Duluth Holdings Inc. ((DLTH)) has held its Q4 earnings call. Read on for the main highlights of the call.
Duluth Holdings Inc. faced a challenging year, grappling with order fulfillment issues and a decline in sales. However, the company demonstrated resilience through strategic initiatives, maintaining a robust financial position and achieving significant growth in mobile engagement. Despite operational setbacks, Duluth Holdings’ strategic progress and liquidity suggest potential for future improvement.
Record Sales During Black Friday to Cyber Monday
Despite the challenges faced throughout the year, Duluth Holdings achieved record sales during the Black Friday week through Cyber Monday. This period marked a significant achievement for the company, showcasing its ability to capitalize on peak shopping times despite broader sales declines.
Mobile Growth and Performance
Mobile engagement has become a cornerstone of Duluth Holdings’ digital strategy, with mobile now accounting for nearly 70% of site visits and 58% of digital sales. Both metrics have grown year-over-year, with conversion rates significantly surpassing industry averages, highlighting the success of the company’s mobile-first approach.
Successful Cost-Saving Fulfillment Strategy
The Adairsville fulfillment center has been a pivotal part of Duluth Holdings’ cost-saving strategy, processing over 60% of total volume at a cost per unit 66% lower than legacy facilities. This strategy has resulted in faster deliveries and expanded network capacity, contributing to operational efficiencies.
Strategic Initiatives and Product Collaborations
Duluth Holdings is making strides in product development and sourcing initiatives, with notable partnerships such as those with Leinenkugels and innovations like Armachillo cooling technology and NoGa Air. These strategic initiatives are aimed at enhancing the company’s product offerings and market position.
Strong Financial Position
Ending the year debt-free with $103 million in liquidity, Duluth Holdings is well-positioned to manage its business effectively. This strong financial footing provides the company with the flexibility needed to navigate challenges and invest in growth opportunities.
Order Fulfillment Challenges
The Belleville fulfillment center faced significant backlogs due to processing delays, which negatively impacted top line growth. These challenges highlight the operational hurdles Duluth Holdings needs to overcome to improve order fulfillment efficiency.
Net Sales Decline
Duluth Holdings experienced a net sales decline of 1.8% in Q4 and 3.1% for the full year 2024, with retail store sales decreasing by 6.9%. This decline underscores the challenging retail environment the company is navigating.
Gross Margin Contraction
The company reported a contraction in gross margin by 410 basis points in Q4 and 110 basis points for the full year, primarily due to deeper promotions. This contraction reflects the competitive pressures and pricing strategies employed to drive sales.
Inventory Increase
Inventory levels increased by 32% year-over-year, ending at $166.5 million. The rise in inventory, including higher levels of core products and in-transit inventory, indicates a need for improved inventory management.
Adjusted Net Loss
Duluth Holdings reported an adjusted net loss of $23.6 million for the full year 2024, compared to a net loss of $9.9 million the previous year. This increase in net loss highlights the financial challenges faced by the company.
Forward-Looking Guidance
Looking ahead to fiscal 2025, Duluth Holdings projects net sales between $570 million and $595 million, with a forecasted gross margin expansion of approximately 300 basis points. The company plans to reduce SG&A expenses by up to 200 basis points and anticipates adjusted EBITDA between $20 million and $25 million. Duluth Holdings is focusing on enhancing inventory management, operational execution, and continuing its transformation initiatives, including direct sourcing from factories and mobile-first digital strategies.
In summary, Duluth Holdings Inc. has faced a challenging year with declines in sales and operational setbacks. However, the company’s strategic initiatives, strong financial position, and growth in mobile engagement provide a foundation for potential future improvement. The forward-looking guidance suggests a focus on operational efficiency and strategic growth, indicating a positive outlook for the coming year.