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Duluth (DLTH) - 2026 Q1 - Earnings Call Transcript
DLTHDuluth (DLTH)2025-06-05 14:32
Financials
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Financial Data and Key Metrics Changes - The company reported Q1 2025 net sales of 102.7million,adecreaseof12102.7 million, a decrease 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]BusinessLineDataandKeyMetricsChanges−Directchannelsales,excludingwholesale,fellby14.63.8 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] Business Line Data and Key Metrics Changes - Direct channel sales, excluding wholesale, fell by 14.6%, with web traffic declining but partially offset by higher average order value (AOV) [16] - Retail store sales declined by 2.6%, but profitability trends improved as promotions were reduced [17] - The company plans to reduce SKU count by at least 20% by spring 2026, focusing on core men's and women's workwear [9][23] Market Data and Key Metrics Changes - Mobile sales penetration increased by 200 basis points, with mobile conversion trending upwards [16] - Inventory levels increased by 29% year-over-year, with a current inventory mix of 91% core products and 9% clearance [19] Company Strategy and Development Direction - The company is focusing on three key areas: brand awareness, solution-based products, and customer service [6][9] - A significant expense savings initiative is expected to yield annualized savings of approximately 15 million, with at least 10millionrealizedinthecurrentfiscalyear[10]−Thecompanyisrationalizingitsstoreportfolio,withnearly2510 million realized in the current fiscal year [10] - The company is rationalizing its store portfolio, with nearly 25% of store leases up for renewal through 2026 [13][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment and emphasized the need to manage expenses prudently [25] - The company is maintaining its fiscal year 2025 financial guidance, with an adjusted EBITDA range of 20 million to 25million[20]−Managementisoptimisticaboutthepathforward,focusingonbrandandproductenablerstoachieveprofitablegrowth[14][42]OtherImportantInformation−Thecompanyhastransitioneditslineofcredittoanasset−basedlendingagreement,providinga25 million [20] - Management is optimistic about the path forward, focusing on brand and product enablers to achieve profitable growth [14][42] 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][25] - 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 [30][31] Question: What are the consumer responses to the promotional reductions and potential price increases? - Management observed sequential improvement in gross margin rates and positive trends in conversion and full-price sales as promotions were refined [34][38]