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Duluth (DLTH) - 2026 Q1 - Earnings Call Transcript
DLTHDuluth (DLTH)2025-06-05 14:30

Financial Data and Key Metrics Changes - The company reported Q1 2025 net sales of 102.7million,adeclineof12102.7 million, a decline of 12% compared to the previous year [16] - Reported EPS loss was 0.45, while adjusted EPS loss was 0.32,withadjustmentstotaling0.32, with adjustments totaling 4.5 million [16] - Adjusted EBITDA for the quarter was negative 3.8million[16]−Grossprofitmarginratedeclinedby80basispointsyear−over−year,butimprovedbyover300basispointsinMarchandAprilcombinedcomparedtolastyear[17][18]−Inventoryincreasedby3.8 million [16] - Gross profit margin rate declined by 80 basis points year-over-year, but improved by over 300 basis points in March and April combined compared to last year [17][18] - Inventory increased by 39.7 million or 29% year-over-year, with a current inventory mix of 91% core products and 9% clearance [19] Business Line Data and Key Metrics Changes - Direct channel sales, excluding wholesale, fell by 14.6%, with web traffic declining but higher average order value (AOV) partially offsetting this [16][17] - Retail store sales declined by 2.6%, but profitability trends improved due to reduced promotions [17] Market Data and Key Metrics Changes - Mobile sales penetration increased by 200 basis points, with mobile conversion trending upwards [17] - The company is experiencing a shift in promotional strategy, reducing the number of promotional days by 35% and the depth of promotions from 25% to 20% on average [16] Company Strategy and Development Direction - The company is focusing on three key areas: brand awareness, solution-based products and product innovation, and customer service [6][14] - A significant reduction in SKU count by at least 20% is planned by spring 2026 to enhance efficiency in inventory purchases and marketing activities [9][24] - The company is implementing an expense savings initiative expected to yield annualized savings of approximately 15million[10]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgestheneedtorestorefinancialhealthandistakingdecisiveactionstoright−sizethebusiness[10][14]−Thecompanyismaintainingitsfiscalyear2025financialguidance,withadjustedEBITDAexpectedtorangefrom15 million [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the need to restore financial health and is taking decisive actions to right-size the business [10][14] - The company is maintaining its fiscal year 2025 financial guidance, with adjusted EBITDA expected to range from 20 million to 25million[20]−Managementisawareoftheuncertainmacroeconomicenvironmentandisfocusedonmanagingexpensesandoperationalexecution[26]OtherImportantInformation−Thecompanyhastransitioneditslineofcredittoanasset−basedlendingagreement,providinga25 million [20] - Management is aware of the uncertain macroeconomic environment and is focused on managing expenses and operational execution [26] Other Important Information - The company has transitioned its line of credit to an asset-based lending agreement, providing a 100 million limit with improved borrowing rates [20][26] - The company anticipates approximately $14 million in additional product costs due to tariffs, with minimal exposure to China [21][22] Q&A Session Summary Question: Can you elaborate on building brand awareness and marketing strategies? - Management is evaluating investments in the marketing funnel, particularly in upper funnel activities to drive brand awareness, with initial successes noted [31][33] Question: What are the consumer responses to the promotional reductions and potential price increases? - Management observed sequential improvement in gross margin rates and is balancing promotional activities while being cautious about pricing strategies to maintain customer retention [35][37]