SEC Form 10-Q filed by Duluth Holdings Inc.

5/31/24 12:14:27 PM ET

$DLTH

Clothing/Shoe/Accessory Stores

Consumer Discretionary

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dlth-20240428x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 28, 2024


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-37641

_________________________________________

DULUTH HOLDINGS INC.

(Exact name of registrant as specified in its charter)

_________________________________________

	99
Wisconsin	39-1564801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

201 East Front Street Mount Horeb, Wisconsin	53572
(Address of principal executive offices)	(Zip Code)

(608) 424-1544

(Registrant’s telephone number, including area code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class B Common Stock, No Par Value	DLTH	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	o	Accelerated Filer	þ
Non-accelerated Filer	o	Smaller Reporting Company	þ
		Emerging Growth Company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the Registrant’s Class A common stock, no par value, as of May 29, 2024, was 3,364,200.

The number of shares outstanding of the Registrant’s Class B common stock, no par value, as of May 29, 2024, was 31,701,292.

DULUTH HOLDINGS INC.

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED April 28, 2024

INDEX



	Part I—Financial Information	Page
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of April 28, 2024 and January 28, 2024 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the three months ended April 28, 2024 and April 30, 2023 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended April 28, 2024 and April 30, 2023 (Unaudited)	6
	Condensed Consolidated Statement of Shareholders’ Equity for the three months ended April 28, 2024 (Unaudited)	7
	Condensed Consolidated Statement of Shareholders’ Equity for the three months ended April 30, 2023 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the three months ended April 28, 2024 and April 30, 2023 (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
	Part II—Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

Signatures		31

‎

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DULUTH HOLDINGS INC.

Condensed Consolidated Balance Sheets - Assets

(Unaudited)

(Amounts in thousands)


	April 28, 2024		January 28, 2024
ASSETS
Current Assets:
Cash and cash equivalents	$	6,799	$	32,157
Receivables		10,572		5,955
Income tax receivable		84		617
Inventory, less reserves of $1,729 and $1,361, respectively		136,434		125,757
Prepaid expenses & other current assets		17,537		16,488
Total current assets		171,426		180,974
Property and equipment, net		126,526		132,718
Operating lease right-of-use assets		117,400		121,430
Finance lease right-of-use assets, net		38,432		40,315
Available-for-sale security		4,798		4,986
Other assets, net		9,629		9,020
Deferred tax assets		3,172		1,010
Total assets	$	471,383	$	490,453

The accompanying notes are an integral part of these condensed consolidated financial statements.

‎

DULUTH HOLDINGS INC.

Condensed Consolidated Balance Sheets – Liabilities and Shareholders’ Equity

(Unaudited)

(Amounts in thousands)


	April 28, 2024		January 28, 2024
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$	37,419	$	51,122
Accrued expenses and other current liabilities		26,366		30,930
Current portion of operating lease liabilities		16,619		16,401
Current portion of finance lease liabilities		3,253		3,149
Duluth line of credit		11,000		—
Current maturities of TRI long-term debt		867		847
Total current liabilities		95,524		102,449
Operating lease liabilities, less current maturities		102,188		106,413
Finance lease liabilities, less current maturities		33,435		34,276
TRI long-term debt, less current maturities		24,933		25,141
Total liabilities		256,080		268,279
Shareholders' equity:
Preferred stock, no par value; 10,000 shares authorized; no shares ‎ issued or outstanding as of April 28, 2024 and January 28, 2024		—		—
Common stock (Class A), no par value; 10,000 shares authorized; 3,364 shares ‎issued and outstanding as of April 28, 2024 and January 28, 2024		—		—
Common stock (Class B), no par value; 200,000 shares authorized; ‎ 31,945 shares issued and 31,710 shares outstanding as of April 28, 2024 and ‎31,178 shares issued and 31,023 shares outstanding as of January 28, 2024		—		—
Treasury stock, at cost; 235 and 155 shares as of April 28, 2024 and ‎ January 28, 2024, respectively		(2,121)		(1,738)
Capital stock		105,061		103,579
Retained earnings		115,943		123,816
Accumulated other comprehensive loss		(532)		(427)
Total shareholders' equity of Duluth Holdings Inc.		218,351		225,230
Noncontrolling interest		(3,048)		(3,056)
Total shareholders' equity		215,303		222,174
Total liabilities and shareholders' equity	$	471,383	$	490,453

The accompanying notes are an integral part of these condensed consolidated financial statements.

‎

DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share figures)


	Three Months Ended
	April 28, 2024		April 30, 2023
Net sales	$	116,684	$	123,759
Cost of goods sold (excluding depreciation and amortization)		55,060		58,108
Gross profit		61,624		65,651
Selling, general and administrative expenses		70,595		70,200
Operating loss		(8,971)		(4,549)
Interest expense		993		934
Other income, net		16		148
Loss before income taxes		(9,948)		(5,335)
Income tax benefit		(2,083)		(1,458)
Net loss		(7,865)		(3,877)
Less: Net income (loss) attributable to noncontrolling interest		8		(8)
Net loss attributable to controlling interest	$	(7,873)	$	(3,869)
Basic earnings per share (Class A and Class B):
Weighted average shares of common stock outstanding		33,087		32,865
Net loss per share attributable to controlling interest	$	(0.24)	$	(0.12)
Diluted earnings per share (Class A and Class B):
Weighted average shares and equivalents outstanding		33,087		32,865
Net loss per share attributable to controlling interest	$	(0.24)	$	(0.12)

The accompanying notes are an integral part of these condensed consolidated financial statements.

‎

DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

(Amounts in thousands)


	Three Months Ended
	April 28, 2024		April 30, 2023
Net loss	$	(7,865)	$	(3,877)
Other comprehensive loss
Securities available-for sale:
Unrealized security loss arising during the period		(140)		(79)
Income tax benefit		(35)		(20)
Other comprehensive loss		(105)		(59)
Comprehensive loss		(7,970)		(3,936)
Comprehensive income (loss) attributable to noncontrolling interest		8		(8)
Comprehensive loss attributable ‎to controlling interest	$	(7,978)	$	(3,928)

The accompanying notes are an integral part of these condensed consolidated financial statements.

‎

DULUTH HOLDINGS INC.

Condensed Consolidated Statement of Shareholders’ Equity

(Unaudited)

(Amounts in thousands)


	Three Months Ended April 28, 2024
								Accumulated		Noncontrolling
	Capital stock							other		interest in		Total
				Treasury		Retained		comprehensive		variable interest		shareholders'
	Shares	Amount		stock		earnings		loss		entity		equity
Balance at January 28, 2024	34,387	$	103,579	$	(1,738)	$	123,816	$	(427)	$	(3,056)	$	222,174
Issuance of common stock	782		110		—		—		—		—		110
Stock-based compensation	—		1,372		—		—		—		—		1,372
Restricted stock forfeitures	(15)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(80)		—		(383)		—		—		—		(383)
Other comprehensive loss	—		—		—		—		(105)		—		(105)
Net (loss) income	—		—		—		(7,873)		—		8		(7,865)
Balance at April 28, 2024	35,074	$	105,061	$	(2,121)	$	115,943	$	(532)	$	(3,048)	$	215,303

The accompanying notes are an integral part of these condensed consolidated financial statements.

‎

DULUTH HOLDINGS INC.

Condensed Consolidated Statement of Shareholders’ Equity

(Unaudited)

(Amounts in thousands)


	Three Months Ended April 30, 2023
								Accumulated		Noncontrolling
	Capital stock							other		interest in		Total
				Treasury		Retained		comprehensive		variable interest		shareholders'
	Shares	Amount		stock		earnings		loss		entity		equity
Balance at January 29, 2023	33,443	$	98,842	$	(1,459)	$	133,172	$	(148)	$	(3,210)	$	227,197
Issuance of common stock	1,081		136		—		—		—		—		136
Stock-based compensation	—		990		—		—		—		—		990
Restricted stock forfeitures	(9)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(41)		—		(273)		—		—		—		(273)
Other comprehensive income	—		—		—		—		(59)		—		(59)
Net loss	—		—		—		(3,869)		—		(8)		(3,877)
Balance at April 30, 2023	34,474	$	99,968	$	(1,732)	$	129,303	$	(207)	$	(3,218)	$	224,114

The accompanying notes are an integral part of these condensed consolidated financial statements.

‎

DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)


	Three Months Ended
	April 28, 2024		April 30, 2023
Cash flows from operating activities:
Net loss	$	(7,865)	$	(3,877)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		8,251		7,413
Stock based compensation		1,372		990
Deferred income taxes		(2,127)		(1,365)
Loss on disposal of property and equipment		13		—
Changes in operating assets and liabilities:
Receivables		(4,617)		(396)
Income taxes receivable		533		—
Inventory		(10,677)		9,953
Prepaid expense & other current assets		871		84
Software hosting implementation costs, net		(2,617)		(746)
Trade accounts payable		(13,150)		(21,080)
Income taxes payable		—		(338)
Accrued expenses and deferred rent obligations		(4,635)		(4,475)
Other assets		37		(17)
Noncash lease impacts		945		(119)
Net cash used in operating activities		(33,666)		(13,973)
Cash flows from investing activities:
Purchases of property and equipment		(1,525)		(21,392)
Principal receipts from available-for-sale security		48		44
Net cash used in investing activities		(1,477)		(21,348)
Cash flows from financing activities:
Proceeds from line of credit		28,000		10,000
Payments on line of credit		(17,000)		(10,000)
Payments on TRI long term debt		(204)		(186)
Payments on finance lease obligations		(737)		(694)
Payments of tax withholding on vested restricted shares		(383)		(273)
Other		109		136
Net cash provided by (used in) financing activities		9,785		(1,017)
Decrease in cash and cash equivalents		(25,358)		(36,338)
Cash and cash equivalents at beginning of period		32,157		45,548
Cash and cash equivalents at end of period	$	6,799	$	9,210
Supplemental disclosure of cash flow information:
Interest paid	$	993	$	934
Income taxes paid	$	2	$	216
Supplemental disclosure of non-cash information:
Unpaid liability to acquire property and equipment	$	1,392	$	1,832

The accompanying notes are an integral part of these condensed consolidated financial statements.


	April 28, 2024		January 28, 2024
(in thousands)
Prepaid expenses & other current assets
Pending returns inventory, net	$	2,108	$	2,778
Current software hosting implementation costs, net		3,702		3,353
Other prepaid expenses		11,727		10,357
Prepaid expenses & other current assets	$	17,537	$	16,488

Other assets, net
Goodwill	$	402	$	402
Intangible assets, net		428		436
Non-current software hosting implementation costs		7,403		6,705
Other assets, net		1,396		1,477
Other assets, net	$	9,629	$	9,020


	Consolidated Statement	Three Months Ended
	of Operations	April 28, 2024		April 30, 2023
(in thousands)
Finance lease expenses
Amortization of right-of-use ‎assets	Selling, general and ‎administrative expenses	$	838	$	840
Interest on lease liabilities	Interest expense		409		438
Total finance lease expense		$	1,247	$	1,278
Operating lease expense	Selling, general and ‎administrative expenses	$	5,093	$	5,050
Amortization of build-to-suit ‎leases capital contribution	Selling, general and ‎administrative expenses		321		321
Variable lease expense	Selling, general and ‎administrative expenses		2,922		2,914
Total lease expense		$	9,583	$	9,563


Fiscal year	Finance		Operating
(in thousands)
2023 (remainder of fiscal year)	$	3,590		15,937
2024		5,099		20,612
2025		3,993		19,659
2026		3,993		18,410
2027		4,017		16,631
Thereafter		25,214		46,792
Total future minimum lease payments	$	45,906	$	138,041
Less – Discount		(9,218)		(19,234)
Lease liability	$	36,688	$	118,807


	April 28, 2024
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
(in thousands)
Level 1 security:
Money market funds	$	—	$	—	$	—	$	—

Level 3 security:
Corporate trust	$	5,508	$	—	$	(710)	$	4,798


	April 28, 2024				January 28, 2024
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
(in thousands)
TRI Long-term debt, including short-term portion	$	25,800	$	22,627	$	25,988	$	23,554


		Weighted
		average
		fair value
	Shares	per share
Outstanding at January 28, 2024	1,367,270	$	8.77
Granted	764,055		4.64
Vested	(247,698)		8.03
Forfeited	(14,732)		8.19
Outstanding at April 28, 2024	1,868,895	$	6.93

Other income, net	-	%	-	%
Loss before income taxes	(8.5)	%	(4.3)	%
Income tax benefit	(1.8)	%	(1.2)	%
Net loss	(6.7)	%	(3.1)	%
Less: Net income (loss) attributable to noncontrolling interest	-	%	-	%
Net loss attributable to controlling interest	(6.7)	%	(3.1)	%

Amortization of internal-use software hosting
subscription implementation costs		1,170		1,270
Interest expense		993		934
Income tax benefit		(2,083)		(1,458)
EBITDA	$	466	$	4,282
Stock based compensation		1,372		990
Adjusted EBITDA	$	1,838	$	5,272

				Total number	Approximate dollar
				of shares purchased	value of shares that
	Total number			as part of publicly	may yet to be
	of shares	Average price		announced plans	purchased under the
Period	purchased	paid per share		or programs	plans or programs
January 29, 2024 - February 25, 2024	24,617	$	4.90	—	$	—
February 26, 2024 - March 31, 2024	159,404		4.60	—		—
April 1, 2024 - April 28, 2024	16,677		4.90	—		—
Total	200,698	$	4.67	—	$	—


Exhibit No.
10.1	Amended and Restated Annual Incentive Plan, incorporate by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated February 20, 2024.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.*
31.2	Certification of Interim Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended.*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 28, 2024 has been formatted in Inline XBRL (Inline Extensible Business Reporting Language and contained in Exhibits 101).


	Amortized		Estimated
	Cost		Fair Value
(in thousands)
Within one year	$	205	$	156
After one year through five years		1,349		1,104
After five years through ten years		2,023		1,778
After ten years		1,931		1,760
Total	$	5,508	$	4,798


	April 28, 2024		January 28, 2024
(in thousands)
Land and land improvements	$	4,486	$	4,486
Leasehold improvements		57,364		56,850
Buildings		36,186		36,191
Vehicles		121		121
Warehouse equipment		66,594		66,481
Office equipment and furniture		55,075		54,294
Computer equipment		11,167		11,142
Software		39,258		39,923
		270,251		269,488
Accumulated depreciation and amortization		(145,340)		(140,551)
		124,911		128,937
Construction in progress		1,615		3,781
Property and equipment, net	$	126,526	$	132,718


	April 28, 2024		April 30, 2023
(in thousands)
Balance as of beginning of period	$	9,579	$	10,249
Gift cards sold		2,222		1,878
Gift cards redeemed		(3,635)		(3,553)
Gift card breakage		(61)		(49)
Balance as of end of period	$	8,105	$	8,525


*	Filed herewith
**	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”


Date: May 31, 2024
	DULUTH HOLDINGS INC. ‎(Registrant)
		/s/ Heena Agrawal
		Heena Agrawal
		Senior Vice President, Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial Officer)

		/s/ Michael Murphy
		Michael Murphy
		Vice President, Chief Accounting Officer and Treasury
		(On behalf of the Registrant and as Principal Accounting Officer)

Date	Price Target	Rating	Analyst
2/7/2023		Neutral	BTIG Research
8/4/2022	$18.00 → $11.00	Outperform → Neutral	Robert W. Baird

SEC Form 10-Q filed by Duluth Holdings Inc.

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