Duluth Holdings Inc 10-Q for FY2023 Q2

About this 10-Q

Headline figures

Duluth Holdings Inc. (DLTH)

10-Q 2022-09-02 For: 2022-07-31

Added on April 06, 2026

Duluth Holdings Inc filed this 10-Q on September 2, 2022, covering the quarter ended July 31, 2022 (FY2023 Q2).

Fair Value

(in thousands)

Within one year

Quarter ended July 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $141.51M; down 5.1% from $149.13M a year earlier
Net income: $2.37M; down 73.7% from net income of $8.99M a year earlier
Diluted EPS: $0.07; down 74.1% from $0.27 a year earlier

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	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)


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


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



	Part I—Financial Information	Page
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of July 31, 2022 and January 30, 2022 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the three and six months ended July 31, 2022 and August 1, 2021 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 31, 2022 and August 1, 2021 (Unaudited)	6
	Condensed Consolidated Statement of Shareholders’ Equity for the six months ended July 31, 2022 (Unaudited)	7
	Condensed Consolidated Statement of Shareholders’ Equity for the six months ended August 1, 2021 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2022 and August 1, 2021 (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
	Part II—Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29

Signatures		30


	July 31, 2022		January 30, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	15,369	$	77,051
Receivables		5,764		5,455
Inventory, less reserves of $2,310 and $2,372, respectively		164,499		122,672
Prepaid expenses & other current assets		16,841		17,333
Prepaid catalog costs		35		10
Total current assets		202,508		222,521
Property and equipment, net		114,616		110,078
Operating lease right-of-use assets		114,980		120,911
Finance lease right-of-use assets, net		48,669		50,133
Available-for-sale security		5,823		6,554
Other assets, net		6,725		5,353
Total assets	$	493,321	$	515,550


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


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


	July 31, 2022		January 30, 2022
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$	53,604	$	45,402
Accrued expenses and other current liabilities		28,961		47,504
Income taxes payable		583		6,814
Current portion of operating lease liabilities		13,422		12,882
Current portion of finance lease liabilities		2,763		2,701
Current portion of Duluth long-term debt		—		—
Current maturities of TRI long-term debt		729		693
Total current liabilities		100,062		115,996
Operating lease liabilities, less current maturities		101,008		107,094
Finance lease liabilities, less current maturities		38,870		40,267
Duluth long-term debt, less current maturities		—		—
TRI long-term debt, less current maturities		26,271		26,608
Deferred tax liabilities		2,729		2,867
Total liabilities		268,940		292,832
Shareholders' equity:
Preferred stock, no par value; 10,000 shares authorized; no shares issued or outstanding as of July 31, 2022 and January 30, 2022		—		—
Common stock (Class A), no par value; 10,000 shares authorized; 3,364 shares issued and outstanding as of July 31, 2022 and January 30, 2022		—		—
Common stock (Class B), no par value; 200,000 shares authorized; 30,089 shares issued and 29,977 shares outstanding as of July 31, 2022 and 29,786 shares issued and 29,707 shares outstanding as of January 30, 2022		—		—
Treasury stock, at cost; 112 and 79 shares as of July 31, 2022 and January 30, 2022, respectively		(1,458)		(1,002)
Capital stock		97,102		95,515
Retained earnings		131,943		130,868
Accumulated other comprehensive income		2		489
Total shareholders' equity of Duluth Holdings Inc.		227,589		225,870
Noncontrolling interest		(3,208)		(3,152)
Total shareholders' equity		224,381		222,718
Total liabilities and shareholders' equity	$	493,321	$	515,550


	Three Months Ended				Six Months Ended
	July 31, 2022		August 1, 2021		July 31, 2022		August 1, 2021
Net sales	$	141,511	$	149,127	$	264,415	$	282,546
Cost of goods sold (excluding depreciation and amortization)		65,903		67,701		121,744		134,577
Gross profit		75,608		81,426		142,671		147,969
Selling, general and administrative expenses		71,739		68,339		139,733		132,987
Operating income		3,869		13,087		2,938		14,982
Interest expense		879		1,182		1,755		2,490
Other income, net		78		56		124		72
Income before income taxes		3,068		11,961		1,307		12,564
Income tax expense		727		3,014		289		3,119
Net income		2,341		8,947		1,018		9,445
Less: Net loss attributable to noncontrolling interest		(27)		(45)		(56)		(91)
Net income attributable to controlling interest	$	2,368	$	8,992	$	1,074	$	9,536
Basic earnings per share (Class A and Class B):
Weighted average shares of common stock outstanding		32,766		32,624		32,732		32,582
Net income per share attributable to controlling interest	$	0.07	$	0.28	$	0.03	$	0.29
Diluted earnings per share (Class A and Class B):
Weighted average shares and equivalents outstanding		32,766		32,813		32,910		32,786
Net income per share attributable to controlling interest	$	0.07	$	0.27	$	0.03	$	0.29


	Six Months Ended July 31, 2022
								Accumulated		Noncontrolling
	Capital stock							other		interest in		Total
				Treasury		Retained		comprehensive		variable interest		shareholders'
	Shares	Amount		stock		earnings		income		entity		equity
Balance at January 30, 2022	33,071	$	95,515	$	(1,002)	$	130,868	$	489	$	(3,152)	$	222,718
Issuance of common stock	292		166		—		—		—		—		166
Stock-based compensation	—		618		—		—		—		—		618
Restricted stock forfeitures	(1)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(33)		—		(455)		—		—		—		(455)
Other comprehensive loss	—		—		—		—		(336)		—		(336)
Net loss	—		—		—		(1,294)		—		(29)		(1,323)
Balance at May 1, 2022	33,329	$	96,299	$	(1,457)	$	129,575	$	153	$	(3,181)	$	221,389
Issuance of common stock	56		147		—		—		—		—		147
Stock-based compensation	—		656		—		—		—		—		656
Restricted stock forfeitures	(44)		—		—		—		—		—		—
Restricted stock surrendered for taxes	—		—		(1)		—		—		—		(1)
Other comprehensive loss	—		—		—		—		(151)		—		(151)
Net income (loss)	—		—		—		2,368		—		(27)		2,341
Balance at July 31, 2022	33,341	$	97,102	$	(1,458)	$	131,943	$	2	$	(3,208)	$	224,381


	Six Months Ended August 1, 2021
								Accumulated		Noncontrolling
	Capital stock							other		interest in		Total
				Treasury		Retained		comprehensive		variable interest		shareholders'
	Shares	Amount		stock		earnings		income		entity		equity
Balance at January 31, 2021	32,841	$	92,875	$	(628)	$	101,166	$	48	$	(3,000)	$	190,461
Issuance of common stock	101		132		—		—		—		—		132
Stock-based compensation	—		371		—		—		—		—		371
Restricted stock forfeitures	(1)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(24)		—		(358)		—		—		—		(358)
Other comprehensive income	—		—		—		—		202		—		202
Net income (loss)	—		—		—		544		—		(46)		498
Balance at May 2, 2021	32,917	$	93,378	$	(986)	$	101,710	$	250	$	(3,046)	$	191,306
Issuance of common stock	142		139		—		—		—		—		139
Stock-based compensation	—		563		—		—		—		—		563
Restricted stock forfeitures	(2)		—		—		—		—		—		—
Restricted stock surrendered for taxes	—		—		(5)		—		—		—		(5)
Other comprehensive income	—		—		—		—		314		—		314
Net income (loss)	—		—		—		8,992		—		(45)		8,947
Balance at August 1, 2021	33,057	$	94,080	$	(991)	$	110,702	$	564	$	(3,091)	$	201,264


	July 31, 2022		January 30, 2022
(in thousands)
Prepaid expenses & other current assets
Pending returns inventory, net	$	1,824	$	2,235
Current software hosting implementation costs, net		1,942		1,475
Other prepaid expenses		13,075		13,623
Prepaid expenses & other current assets	$	16,841	$	17,333

Other assets, net
Goodwill	$	402	$	402
Intangible assets, net		459		246
Non-current software hosting implementation costs		3,885		2,949
Other assets, net		1,979		1,756
Other assets, net	$	6,725	$	5,353


	Consolidated Statement	Three Months Ended				Six Months Ended
	of Operations	July 31, 2022		August 1, 2021		July 31, 2022		August 1, 2021
(in thousands)
Finance lease expenses
Amortization of right-of-use ‎assets	Selling, general and ‎administrative expenses	$	840	$	840	$	1,680	$	1,678
Interest on lease liabilities	Interest expense		459		486		925		981
Total finance lease expense		$	1,299	$	1,326	$	2,605	$	2,659
Operating lease expense	Selling, general and ‎administrative expenses	$	4,717	$	3,849	$	9,106	$	7,800
Amortization of build-to-suit ‎leases capital contribution	Selling, general and ‎administrative expenses		321		321		642		649
Variable lease expense	Selling, general and ‎administrative expenses		2,473		2,167		4,445		4,226
Total lease expense		$	8,810	$	7,663	$	16,798	$	15,334


Fiscal year	Finance		Operating
(in thousands)
2022 (remainder of fiscal year)	$	2,263	$	8,872
2023		4,551		17,919
2024		4,736		17,304
2025		5,098		16,554
2026		3,993		15,612
Thereafter		33,225		59,227
Total future minimum lease payments	$	53,866	$	135,488
Less – Discount		(12,233)		(21,058)
Lease liability	$	41,633	$	114,430


	Six Months Ended
	July 31, 2022		August 1, 2021
Cash flows from operating activities:
Net income	$	1,018	$	9,445
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		15,374		14,516
Stock based compensation		1,274		1,007
Deferred income taxes		27		(312)
Loss on disposal of property and equipment		23		67
Changes in operating assets and liabilities:
Receivables		(309)		(642)
Inventory		(41,827)		14,165
Prepaid expense & other current assets		86		(1,332)
Software hosting implementation costs, net		(529)		(1,220)
Deferred catalog costs		(25)		975
Trade accounts payable		9,549		2,889
Income taxes payable		(6,231)		(6,992)
Accrued expenses and deferred rent obligations		(18,974)		(4,908)
Other assets		(519)		(1,035)
Noncash lease impacts		(75)		(111)
Net cash (used in) provided by operating activities		(41,138)		26,512
Cash flows from investing activities:
Purchases of property and equipment		(18,814)		(4,984)
Principal receipts from available-for-sale security		79		71
Proceeds from disposals		8		55
Net cash used in investing activities		(18,727)		(4,858)
Cash flows from financing activities:
Proceeds from line of credit		—		5,000
Payments on line of credit		—		(5,000)
Payments on delayed draw term loan		—		(48,250)
Payments on TRI long term debt		(338)		(303)
Payments on finance lease obligations		(1,336)		(1,237)
Payments of tax withholding on vested restricted shares		(456)		(363)
Other		313		199
Net cash used in financing activities		(1,817)		(49,954)
Decrease in cash, cash equivalents		(61,682)		(28,300)
Cash and cash equivalents at beginning of period		77,051		47,221
Cash and cash equivalents at end of period	$	15,369	$	18,921
Supplemental disclosure of cash flow information:


	July 31, 2022		January 30, 2022
(in thousands)
Salaries and benefits	$	3,928	$	11,773
Deferred revenue		8,110		10,791
Freight		3,281		8,942
Product returns		4,160		5,439
Unpaid purchases of property & equipment		1,225		794
Accrued advertising		4,604		600
Other		3,653		9,165
Total accrued expenses and other current liabilities	$	28,961	$	47,504

After one year through five years		1,155		1,156
After five years through ten years		1,765		1,766
After ten years		2,729		2,729
Total	$	5,821	$	5,823


		Weighted
		average
		fair value
	Shares	per share
Outstanding at January 30, 2022	405,334	$	13.54
Granted	321,771		12.62
Vested	(124,352)		13.34
Forfeited	(44,435)		12.24
Outstanding at July 31, 2022	558,318	$	13.21


	July 31, 2022				January 30, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
(in thousands)
TRI Long-term debt, including short-term portion	$	27,000	$	24,701	$	27,301	$	27,804


				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
May 2, 2022 - May 29, 2022	—	$	—	—	$	—
May 30, 2022 - July 3, 2022	365		10.38	—		—
July 4, 2022 - July 31, 2022	—		—	—		—
Total	365	$	10.38	—	$	—


Exhibit No.
10.1	First Amendment, dated as of July 8, 2022, among Duluth Holdings Inc., the Lenders party thereto, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, BofA Securities, Inc., as a Joint Lead Arranger and Sole Bookrunner, and Keybanc Capital Markets Inc., as a Joint Lead Arranger, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K date July 8, 2022.
10.2	Offer Letter Dated July 27, 2022 by and between Albert J. Sutera and Duluth Holdings Inc.*
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 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 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 May 1, 2022 has been formatted in Inline XBRL (Inline Extensible Business Reporting Language and contained in Exhibits 101).


*	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: September 2, 2022
	DULUTH HOLDINGS INC. ‎(Registrant)
		/s/ David Loretta
		David Loretta
		Senior Vice President and Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial Officer)


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



	/s/ Sam Sato
Name:	Sam Sato
Title:	Chief Executive Officer
Date:	September 2, 2022