Press release·03/24/2025 10:40:58

Overview of Duluth Holdings Inc.’s Financial Performance

Duluth Holdings Inc. is a lifestyle brand that sells men’s and women’s casual wear, workwear, and accessories primarily through its own omnichannel platform. The company has been growing its retail presence, operating 62 retail stores and 3 outlet stores as of February 2, 2025.

In fiscal 2024, Duluth Holdings’ net sales decreased by 3.1% to $626.6 million compared to the prior year. The company reported a net loss of $43.6 million in fiscal 2024, compared to a net loss of $9.9 million in fiscal 2023. Adjusted EBITDA, a non-GAAP financial measure, decreased by $18.0 million to $14.6 million in fiscal 2024.

The decrease in net sales was primarily driven by lower average unit retail prices, processing delays at a legacy fulfillment center, lower web conversion, and a decline in store traffic. Gross profit decreased by 5.1% to $308.5 million, with gross margin declining to 49.2% of net sales from 50.3% in the prior year. This was mainly due to a lower mix of full-price sales as customers increased their purchasing activity during promotional periods, partially offset by improved product costs from the company’s direct-to-factory sourcing initiative.

Selling, general, and administrative (SG&A) expenses increased by 0.9% to $337.6 million, primarily due to increased overhead costs, partially offset by optimization in the company’s outbound shipping network. Interest expense increased by $0.4 million to $4.6 million, reflecting higher interest rates on outstanding debt.

The company recorded an income tax expense of $2.4 million in fiscal 2024, compared to an income tax benefit of $2.9 million in the prior year. The provision for fiscal 2024 reflected the establishment of a valuation allowance against the net amount of deferred tax assets as well as the pre-tax loss in the current year.

Revenue and Profit Trends

Duluth Holdings’ net sales have been impacted by a variety of factors in recent years. In fiscal 2024, the company experienced a 3.1% decrease in net sales compared to the prior year, driven by lower average unit retail prices, processing delays at a legacy fulfillment center, lower web conversion, and a decline in store traffic.

The company’s gross profit and gross margin have also been affected by these trends. Gross profit decreased by 5.1% in fiscal 2024, and gross margin declined to 49.2% of net sales from 50.3% in the prior year. This was primarily due to a lower mix of full-price sales as customers increased their purchasing activity during promotional periods, partially offset by improved product costs from the company’s direct-to-factory sourcing initiative.

SG&A expenses have been increasing as a percentage of net sales, rising to 53.9% in fiscal 2024 from 51.7% in the prior year. This was mainly driven by increased overhead costs, partially offset by optimization in the company’s outbound shipping network.

The company’s net loss widened to $43.6 million in fiscal 2024 from $9.9 million in the prior year, reflecting the factors discussed above. Adjusted EBITDA, a non-GAAP measure that excludes the impact of certain items, decreased by $18.0 million to $14.6 million in fiscal 2024.

Analysis of Strengths and Weaknesses

One of Duluth Holdings’ key strengths is its strong brand recognition and loyal customer base. The company has built a reputation for innovative, durable, and functional products that appeal to a broad demographic for everyday and on-the-job use. Over the past decade, Duluth Trading has created strong brand awareness and generated sales growth by sticking to its roots of providing high-quality, functional apparel and gear.

However, the company has faced some challenges in recent years that have impacted its financial performance. The processing delays at a legacy fulfillment center, lower web conversion, and decline in store traffic have all contributed to the decrease in net sales. Additionally, the company’s gross margin has been under pressure due to a lower mix of full-price sales and the need to offer more promotional activity to drive customer demand.

Duluth Holdings has also experienced an increase in SG&A expenses as a percentage of net sales, which has put pressure on its profitability. The company has been investing in infrastructure and technology to support its growth, but these investments have not yet translated into improved financial results.

Another potential weakness for Duluth Holdings is its reliance on a single major supplier, which accounted for 43% and 59% of total inventory expenditures in fiscal 2024 and fiscal 2023, respectively. This concentration of supply chain risk could expose the company to disruptions or changes in the supplier’s pricing or availability.

Outlook and Future Prospects

Looking ahead, Duluth Holdings will need to address the challenges it has faced in recent years to improve its financial performance. The company will need to find ways to drive top-line growth, either by increasing sales through its existing channels or expanding into new markets or product categories.

One potential area of focus could be improving the company’s e-commerce capabilities and web conversion rates, which have been a drag on overall sales. Investing in digital marketing, user experience, and fulfillment optimization could help the company better capitalize on the growing shift to online shopping.

The company will also need to continue to manage its costs effectively, particularly in the areas of SG&A expenses. Optimizing its supply chain, streamlining its operations, and finding ways to leverage its scale and brand recognition could help the company improve its profitability.

Another key area of focus for Duluth Holdings will be addressing the decline in its gross margin. The company will need to find ways to maintain pricing power and reduce the need for promotional activity, either through product innovation, improved inventory management, or other strategies.

Overall, Duluth Holdings faces a challenging environment, but the company’s strong brand, loyal customer base, and focus on functional, high-quality products could provide a foundation for future growth and profitability. However, the company will need to execute effectively on its strategic initiatives and address the operational and financial challenges it has faced in recent years to achieve its long-term goals.