year at $51.9 million
  • The Company opened 15 retail stores, totaling approximately 215,000 gross square feet, and ended the year with a total of 61 stores

1See Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA in the accompanying financial tables.

Management Commentary

“We entered the fourth quarter well prepared to serve our customers during the peak holiday season, yet like many retailers, significant headwinds of a shortened holiday shopping season and unseasonably warm weather limited our fourth quarter potential. Net sales grew 7% on a comparable 13-week basis and due to our intense focus on managing expenses, reported operating margin improved 80 basis points year-over-year,” said Stephen L. Schlecht, Founder and Chief Executive Officer of Duluth Trading.

Operating Results for the Fourth Quarter Ended February 2, 2020 (13 weeks compared to 14 weeks last year)

Net sales increased 3.6% to $259.6 million, compared to $250.5 million in the same period a year ago. The increase was driven by a 11.6% growth in retail net sales, partially offset by a 0.6% decline in direct net sales. The inclusion of the 53rd week in fiscal 2018 amounted to an additional $7.7 million of net sales. The increase in retail net sales was attributed to the opening of 15 new retail stores during fiscal 2019, partially offset by a decline in existing store sales. Direct net sales growth in established markets with a store continued to outpace markets without a store.

Women’s business net sales increased 9.2% driven by fall and winter gear and the expansion of the women’s plus line. Men’s business net sales increased 2.1% driven by new products and growth in Alaskan Hardgear, partially offset by lower outerwear sales due to unseasonably warm weather in many parts of the country.

Gross profit increased 4.4% to $137.1 million, or 52.8% of net sales, compared to $131.2 million, or 52.4% of net sales, in the corresponding prior-year period. The increase in gross margin rate was primarily due to leverage gained from higher retail sales, partially offset by global promotions and clearance activity throughout the quarter. 

Selling, general and administrative expenses increased 2.7% to $103.9 million, compared to $101.1 million in the same period a year ago. As a percentage of net sales, selling, general and administrative expenses decreased to 40.0%, compared to 40.4% in the corresponding prior-year period.

The increase in selling, general and administrative expenses was primarily due to increased occupancy, equipment and personnel costs to support the growth in the number of retail stores and increased demand during the peak season. The leverage gained was primarily driven by net sales growth and further benefited from reduced catalog spend, improved shipping rates and efficiencies gained at our distribution centers and call center. Contributing to these efficiencies was the ability to leverage the new distribution center in Dubuque, IA allowing the Company to lessen its reliance on more costly third-party logistics companies during the peak season. The Company also benefited from further omnichannel momentum with 10.7% of direct orders fulfilled and shipped directly from a retail store.

Balance Sheet and Liquidity

The Company ended the quarter with a cash balance of approximately $0.5 million, with net working capital of $83.4 million, $20.0 million outstanding on its $50.0 million term loan, $19.3 million outstanding on its $80.0 million line of credit and $30.8 million in fiscal 2019 of capital expenditures.

Fiscal 2020 Outlook
Given the unpredictability of the effects of the coronavirus on, among other things, consumer behavior, store traffic, store closings, production capabilities, timing of deliveries, our people, economic activity and the market generally in the coming weeks and months, the Company is unable to provide specific earnings guidance at this time.

In response to expected impacts to sales plans, the Company is focusing on managing expense and capital spending levels by reducing new store openings; deferring certain technology and infrastructure projects; adjusting inventory receipt plans, and evaluating its bank line of credit to confirm access to the maximum capacity and commitment available.

The table below recaps the Company’s fiscal 2019 stores and signed new store leases along with the opening timeframe.

         
FISCAL 2019 STORES EXECUTED LEASES as of March 19, 2020
  Gross     Gross
Location Square Footage Location Timing Square Footage
Friendswood, TX 16,026 Short Pump, VA Opened March 5, 2020 16,828
Katy, TX 16,000 Springfield, OR Q3 Fiscal 2020 20,388
Wichita, KS 15,385 Orland Park, IL Q3 Fiscal 2020 10,000
Spokane Valley, WA 15,656 Florence, KY Q3 Fiscal 2020 11,441
Jacksonville, FL 14,557 Roseville, CA Fiscal 2021 15,000
Rogers, AR 15,656 Cherry Hill, NJ Fiscal 2021 11,441
Danbury, CT 9,792      
Madison, AL 15,656      
Kennesaw, GA 20,041      
Round Rock, TX 15,536      
Hoover, AL 15,656      
Sandy, UT 15,602      
Bloomington, MN 1,663      
Franklin, TN 11,940      
Knoxville, TN 15,385      


Conference Call Information

A conference call and audio webcast with analysts and investors will be held on Thursday, March 19, 2020 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 April 2, 2020: 877-344-7529 (domestic) or 412-317-0088 (international)
  • Replay access code: 10139930
  • Live and archived webcast: ir.duluthtrading.com              

Investors can pre-register for the earnings conference call to expedite their entry into the call and avoid waiting for a live operator. To pre-register for the call, please visit http://dpregister.com/10139930 and enter your contact information. You will then be issued a personalized phone number and pin to dial into the live conference call. Investors can pre-register any time prior to the start of the conference call.

About Duluth Trading

Duluth Trading is a rapidly growing lifestyle brand for the Modern, Self-Reliant American. Based in Mount Horeb, Wisconsin, we offer high quality, solution-based casual wear, workwear and accessories for men and women who lead a hands-on lifestyle and who value a job well-done. We provide our customers an engaging and entertaining experience.  Our marketing incorporates humor and storytelling that conveys the uniqueness of our products in a distinctive, fun way, and our products are sold exclusively through our content-rich website, catalogs, and “store like no other” retail locations. We are committed to outstanding customer service backed by our “No Bull Guarantee” - if it’s not right, we’ll fix it. Visit our website at http://www.duluthtrading.com/

Non-GAAP Measurements

Management believes that non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Within this release, including the tables attached hereto, reference is made to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).  See attached Table “Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA,” for a reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA for the three months and fiscal year ended February 2, 2020, versus the three months and fiscal year ended February 3, 2019. Adjusted EBITDA is a metric used by management and frequently used by the financial community, which provides insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period.  The Company provides this information to investors to assist in comparisons of past, present and future operating results and to assist in highlighting the results of on-going operations.  While the Company’s management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company’s GAAP financial results and should be read in conjunction with those GAAP results.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts included in this press release, including statements concerning Duluth Trading's plans, objectives, goals, beliefs, business strategies, future events, business conditions, its results of operations, financial position and its business outlook, business trends and certain other information herein are forward-looking statements. You can identify forward-looking statements by the use of words such as “may,” ”might,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “believe,” “estimate,” “project,” “target,” “predict,” “intend,” “future,” “budget,” “goals,” “potential,” “continue,” “design,” “objective,” “forecasted,” “would” and other similar expressions. The forward-looking statements are not historical facts, and are based upon Duluth Trading's current expectations, beliefs, estimates, and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond Duluth Trading's control. Duluth Trading's expectations, beliefs and projections are expressed in good faith, and Duluth Trading believes there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, estimates, and projections will be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the forward-looking statements, including, among others, the risks, uncertainties, and factors set forth under Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on April 19, 2019, and other factors as may be periodically described in Duluth Trading’s subsequent filings with the SEC. Forward-looking statements speak only as of the date the statements are made. Duluth Trading assumes no obligation to update forward-looking statements to reflect actual results, subsequent events or circumstances or other changes affecting forward-looking information except to the extent required by applicable securities laws.

Investor Contacts:
Donni Case (310) 622-8224
Margaret Boyce (310) 622-8247
Financial Profiles, Inc.
Duluth@finprofiles.com

(Tables Follow)


DULUTH HOLDINGS INC.
Condensed Consolidated Balance Sheets
(Unaudited)
 (Amounts in thousands)

       
  February 2, 2020 February 3, 2019
ASSETS      
Current Assets:      
Cash $538  $731 
Receivables  3,121   4,639 
Inventory, net  147,849   97,685 
Prepaid expenses & other current assets  9,503   12,640 
Prepaid catalog costs  1,181   2,503 
Total current assets  162,192   118,198 
Property and equipment, net  137,071   167,109 
Operating lease right-of-use assets  120,431    
Finance lease right-of-use assets, net  46,677    
Restricted cash  51   2,354 
Available-for-sale security  6,432   6,295 
Other assets, net  1,196   1,349 
Total assets $474,050  $295,305 
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Trade accounts payable $33,053  $25,363 
Accrued expenses and other current liabilities  29,464   26,530 
Income tax payable  3,427   218 
Current portion of operating lease liabilities  10,674    
Current portion of finance lease liabilities  1,600    
Current maturities of long-term debt1  557   500 
Total current liabilities  78,775   52,611 
Operating lease liabilities, less current maturities  106,120    
Finance lease liabilities, less current maturities  37,434    
Long-term debt, less current maturities2  67,110   44,825 
Deferred tax liabilities  8,505   9,722 
Finance lease obligations under build-to-suit leases     23,034 
Deferred rent obligations, less current maturities     5,003 
Total liabilities  297,944   135,195 
Treasury stock  (407)  (92)
Capital stock  90,902   89,849 
Retained earnings  87,589   70,592 
Accumulated other comprehensive loss  188    
Total shareholders' equity of Duluth Holdings Inc.  178,272   160,349 
Noncontrolling interest  (2,166)  (239)
Total shareholders' equity  176,106   160,110 
Total liabilities and shareholders' equity $474,050  $295,305 

1Represents debt of the variable interest entity, TRI Holdings, LLC, that is consolidated in accordance with ASC 810, Consolidation. Duluth Trading Company is not the guarantor nor the obligor of this debt.
2Includes $27.8 million of TRI Holdings, LLC long-term debt.


DULUTH HOLDING INC.
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share figures)

             
  Three Months Ended Fiscal Year Ended
  February 2, 2020 February 3, 2019 February 2, 2020 February 3, 2019
Net sales $259,649  $250,541  $615,624  $568,102
Cost of goods sold (excluding depreciation and
 amortization)
  122,587   119,290   287,475   257,700
Gross profit  137,062   131,251   328,149   310,402
Selling, general and administrative expenses  103,913   101,146   300,041   273,221
Operating income  33,149   30,105   28,108   37,181
Interest expense  1,340   2,311   4,471   5,949
Other income, net  37   215   291   383
Income before income taxes  31,846   28,009   23,928   31,615
Income tax expense  7,638   7,537   5,429   8,450
Net income  24,208   20,472   18,499   23,165
Less: Net (loss) income attributable
  to noncontrolling interest
  (167)  (148)  (422)  9
Net income attributable to controlling interest $24,375  $20,620  $18,921  $23,156
Basic earnings per share (Class A and Class B):            
Weighted average shares of
 common stock outstanding
  32,336   32,130   32,309   32,086
Net income per share attributable
 to controlling interest
 $ 0.75  $ 0.64  $ 0.59  $ 0.72
Diluted earnings per share (Class A and Class B):            
Weighted average shares and
 equivalents outstanding
  32,336   32,344   32,371   32,317
Net income per share attributable
 to controlling interest
 $ 0.75  $ 0.64  $ 0.58  $ 0.72



DULUTH HOLDINGS INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)

       
  Fiscal Year Ended
  February 2, 2020 February 3, 2019
Cash flows from operating activities:      
Net income $18,499  $23,165 
Adjustments to reconcile net income to net cash provided
 by operating activities:
      
Depreciation and amortization  22,083   12,594 
Stock-based compensation  647   1,668 
Deferred income taxes  (1,151)  7,999 
Loss on disposal of property and equipment     162 
Changes in operating assets and liabilities:      
Receivables  1,518   (4,329)
Inventory  (50,164)  (11,013)
Prepaid expense & other current assets  5,429   (5,618)
Prepaid catalog costs  1,322   (3,261)
Trade accounts payable  7,564   10,282 
Income taxes payable  3,209   (7,562)
Accrued expenses and deferred rent obligations  (2,260)  7,008 
Net cash provided by operating activities  6,696   31,095 
Cash flows from investing activities:      
Purchases of property and equipment  (24,435)  (53,036)
Capital contributions towards build-to-suit stores  (6,354)   
Principal receipts from available-for-sale security  117   28 
Change in other assets  (15)  (438)
Consolidation of TRI Holdings, LLC     217 
Deconsolidation of Schlecht Retail Ventures LLC     (506)
Net cash used in investing activities  (30,687)  (53,735)
Cash flows from financing activities:      
Proceeds from line of credit  271,754   130,086 
Payments on line of credit  (268,965)  (113,544)
Proceeds from other borrowings  20,000    
Payments on long term debt  (495)  (416)
Payments on finance lease obligations under build-to-suit leases  (891)   
Proceeds from finance lease obligations     2,281 
Shares withheld for tax payments on vested restricted stock  (315)  (35)
Capital contributions to variable interest entities      
Other  407   270 
Net cash provided by financing activities  21,495   18,642 
Decrease in cash and restricted cash  (2,496)  (3,998)
Cash and restricted cash at beginning of period  3,085   7,083 
Cash and restricted cash at end of period $589  $3,085 



DULUTH HOLDINGS INC.
Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA
(Unaudited)
(Amounts in thousands)

             
  Three Months Ended Fiscal Year Ended
  February 2, 2020 February 3, 2019 February 2, 2020 February 3, 2019
Net income $24,208 $20,472 $18,499 $23,165
Depreciation and amortization  6,149  4,407  22,083  12,594
Interest expense  1,340  2,311  4,471  5,949
Amortization of build-to-suit operating
leases capital contributions
  211    784  
Income tax expense  7,638  7,537  5,429  8,450
EBITDA $39,546 $34,727 $51,266 $50,158
Stock based compensation  365  363  647  1,668
Adjusted EBITDA $39,911 $35,090 $51,913 $51,826


DULUTH HOLDINGS INC.
Segment Information
(Unaudited)
(Amounts in thousands)

             
  Three Months Ended Fiscal Year Ended
  February 2, 2020 February 3, 2019 February 2, 2020 February 3, 2019
Net sales            
Direct $162,822 $163,766 $350,371  $350,638 
Retail  96,827  86,775  265,253   217,464 
Total net sales $259,649 $250,541 $615,624  $568,102 
Operating income (loss)            
Direct $11,851 $8,981 $(10,203) $(381)
Retail  21,298  21,124  38,311   37,562 
Total operating income  33,149  30,105  28,108   37,181 
Interest expense  1,340  2,311  4,471   5,949 
Other income, net  37  215  291   383 
Income before income taxes $31,846 $28,009 $23,928  $31,615 


DULUTH HOLDINGS INC.
Net Sales by Business
(Unaudited)
(Amounts in thousands)

             
  Three Months Ended Fiscal Year Ended
  February 2, 2020 February 3, 2019 February 2, 2020 February 3, 2019
Net sales            
Men's $183,183 $179,393 $419,122 $395,536
Women's  61,143  56,000  162,816  141,244
Hard goods/other  15,323  15,148  33,686  31,322
Total net sales $259,649 $250,541 $615,624 $568,102

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Source: Duluth Trading Company