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 October 31, 2021

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)

_________________________________________

Wisconsin	39-1564801
(State or other jurisdiction of<br><br>incorporation or organization)	(I.R.S. Employer<br><br>Identification Number)
201 East Front Street<br><br>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 December 1, 2021, was 3,364,200.

The number of shares outstanding of the Registrant’s Class B common stock, no par value, as of December 1, 2021, was 29,698,318.

DULUTH HOLDINGS INC.

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED October 31, 2021

INDEX

	Part I—Financial Information	Page
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of October 31, 2021 and January 31, 2021 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the three and nine months ended October 31, 2021 and November 1, 2020 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 31, 2021 and November 1, 2020 (Unaudited)	6
	Condensed Consolidated Statement of Shareholders’ Equity for the nine months ended October 31, 2021 (Unaudited)	7
	Condensed Consolidated Statement of Shareholders’ Equity for the nine months ended November 1, 2020 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended October 31, 2021 and November 1, 2020 (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
	Part II—Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	30
Signatures		31

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DULUTH HOLDINGS INC.

Condensed Consolidated Balance Sheets - Assets

(Unaudited)

(Amounts in thousands)

		January 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	20,390	$	47,221
Receivables	5,133		2,270
Income tax receivable	605		—
Inventory, less reserves of 1,439 and 1,600, respectively	165,078		149,052
Prepaid expenses & other current assets	14,787		10,203
Prepaid catalog costs	635		1,014
Total current assets	206,628		209,760
Property and equipment, net	114,579		124,237
Operating lease right-of-use assets	124,164		117,490
Finance lease right-of-use assets, net	50,866		53,468
Available-for-sale security	6,598		6,111
Other assets, net	5,382		4,511
Total assets	508,217	$	515,577

All values are in US Dollars.

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

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DULUTH HOLDINGS INC.

Condensed Consolidated Balance Sheets – Liabilities and Shareholders’ Equity

(Unaudited)

(Amounts in thousands)

	October 31, 2021		January 31, 2021
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$	59,157	$	33,647
Accrued expenses and other current liabilities		41,832		37,686
Income taxes payable		—		7,579
Current portion of operating lease liabilities		12,362		11,050
Current portion of finance lease liabilities		2,679		2,629
Current portion of Duluth long-term debt		—		2,500
Current maturities of TRI long-term debt		675		623
Total current liabilities		116,705		95,714
Operating lease liabilities, less current maturities		110,370		104,287
Finance lease liabilities, less current maturities		40,954		43,299
Duluth long-term debt, less current maturities		—		45,750
TRI long-term debt, less current maturities		26,773		27,229
Deferred tax liabilities		8,092		8,200
Total liabilities		302,894		324,479
Shareholders' equity:
Preferred stock, no par value; 10,000 shares authorized; no shares<br><br>issued or outstanding as of October 31, 2021 and January 31, 2021		—		—
Common stock (Class A), no par value; 10,000 shares authorized;<br><br>3,364 shares issued and outstanding as of October 31, 2021 and January 31, 2021		—		—
Common stock (Class B), no par value; 200,000 shares authorized;<br><br>29,782 shares issued and 29,703 shares outstanding as of October 31, 2021 and<br><br>29,530 shares issued and 29,477 shares outstanding as of January 31, 2021		—		—
Treasury stock, at cost; 79 and 53 shares as of October 31, 2021 and<br><br>January 31, 2021, respectively		(998)		(628)
Capital stock		94,815		92,875
Retained earnings		113,509		101,166
Accumulated other comprehensive income		494		48
Total shareholders' equity of Duluth Holdings Inc.		207,820		193,461
Noncontrolling interest		(2,497)		(2,363)
Total shareholders' equity		205,323		191,098
Total liabilities and shareholders' equity	$	508,217	$	515,577

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

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DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share figures)

	Three Months Ended				Nine Months Ended
	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net sales	$	145,277	$	135,531	$	427,823	$	382,823
Cost of goods sold (excluding depreciation and amortization)		61,627		64,494		196,204		186,982
Gross profit		83,650		71,037		231,619		195,841
Selling, general and administrative expenses		78,792		68,189		211,779		202,175
Operating income (loss)		4,858		2,848		19,840		(6,334)
Interest expense		900		1,643		3,390		4,771
Other (loss) income, net		(265)		87		(193)		(104)
Income (loss) before income taxes		3,693		1,292		16,257		(11,209)
Income tax expense (benefit)		930		393		4,048		(2,827)
Net income (loss)		2,763		899		12,209		(8,382)
Less: Net loss attributable to noncontrolling interest		(43)		(41)		(134)		(128)
Net income (loss) attributable to controlling interest	$	2,806	$	940	$	12,343	$	(8,254)
Basic earnings (loss) per share (Class A and Class B):
Weighted average shares of common stock outstanding		32,649		32,476		32,605		32,431
Net income (loss) per share attributable to controlling interest	$	0.09	$	0.03	$	0.38	$	(0.25)
Diluted earnings (loss) per share (Class A and Class B):
Weighted average shares and equivalents outstanding		32,761		32,606		32,825		32,431
Net income (loss) per share attributable to controlling interest	$	0.09	$	0.03	$	0.38	$	(0.25)

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

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DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)

	Three Months Ended				Nine Months Ended
	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net income (loss)	$	2,763	$	899	$	12,209	$	(8,382)
Other comprehensive income
Securities available-for sale:
Unrealized security (loss) income arising during the period		(94)		51		595		(314)
Income tax (benefit) expense		(24)		13		149		(82)
Other comprehensive (loss) income		(70)		38		446		(232)
Comprehensive income (loss)		2,693		937		12,655		(8,614)
Comprehensive loss attributable to noncontrolling interest		(43)		(41)		(134)		(128)
Comprehensive income (loss) attributable <br>‎to controlling interest	$	2,736	$	978	$	12,789	$	(8,486)

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

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DULUTH HOLDINGS INC.

Condensed Consolidated Statement of Shareholders’ Equity

(Unaudited)

(Amounts in thousands)

	Nine Months Ended October 31, 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	$	(2,363)	$	191,098
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 loss	—		—		—		—		202		—		202
Net income (loss)	—		—		—		544		—		(46)		498
Balance at May 2, 2021	32,917	$	93,378	$	(986)	$	101,711	$	250	$	(2,409)	$	191,944
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)	$	110,703	$	564	$	(2,454)	$	201,902
Issuance of common stock	13		171		—		—		—		—		171
Stock-based compensation	—		564		—		—		—		—		564
Restricted stock forfeitures	(2)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(1)		—		(7)		—		—		—		(7)
Other comprehensive income	—		—		—		—		(70)		—		(70)
Net income (loss)	—		—		—		2,806		—		(43)		2,763
Balance at October 31, 2021	33,067	$	94,815	$	(998)	$	113,509	$	494	$	(2,497)	$	205,323

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

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DULUTH HOLDINGS INC.

Condensed Consolidated Statement of Shareholders’ Equity

(Unaudited)

(Amounts in thousands)

	Nine Months Ended November 1, 2020
								Accumulated		Noncontrolling
	Capital stock							other		interest in		Total
				Treasury		Retained		comprehensive		variable interest		shareholders'
	Shares	Amount		stock		earnings		income		entity		equity
Balance at February 2, 2020	32,536	$	90,902	$	(407)	$	87,589	$	188	$	(2,166)	$	176,106
Issuance of common stock	227		115		—		—		—		—		115
Stock-based compensation	—		434		—		—		—		—		434
Restricted stock forfeitures	(1)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(18)		—		(107)		—		—		—		(107)
Other comprehensive loss	—		—		—		—		(518)		—		(518)
Net loss	—		—		—		(15,135)		—		(44)		(15,179)
Balance at May 3, 2020	32,744	$	91,451	$	(514)	$	72,454	$	(330)	$	(2,210)	$	160,851
Issuance of common stock	98		98		—		—		—		—		98
Stock-based compensation	—		372		—		—		—		—		372
Restricted stock forfeitures	(15)		—		—		—		—		—		—
Restricted stock surrendered for taxes	(13)		—		(67)		—		—		—		(67)
Other comprehensive income	—		—		—		—		248		—		248
Net income (loss)	—		—		—		5,941		—		(43)		5,898
Balance at August 2, 2020	32,814	$	91,921	$	(581)	$	78,395	$	(82)	$	(2,253)	$	167,400
Issuance of common stock	17		133		—		—		—		—		133
Stock-based compensation	—		331		—		—		—		—		331
Restricted stock forfeitures	(3)		—		—		—		—		—		—
Restricted stock surrendered for taxes	—		—		(41)		—		—		—		(41)
Other comprehensive income	—		—		—		—		38		—		38
Net income (loss)	—		—		—		940		—		(41)		899
Balance at November 1, 2020	32,828	$	92,385	$	(622)	$	79,335	$	(44)	$	(2,294)	$	168,760

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

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DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	Nine Months Ended
	October 31, 2021		November 1, 2020
Cash flows from operating activities:
Net income (loss)	$	12,209	$	(8,382)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		21,822		21,209
Stock based compensation		1,612		1,263
Deferred income taxes		(257)		3,463
Loss on disposal of property and equipment		404		304
Changes in operating assets and liabilities:
Receivables		(2,863)		(64)
Income taxes receivable		(605)		(3,549)
Inventory		(16,026)		(65,554)
Prepaid expense & other current assets		(1,571)		1,154
Software hosting implementation costs, net		(2,939)		—
Deferred catalog costs		379		94
Trade accounts payable		24,944		21,424
Income taxes payable		(7,579)		(3,427)
Accrued expenses and deferred rent obligations		4,117		2,667
Other assets		(918)		—
Noncash lease impacts		29		784
Net cash provided by (used in) operating activities		32,758		(28,614)
Cash flows from investing activities:
Purchases of property and equipment		(9,108)		(11,059)
Capital contributions towards build-to-suit stores		—		(520)
Principal receipts from available-for-sale security		108		96
Proceeds from disposals		55		—
Net cash used in investing activities		(8,945)		(11,483)
Cash flows from financing activities:
Proceeds from line of credit		5,000		84,588
Payments on line of credit		(5,000)		(60,894)
Proceeds from delayed draw term loan		—		32,500
Payments on delayed draw term loan		(48,250)		(3,625)
Payments on TRI long term debt		(457)		(354)
Payments on finance lease obligations		(1,894)		(1,325)
Payments of tax withholding on vested restricted shares		(370)		(215)
Other		327		(18)
Net cash (used in) provided by financing activities		(50,644)		50,657
(Decrease) increase in cash, cash equivalents		(26,831)		10,560
Cash, cash equivalents and restricted cash at beginning of period		47,221		2,240
Cash, cash equivalents and restricted cash at end of period	$	20,390	$	12,800
Supplemental disclosure of cash flow information:
Interest paid	$	3,328	$	4,730
Income taxes paid	$	12,585	$	40
Supplemental disclosure of non-cash information:
Unpaid liability to acquire property and equipment	$	2,518	$	657

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

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

A. Nature of Operations

Duluth Holdings Inc. (“Duluth Trading” or the “Company”), a Wisconsin corporation, is a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through the Company’s own omnichannel platform. The Company’s products are marketed under the Duluth Trading brand, with the majority of products being exclusively developed and sold as Duluth Trading branded merchandise.

The Company identifies its operating segments according to how its business activities are managed and evaluated. The Company continues to report one reportable external segment, consistent with the Company’s omnichannel business approach. The Company’s revenues generated outside the United States were insignificant.

The Company has two classes of authorized common stock: Class A common stock and Class B common stock. The rights of holders of Class A common stock and Class B common stock are identical, except for voting and conversion rights. Each share of Class A common stock is entitled to ten votes per share and is convertible at any time into one share of Class B common stock. Each share of Class B common stock is entitled to one vote per share. The Company’s Class B common stock trades on the NASDAQ Global Select Market under the symbol “DLTH.”

B. Basis of Presentation

The condensed consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The Company consolidates TRI Holdings, LLC (“TRI”) as a variable interest entity (see Note 6 “Variable Interest Entity” for further information). All significant intercompany balances and transactions have been eliminated in consolidation.

The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year. Fiscal 2021 is a 52-week period and ends on January 30, 2022. Fiscal 2020 was a 52-week period and ended on January 31, 2021. The three months of fiscal 2021 and fiscal 2020 represent the Company’s 13 week periods ended October 31, 2021 and November 1, 2020, respectively.

The accompanying condensed consolidated financial statements as of and for the three and nine months ended October 31, 2021 and November 1, 2020 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such SEC rules and regulations as of and for the three and nine months ended October 31, 2021 and November 1, 2020. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the fiscal year ended January 31, 2021.

C. COVID-19

In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, led to significant travel and transportation restrictions, including mandatory business closures and orders to shelter in place. These impacts are discussed within these notes to the condensed consolidated financial statements.

The ultimate impact of COVID-19 on our operational and financial performance still depends on future developments outside of our control. Given the uncertainty, we cannot reasonably estimate the continued impact on our business and whether that impact will be different than what we have already experienced.

D. Impairment Analysis

As of October 31, 2021 and for the three and nine months then ended, no triggering events or indicators of asset impairment were noted.

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

E. Inventory

Inventory, consisting of purchased product, is valued at the lower of cost or net realizable value, under the first-in, first-out method. The significant estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or market reserves) and estimates of inventory shrinkage. Both estimates have calculations that require the Company to make assumptions and apply judgment regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends. Inventory is adjusted periodically to reflect current market conditions, which requires management’s judgment that may significantly affect the ending inventory valuation, as well as gross margin.

The reserve for inventory shrinkage is adjusted to reflect the trend of historical physical inventory count results. The Company performs its retail store physical inventory counts in July and the difference between actual and estimated shrinkage, recorded in Cost of goods sold, may cause fluctuations in second fiscal quarter results.

F. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

	October 31, 2021		January 31, 2021
(in thousands)
Prepaid expenses & other current assets
Pending returns inventory, net	$	1,993	$	2,490
Current software hosting implementation costs, net		1,432		1,149
Other prepaid expenses		11,362		6,564
Prepaid expenses & other current assets	$	14,787	$	10,203
Other assets, net
Goodwill	$	402	$	402
Intangible assets, net		251		264
Non-current software hosting implementation costs		2,866		2,755
Other assets, net		1,863		1,090
Other assets, net	$	5,382	$	4,511

G. Seasonality of Business

The Company’s business is affected by the pattern of seasonality common to most apparel businesses. Historically, the Company has recognized a significant portion of its revenue and operating profit in the fourth fiscal quarter of each year as a result of increased sales during the holiday season.

H. Cash and cash equivalents

The Company considers short-term investments with original maturities of three months or less when purchased to be cash equivalents. Amounts receivable from credit card issuers are typically converted to cash within 2 to 4 days of the original sales transaction and are considered to be cash equivalents.

I. Reclassifications

Certain reclassifications have been made to the 2020 financial statements in order to conform to the 2021 presentation. There were no changes to previously reported shareholders’ equity or net income (loss) as a result of the reclassifications.

J. Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021.

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

2. LEASES

Based on the criteria set forth in ASC Topic 842, Leases (“ASC 842”), the Company recognizes ROU assets and lease liabilities related to leases on the Company’s consolidated balance sheets. The Company determines if an arrangement is, or contains, a lease at inception. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities reflect the obligation to make lease payments arising from the lease. At any given time during the lease term, the lease liability represents the present value of the remaining lease payments and the ROU asset is measured at the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs and the remaining balance of lease incentives received. Both the lease ROU asset and liability are reduced to zero at the end of the lease.

The Company leases retail space under non-cancelable lease agreements, which expire on various dates through 2041. Substantially all of these arrangements are store leases. Store leases generally have initial lease terms ranging from five years to fifteen years with renewal options and rent escalation provisions. At the commencement of a lease, the Company includes only the initial lease term as the option to extend is not reasonably certain. The Company does not record leases with a lease term of 12 months or less on the Company’s consolidated balance sheets.

When calculating the lease liability on a discounted basis, the Company applies its estimated discount. The Company bases this discount on a collateralized interest rate as well as publicly available data for instruments with similar characteristics.

In addition to rent payments, leases for retail space contain payments for real estate taxes, insurance costs, common area maintenance, and utilities that are not fixed. The Company accounts for these costs as variable payments and does not include such costs as a lease component.

The expense components of the Company’s leases reflected on the Company’s consolidated statement of operations were as follows:

	Consolidated Statement	Three Months Ended				Nine Months Ended
	of Operations	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
(in thousands)
Finance lease expenses
Amortization of right-of-use <br>‎assets	Selling, general and <br>‎administrative expenses	$	840	$	778	$	2,518	$	2,092
Interest on lease liabilities	Interest expense		479		483		1,460		1,356
Total finance lease expense		$	1,319	$	1,261	$	3,978	$	3,448
Operating lease expense	Selling, general and <br>‎administrative expenses	$	4,806	$	3,915	$	12,606	$	12,149
Amortization of build-to-suit <br>‎leases capital contribution	Selling, general and <br>‎administrative expenses		321		329		970		977
Variable lease expense	Selling, general and <br>‎administrative expenses		2,141		2,744		6,367		6,782
Total lease expense		$	8,587	$	8,249	$	23,921	$	23,356

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Other information related to leases were as follows:

	Nine Months Ended
	October 31, 2021		November 1, 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	1,894	$	1,325
Operating cash flows from finance leases	$	1,460	$	1,356
Operating cash flows from operating leases	$	11,774	$	11,537
Weighted-average remaining lease term (in years):
Finance leases		12		13
Operating leases		9		10
Weighted-average discount rate:
Finance leases		4.4%		4.4%
Operating leases		4.1%		4.3%

Future minimum lease payments under the non-cancellable leases are as follows as of October 31, 2021:

Fiscal year	Finance		Operating
(in thousands)
2021 (remainder of fiscal year)	$	1,137	$	4,017
2022		4,523		17,520
2023		4,551		17,741
2024		4,736		17,130
2025		5,099		16,380
Thereafter		37,218		74,550
Total future minimum lease payments	$	57,264	$	147,338
Less – Discount		(13,631)		(24,606)
Lease liability	$	43,633	$	122,732

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

3. DEBT AND CREDIT AGREEMENT

Debt consists of the following:

	October 31, 2021		January 31, 2021
(in thousands)
TRI Senior Secured Note	$	23,948	$	24,352
TRI Note		3,500		3,500
	$	27,448	$	27,852
Less: current maturities		675		623
TRI long-term debt	$	26,773	$	27,229
Duluth Delayed draw term loan		—		48,250
	$	—	$	48,250
Less: current maturities		—		2,500
Duluth long-term debt	$	—	$	45,750

TRI Holdings, LLC

TRI entered into a senior secured note (“TRI Senior Secured Note”) with an original balance of $26.7 million. The TRI Senior Secured Note is scheduled to mature on October 15, 2038 and requires installment payments with an interest rate of 4.95%. See Note 6 “Variable Interest Entities” for further information.

TRI entered into a promissory note (“TRI Note”) with an original balance of $3.5 million. The TRI Note is scheduled to mature in November 2038 and requires annual interest payments at a rate of 3.05%, with a final balloon payment due in November 2038.

While the above notes are consolidated in accordance with ASC Topic 810, Consolidation, the Company is not the guarantor nor obligor of these notes.

Credit Agreement

On May 17, 2018, the Company entered into a credit agreement (the “Credit Agreement”) which provided for borrowing availability of up to $80.0 million in revolving credit (the “Revolver”), and borrowing availability of up to $50.0 million in a delayed draw term loan (“DDTL”), for a total credit facility of $130.0 million. The $80.0 million revolving credit facility was scheduled to mature on May 17, 2023. The $50.0 million DDTL was available to draw upon in differing amounts through May 17, 2020 and was scheduled to mature on May 17, 2023. Outstanding balances under the DDTL required quarterly principal payments with a final balloon payment at maturity. The Credit Agreement was secured by essentially all Company assets and required the Company to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the Credit Agreement.

On April 30, 2020, the Credit Agreement was amended to include an incremental DDTL of $20.5 million (the “Incremental DDTL”) that was available to draw upon before March 31, 2021, and matured on April 29, 2021, for a total credit facility of $150.5 million. The loan covenants were also amended to allow for greater flexibility during the Company’s peak borrowing periods in fiscal 2020. The interest rate applicable to the Revolver or DDTL was a fixed rate for a one-, two-, three- or six-month interest period equal to LIBOR (with a 1% floor) for such interest period plus a margin of 225 to 300 basis points, based upon the Company’s rent adjusted leverage. The interest rate applicable to the Incremental DDTL was also a fixed rate over the aforementioned interest periods equal to LIBOR (with a 1% floor) for such interest period plus a margin of 275 to 350 basis points.

On May 14, 2021, the Company terminated the Credit Agreement, and entered into a new credit agreement (the “New Credit Agreement”), which was treated as a modification for accounting purposes. The New Credit Agreement matures on May 14, 2026 and provides for borrowings of up to $150.0 million that are available under a revolving senior credit facility, with a $5.0 million sublimit for issuance of standby letters of credit, as well as a $10.0 million sublimit for swing line loans. At the Company’s option, the interest rate applicable to the revolving senior credit facility will be a floating rate equal to: (i) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.25% to 2.00% determined based on the Company’s rent adjusted leverage ratio, or (ii) the base rate plus the applicable rate of 0.25% to 1.00% based on the Company’s rent adjusted leverage ratio. The New Credit Agreement is secured by essentially all Company assets and requires the Company

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the New Credit Agreement

As of October 31, 2021 and for the nine months then ended, the Company was in compliance with all financial and non-financial covenants contained within the New Credit Agreement.

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	October 31, 2021		January 31, 2021
(in thousands)
Salaries and benefits	$	11,181	$	8,826
Deferred revenue		7,400		9,944
Freight		4,939		6,769
Product returns		5,037		5,304
Catalog costs		64		—
Unpaid purchases of property & equipment		1,126		503
Accrued advertising		3,621		1,377
Other		8,464		4,963
Total accrued expenses and other current liabilities	$	41,832	$	37,686

5. FAIR VALUE

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., an exit price). The exit price is based on the amount that the holder of the asset or liability would receive or need to pay in an actual transaction (or in a hypothetical transaction if an actual transaction does not exist) at the measurement date. ASC 820 describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of the Company’s available-for-sale security was valued based on a discounted cash flow method (Level 3), which incorporates the U.S. Treasury yield curve, credit information and an estimate of future cash flows. During the nine months ended October 31, 2021, certain changes in the inputs did impact the fair value of the available-for-sale security. The calculated fair value is based on estimates that are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The amortized cost and fair value of the Company’s available-for-sale security and the corresponding amount of gross unrealized gains and losses recognized in accumulated other comprehensive income are as follows:

	October 31, 2021
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
(in thousands)
Level 3 security:
Corporate trust	$	5,939	$	659	$	—	$	6,598
	January 31, 2021
---	---	---	---	---	---	---	---	---
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
(in thousands)
Level 3 security:
Corporate trust	$	6,047	$	64	$	—	$	6,111

The Company does not intend to sell the available-for-sale-security in the near term and does not believe that it will be required to sell the security. The Company reviews its securities on a quarterly basis to monitor its exposure to other-than-temporary impairment.

No other-than-temporary impairment was recorded in the unaudited condensed consolidated statements of operations for the nine months ended October 31, 2021 or November 1, 2020.

The following table presents future principal receipts related to the Company’s available-for-sale security by contractual maturity as of October 31, 2021.

	Amortized		Estimated
	Cost		Fair Value
(in thousands)
Within one year	$	159	$	197
After one year through five years		1,077		1,271
After five years through ten years		1,662		1,856
After ten years		3,041		3,274
Total	$	5,939	$	6,598

The carrying values and fair values of other financial instruments in the Consolidated Balance Sheets are as follows:

	October 31, 2021				January 31, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
(in thousands)
TRI Long-term debt, including short-term portion	$	27,448	$	27,944	$	27,852	$	28,697

The above long-term debt, including short-term portion is attributable to the consolidation of TRI in accordance with ASC Topic 810, Consolidation. The fair value was also based on a discounted cash flow method (Level 3) based on credit information and an estimate of future cash flows.

As of January 31, 2021, the carrying value of the delayed draw term loan approximated its fair value.

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

6. VARIABLE INTEREST ENTITY

Based upon the criteria set forth in ASC 810, Consolidation, the Company consolidates variable interest entities (“VIEs”) in which it has a controlling financial interest and is therefore deemed the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance; and (b) the obligation to absorb the VIE losses and the right to receive benefits that are significant to the VIE. The Company has determined that it was the primary beneficiary of one variable interest entity (“VIE”) as of October 31, 2021 and January 31, 2021.

The Company leases the Company’s headquarters in Mt. Horeb, Wisconsin from TRI. In conjunction with the lease, the Company invested $6.3 million in a trust that loaned funds to TRI for the construction of the Company’s headquarters. TRI is a Wisconsin limited liability company whose primary purpose and activity is to own this real property. The Company considers itself the primary beneficiary for TRI as the Company has both the power to direct the activities that most significantly impact the entity’s economic performance and is expected to receive benefits that are significant to TRI. As the Company is the primary beneficiary, it consolidates TRI and the lease is eliminated in consolidation. The Company does not consolidate the trust as the Company is not the primary beneficiary.

The condensed consolidated balance sheets include the following amounts as a result of the consolidation of TRI as of October 31, 2021 and January 31, 2021:

	October 31, 2021		January 31, 2021
(in thousands)
Cash	$	751	$	747
Property and equipment, net		24,334		24,800
Total assets	$	25,085	$	25,547
Other current liabilities	$	134	$	58
Current maturities of long-term debt		675		623
TRI Long-term debt		26,773		27,229
Noncontrolling interest in VIE		(2,497)		(2,363)
Total liabilities and shareholders' equity	$	25,085	$	25,547

7. EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed under the provisions of ASC 260, Earnings Per Share. Basic earnings (loss) per share is based on the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is based on the weighted average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock and are considered only for dilutive earnings (loss) per share unless considered anti-dilutive. The reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share calculation is as follows:

	Three Months Ended				Nine Months Ended
	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
(in thousands, except per share data)
Numerator - net income (loss) attributable to <br>‎controlling interest	$	2,806	$	940	$	12,343	$	(8,254)
Denominator - weighted average shares <br>‎ (Class A and Class B)
Basic		32,649		32,476		32,605		32,431
Dilutive shares		112		130		220		—
Diluted		32,761		32,606		32,825		32,431
Earnings (loss) per share (Class A and Class B)
Basic	$	0.09	$	0.03	$	0.38	$	(0.25)
Diluted	$	0.09	$	0.03	$	0.38	$	(0.25)

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The computation of diluted loss per share for the nine months ended November 1, 2020 excluded (0.1) million shares of unvested restricted stock, respectively, because their inclusion would be anti-dilutive.

8. STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation plan in accordance with ASC 718, Stock Compensation, which requires the Company to measure all share-based payments at grant date fair value and recognize the cost over the requisite service period of the award.

Total stock compensation expense associated with restricted stock recognized by the Company was $0.6 million and $1.6 million for the three and nine months ended October 31, 2021, respectively and $0.3 million and $1.1 million for the three and nine months ended November 1, 2020, respectively. The Company’s total stock compensation expense is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.

A summary of the activity in the Company’s unvested restricted stock during the nine months ended October 31, 2021 is as follows:

		Weighted
		average
		fair value
	Shares	per share
Outstanding at January 31, 2021	338,239	$	9.74
Granted	227,740		15.13
Vested	(150,688)		8.13
Forfeited	(4,165)		14.12
Outstanding at October 31, 2021	411,126	$	13.43

At October 31, 2021, the Company had unrecognized compensation expense of $4.2 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 2.4 years.

9. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

	October 31, 2021		January 31, 2021
(in thousands)
Land and land improvements	$	4,486	$	4,486
Leasehold improvements		46,988		47,451
Buildings		35,344		35,344
Vehicles		161		161
Warehouse equipment		17,469		14,685
Office equipment and furniture		52,898		52,614
Computer equipment		7,919		9,861
Software		34,180		34,003
		199,445		198,605
Accumulated depreciation and amortization		(91,092)		(75,958)
		108,353		122,647
Construction in progress		6,226		1,590
Property and equipment, net	$	114,579	$	124,237

10. REVENUE

The Company’s revenue primarily consists of the sale of apparel, footwear and hard goods. Revenue for merchandise that is shipped to our customers from our distribution centers and stores is recognized upon shipment. Store revenue is

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

recognized at the point of sale, net of returns, and excludes taxes. Shipping and processing revenue generated from customer orders are included as a component of net sales and shipping and processing expense, including handling expense, is included as a component of selling, general and administrative expenses. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses.

Sales disaggregated based upon sales channel is presented below.

	Three Months Ended				Nine Months Ended
	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
(in thousands)
Direct-to-consumer	$	85,200	$	86,392	$	258,830	$	273,503
Stores		60,077		49,139		168,993		109,320
	$	145,277	$	135,531	$	427,823	$	382,823

Contract Assets and Liabilities

The Company’s contract assets primarily consist of the right of return for amounts of inventory to be returned that is expected to be resold and is recorded in Prepaid expenses and other current assets on the Company’s consolidated balance sheets. The Company’s contract liabilities primarily consist of gift card liabilities and are recorded in Accrued expenses and other current liabilities under deferred revenue (see Note 4 “Accrued Expenses and Other Current Liabilities”) on the Company’s consolidated balance sheets. Upon issuance of a gift card, a liability is established for its cash value. The gift card liability is relieved and revenues on gift cards are recorded at the time of redemption by the customer.

Contract assets and liabilities on the Company’s consolidated balance sheets are presented in the following table:

	October 31, 2021		January 31, 2021
(in thousands)
Contract assets	$	1,993	$	2,490
Contract liabilities	$	7,400	$	9,788

Revenue from gift cards is recognized when the gift card is redeemed by the customer for merchandise or as a gift card breakage, an estimate of gift cards which will not be redeemed. The Company does not record breakage revenue when escheat liability to the relevant jurisdictions exists. Gift card breakage is recorded within Net sales on the Company’s consolidated statement of operations. The following table provides the reconciliation of the contract liability related to gift cards for the nine months ended:

	October 31, 2021		November 1, 2020
(in thousands)
Balance as of beginning of period	$	9,788	$	9,790
Gift cards sold		6,097		5,740
Gift cards redeemed		(8,112)		(7,381)
Gift card breakage		(373)		(1,119)
Balance as of end of period	$	7,400	$	7,030

11. INCOME TAXES

The provision for income taxes for the interim period is based on an estimate of the annual effective tax rate adjusted to reflect the impact of discrete items. Management judgment is required in projecting ordinary income to estimate the Company’s annual effective tax rate. The effective tax rate related to controlling interest was 25% for the three months ended October 31, 2021 and 25% for the nine months ended October 31, 2021. The income from TRI was excluded from the calculation of the Company’s effective tax rate, as TRI is a limited liability company and not subject to income taxes.

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DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

12. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses, otherwise known as “CECL”. In addition, this guidance changes the recognition for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk and requires additional disclosures. On November 15, 2019, the FASB issued ASU No. 2019-10 “Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815, and Leases (Topic 842),” (ASU 2019-10”), which provides framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. ASU 2019-10 amends the effective dates for ASU 2016-13 for smaller reporting companies with fiscal years beginning after December 15, 2022, and interim periods within those years. The Company expects to adopt ASU 2016-13 on January 30, 2023, the first day of the Company’s first quarter for the fiscal year ending January 28, 2024, the Company’s fiscal year 2023. The Company is evaluating the impact adopting ASU 2016-13 will have on the Company’s consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the financial statements and related notes of Duluth Holdings Inc. included in Item 1of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 (“2020 Form 10-K”).

The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year. Fiscal 2021 is a 52-week period and ends on January 30, 2022. Fiscal 2020 was a 52-week period and ended on January 31, 2021. The three and nine months of fiscal 2021 and fiscal 2020 represent our 13 and 39 week periods ended October 31, 2021 and November 1, 2020, respectively.

Unless the context indicates otherwise, the terms the “Company,” “Duluth,” “Duluth Trading,” “we,” “our,” or “us” are used to refer to Duluth Holdings Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical or current facts included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “could,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2020 Form 10-K, and other SEC filings, which factors are incorporated by reference herein. These risks and uncertainties include, but are not limited to, the following: the prolonged effects of COVID-19 on store traffic and disruptions to our distribution network, supply chains and operations; our ability to maintain and enhance a strong brand image; effectively adapting to new challenges associated with our expansion into new geographic markets; generating adequate cash from our existing stores to support our growth; effectively relying on sources for merchandise located in foreign markets; transportation delays and interruptions, including port congestion; inability to timely and effectively obtain shipments of products from our suppliers and deliver merchandise to our customers; the inability to maintain the performance of a maturing store portfolio; the impact of changes in corporate tax regulations; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; our ability to attract and retain customers in the various retail venues and locations in which our stores are located; competing effectively in an environment of intense competition; our ability to adapt to significant changes in sales due to the seasonality of our business; price reductions or inventory shortages resulting from failure to purchase the appropriate amount of inventory in advance of the season in which it will be sold in global market constraints; increases in costs of fuel or other energy, transportation or utility costs and in the costs of labor and employment; failure of our information technology systems to support our current and growing business, before and after our planned upgrades; and other factors that may be disclosed in our SEC filings or otherwise. Moreover, we operate in an evolving environment, new risk factors and uncertainties emerge from time to time and it is not possible for management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. We qualify all of our forward-looking statements by these cautionary statements.

We undertake no obligation to update or revise these forward-looking statements, except as required under the federal securities laws.

Overview

We are a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and catalog. In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of October 31, 2021, we operated 62 retail stores and three outlet stores.

We offer a comprehensive line of innovative, durable and functional products, such as our Longtail T^®^ shirts, Buck Naked^TM^ underwear, Fire Hose^®^ work pants, and No-Yank^®^ Tank, which reflect our position as the Modern, Self-Reliant American Lifestyle brand. Our brand has a heritage in workwear that transcends tradesmen and appeals to a broad demographic for everyday and on-the-job use.

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From our heritage as a catalog for those working in the building trades, Duluth Trading has become a widely recognized brand and proprietary line of innovative and functional apparel and gear. Over the last decade, we have created strong brand awareness, built a loyal customer base and generated robust sales momentum. We have done so by sticking to our roots of “there’s gotta be a better way” and through our relentless focus on providing our customers with quality, functional products.

A summary of our financial results is as follows:

Net sales in fiscal 2021 third quarter increased by 7.2% over the prior year third quarter to $145.3 million, and net sales in the first nine months of fiscal 2021 increased by 11.8% over the first nine months of the prior year to $427.8 million;

Net income of $2.8 million in fiscal 2021 third quarter compared to the prior year third quarter net income of $0.9 million, and net income in the first nine months of fiscal 2021 of $12.3 million compared to a net loss in the first nine months of fiscal 2020 of $8.3 million; and

Adjusted EBITDA increased to $13.2 million in fiscal 2021 third quarter compared to the prior year third quarter Adjusted EBITDA of $11.4 million, and Adjusted EBITDA in the first nine months of fiscal 2021 increased to $44.9 million compared to $16.6 million for the first nine months of the prior year.

See the “Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures. See also the information under the heading “Adjusted EBITDA” in the section “How We Assess the Performance of Our Business” for our definition of Adjusted EBITDA.

The Company continues to progress on further defining and executing the “Big Dam Blueprint,” which management believes will unlock the Company’s full potential for long-term, sustainable growth. As introduced in the second quarter of 2021, the Big Dam Blueprint focuses on the following key strategic areas:

Begin with a digital-first mindset that integrates technology into all areas of the business, fundamentally changing how we operate and deliver value to customers.

Intensify efforts to optimize Duluth Trading’s owned retail channels by increasing focus and investments in our direct channel as our primary growth vehicle. We are conducting strategic research that will inform decisions on future stores regarding new locations and market share potential, size and layout.

Evolve the Company’s multi-brand platform as a new pathway to grow the business. Create unique brand positions, across men’s and women’s, for Duluth, 40Grit, Alaskan Hardgear, Buck Naked, and Best Made to address customer needs for various occasions including work, outdoor recreation, casual lifestyle, and first layer. Invest in the evolution of the Duluth Trading platform to enable the integration of new brands, expand our offerings and broaden our customer base.

Carefully test and learn to unlock long-term growth potential. Explore new opportunities to engage current and potential customers through products, services and touchpoints that they expect and value.

Increase and, in some areas, accelerate investments to future proof the business. Areas under analysis include greater automation across the logistics network; technology that will improve operations, generate positive impact and sustainable returns; support growth through multiple brands and seamlessly integrate new brands into the portfolio; and attract the talent, skillsets and expertise needed to scale the business.

Our management’s discussion and analysis includes market sales metrics for our stores, website and catalog sales. Market areas are determined by a third-party that divides the United States and Puerto Rico into 280 unique geographical areas. Our store market sales metrics include sales from our stores, website and catalog. Our non-store market sales metrics include sales from our website and catalog.

COVID-19

The ultimate impact of COVID-19 on our operational and financial performance still depends on future developments outside of our control, including the duration and spread of the pandemic and related actions taken by federal, state and local government officials, and international governments to prevent disease spread. Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand. We continue to actively evaluate all federal, state and local regulations to ensure compliance by our store operations.

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How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of financial and operating measures that affect our operating results.

Net Sales

Net sales reflect our sale of merchandise plus shipping and handling revenue collected from our customers, less returns and discounts. Direct-to-consumer sales are recognized upon shipment of the product and store sales are recognized at the point of sale.

Gross Profit

Gross profit is equal to our net sales less cost of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin. Cost of goods sold includes the direct cost of purchased merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost and net realizable reserves; inbound freight; and freight from our distribution centers to our retail stores. The primary drivers of the costs of individual goods are raw material costs. Depreciation and amortization are excluded from gross profit. We expect gross profit to increase to the extent that we successfully grow our net sales. Our gross profit may not be comparable to other retailers, as we do not include distribution network and store occupancy expenses in calculating gross profit, but instead we include them in selling, general and administrative expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include all operating costs not included in cost of goods sold. These expenses include all payroll and payroll-related expenses and occupancy expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization. They also include marketing expense, which primarily includes digital and television advertising, catalog production, mailing and print advertising costs, as well as all logistics costs associated with shipping product to our customers, consulting and software expenses and professional services fees. Selling, general and administrative expenses as a percentage of net sales is usually higher in lower-volume quarters and lower in higher-volume quarters because a portion of the costs are relatively fixed.

Our historical sales growth has been accompanied by increased selling, general and administrative expenses. The most significant components of these increases are advertising, rent/occupancy and payroll costs. While we expect these expenses to increase as we continue to grow our organization to support our growing business and increase brand awareness, we believe these expenses will decrease as a percentage of sales over time.

Adjusted EBITDA

We believe Adjusted EBITDA is a useful measure of operating performance, as it provides a clearer picture of operating results by excluding the effects of financing and investing activities by eliminating the effects of interest and depreciation costs and eliminating expenses that are not reflective of underlying business performance. We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business.

We define Adjusted EBITDA as consolidated net income before depreciation and amortization, interest expense and provision for income taxes adjusted for the impact of certain items, including non-cash and other items we do not consider representative of our ongoing operating performance. We believe Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other items. We also use Adjusted EBITDA as the key financial metric in determining our fiscal 2021 bonus compensation for our employees. This non-GAAP measure may not be comparable to similarly titled measures used by other companies.

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Results of Operations

The following table summarizes our unaudited consolidated results of operations for the periods indicated, both in dollars and as a percentage of net sales.

	Three Months Ended						Nine Months Ended
	October 31, 2021			November 1, 2020			October 31, 2021			November 1, 2020
(in thousands)
Net sales	$	145,277		$	135,531		$	427,823		$	382,823
Cost of goods sold (excluding depreciation and amortization)		61,627			64,494			196,204			186,982
Gross profit		83,650			71,037			231,619			195,841
Selling, general and administrative expenses		78,792			68,189			211,779			202,175
Operating income (loss)		4,858			2,848			19,840			(6,334)
Interest expense		900			1,643			3,390			4,771
Other (loss) income, net		(265)			87			(193)			(104)
Income (loss) before income taxes		3,693			1,292			16,257			(11,209)
Income tax expense (benefit)		930			393			4,048			(2,827)
Net income (loss)		2,763			899			12,209			(8,382)
Less: Net loss attributable to noncontrolling interest		(43)			(41)			(134)			(128)
Net income (loss) attributable to controlling interest	$	2,806		$	940		$	12,343		$	(8,254)
Percentage of Net sales:
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold (excluding depreciation <br>‎and amortization)		42.4	%		47.6	%		45.9	%		48.8	%
Gross margin		57.6	%		52.4	%		54.1	%		51.2	%
Selling, general and administrative expenses		54.2	%		50.3	%		49.5	%		52.8	%
Operating income (loss)		3.3	%		2.1	%		4.6	%		(1.7)	%
Interest expense		0.6	%		1.2	%		0.8	%		1.2	%
Other (loss) income, net		-	%		0.1	%		-	%		-	%
Income (loss) before income taxes		2.5	%		1.0	%		3.8	%		(2.9)	%
Income tax expense (benefit)		0.6	%		0.3	%		0.9	%		(0.7)	%
Net income (loss)		1.9	%		0.7	%		2.9	%		(2.2)	%
Less: Net loss attributable to noncontrolling interest		-	%		-	%		-	%		-	%
Net income (loss) attributable to controlling interest		1.9	%		0.7	%		2.9	%		(2.2)	%

Three Months Ended October 31, 2021 Compared to Three Months Ended November 1, 2020

Net Sales

Net sales increased $9.7 million, or 7.2%, to $145.3 million in the three months ended October 31, 2021 compared to $135.5 million in the three months ended November 1, 2020. The increase was primarily due to an increase in store market sales.

Store market sales increased $9.4 million, or 10.5%, to $103.0 million in the three months ended October 31, 2021 compared to $93.6 million in the three months ended November 1, 2020. The year-over-year sales difference was primarily driven by continued increases in store traffic and conversion as compared to the prior year. Non-store market sales increased slightly by $0.3 million, or 0.7%, to $41.1 million in the three months ended October 31, 2021 compared to $40.7 million in the three months ended November 1, 2020.

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Gross Profit

Gross profit increased $12.6 million, or 17.8%, to $83.6 million in the three months ended October 31, 2021 compared to $71.0 million in the three months ended November 1, 2020. As a percentage of net sales, gross margin increased to 57.6% of net sales in the three months ended October 31, 2021, compared to 52.4% of net sales in the three months ended November 1, 2020. The increase in gross margin rate was driven by a higher mix of full price sales due to lower clearance inventory and fewer promotional events as compared to the same period in the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $10.6 million, or 15.5%, to $78.8 million in the three months ended October 31, 2021 compared to $68.2 million in the three months ended November 1, 2020. Selling, general and administrative expenses as a percentage of net sales increased to 54.2% in the three months ended October 31, 2021, compared to 50.3% in the three months ended November 1, 2020.

The increase in selling, general and administrative expense was primarily due to higher personnel costs, coupled with increased advertising spend as advertising was limited in the prior year based on our uncertainty about customer demand resulting from the pandemic.

Income Taxes

Income tax expense was $0.9 million in the three months ended October 31, 2021, compared to an income tax expense of $0.4 million in the three months ended November 1, 2020. The effective tax rate related to controlling interest was 25% for the three months ended October 31, 2021 compared to 29% for the three months ended November 1, 2020.

Net Income Attributable to Controlling Interest

Net income attributable to controlling interest was $2.8 million, in the three months ended October 31, 2021 compared to net income of $0.9 million in the three months ended November 1, 2020, due to the factors discussed above.

Nine Months Ended October 31, 2021 Compared to Nine Months Ended November 1, 2020

Net Sales

Net sales increased $45.0 million, or 11.8%, to $427.8 million in the nine months ended October 31, 2021 compared to $382.8 million in the nine months ended November 1, 2020. The increase was also due to an increase in store market sales, partially offset by a decrease in non-store market sales.

Store market sales increased $49.7 million, or 19.9%, to $300.0 million in the nine months ended October 31, 2021 compared to $250.3 million in the nine months ended November 1, 2020. The year-over-year sales difference was driven by temporary store closures in fiscal 2020 beginning on March 20, 2020 through the third week of June, as well as growth in online sales from both existing customers and new buyers. Non-store market sales decreased $5.0 million, or 3.9%, to $123.8 million in the nine months ended October 31, 2021 compared to $128.8 million in the nine months ended November 1, 2020 also due to heavy volume in the prior year as customer purchasing patterns migrating online, coupled with extended free shipping offers, higher promotions and deeper investments in digital prospecting in the prior year.

Gross Profit

Gross profit increased $35.8 million, or 18.3%, to $231.6 million in the nine months ended October 31, 2021 compared to $195.8 million in the nine months ended November 1, 2020. As a percentage of net sales, gross margin increased to 54.1% of net sales in the nine months ended October 31, 2021, compared to 51.2% of net sales in the nine months ended November 1, 2020. The increase in gross margin rate was driven by a higher mix of full price sales due to lower clearance inventory and fewer promotional events, as well as improved gross margin rates on both full price and clearance items.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $9.6 million, or 4.8%, to $211.8 million in the nine months ended October 31, 2021 compared to $202.2 million in the nine months ended November 1, 2020. Selling, general and administrative expenses as a percentage of net sales decreased to 49.5% in the nine months ended October 31, 2021, compared to 52.8% in the nine months ended November 1, 2020. The positive leverage was primarily due to shifting to a more efficient digital marketing approach, as well as lower shipping expenses driven in part by a shift in channel mix resulting from higher store traffic during the current year.

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The increase in selling, general and administrative expense was primarily due to increased wages due to Company retail locations being open for the full fiscal year, wage increases at both the stores and distribution centers, as well as increased depreciation expense associated with investments in technology.

Income Taxes

Income tax expense was $4.0 million in the nine months ended October 31, 2021, compared to an income tax benefit of $2.8 million in the nine months ended November 1, 2020. The effective tax rate related to controlling interest was 25% for the nine months ended October 31, 2021 compared to 26% for the nine months ended November 1, 2020.

Net Income Attributable to Controlling Interest

Net income attributable to controlling interest was $12.3 million, in the nine months ended October 31, 2021 compared to a net loss of $8.3 million in the nine months ended November 1, 2020, due to the factors discussed above.

Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA

The following table presents reconciliations of net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures, for the periods indicated below. See the above section titled “How We Assess the Performance of Our Business,” for our definition of Adjusted EBITDA.

	Three Months Ended				Nine Months Ended
	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
(in thousands)
Net income (loss)	$	2,763	$	899	$	12,209	$	(8,382)
Depreciation and amortization		7,306		7,917		21,822		21,209
Amortization of internal-use software hosting
subscription implementation costs		478		—		1,252		—
Interest expense		900		1,643		3,390		4,771
Amortization of build-to-suit operating leases <br>‎capital contribution		198		199		595		596
Income tax expense (benefit)		930		393		4,048		(2,827)
EBITDA	$	12,575	$	11,051	$	43,316	$	15,367
Stock based compensation		605		382		1,612		1,263
Adjusted EBITDA	$	13,180	$	11,433	$	44,928	$	16,630

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $1.8 million to $13.2 million in the three months ended October 31, 2021 compared to $11.4 million in the three months ended November 1, 2020. As a percentage of net sales, Adjusted EBITDA increased to 9.1% of net sales in the three months ended October 31, 2021 compared to 8.4% of net sales in the three months ended November 1, 2020.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $28.3 million to $44.9 million in the nine months ended October 31, 2021 compared to $16.6 million in the nine months ended November 1, 2020. As a percentage of net sales, Adjusted EBITDA increased to 10.5% of net sales in the nine months ended October 31, 2021 compared to 4.3% of net sales in the nine months ended November 1, 2020.

Liquidity and Capital Resources

General

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, capital expenditures associated with infrastructure, information technology, and opening new stores. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At October 31, 2021, our net working capital was $89.9 million, including $20.4 million of cash and cash equivalents.

We expect to spend approximately $18.5 million in fiscal 2021 on capital expenditures, inclusive of software hosting implementation costs. Capital expenditures includes a total of approximately $16.4 million related to investments in technology and $2.1 million for the one planned new retail store that opened in the third quarter. Due to the seasonality of our business, a

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significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

We believe that our cash flow from operating activities and the availability of cash under our credit facility will be sufficient to cover working capital requirements and anticipated capital expenditures for the foreseeable future.

Cash Flow Analysis

A summary of operating, investing and financing activities is shown in the following table.

	Nine Months Ended
	October 31, 2021		November 1, 2020
(in thousands)
Net cash provided by (used in) operating activities	$	32,758	$	(28,614)
Net cash used in investing activities		(8,945)		(11,483)
Net cash (used in) provided by financing activities		(50,644)		50,657
(Decrease) increase in cash, cash equivalents	$	(26,831)	$	10,560

Net Cash Provided by (Used in) Operating Activities

Operating activities consist primarily of net income adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in operating assets and liabilities.

For the nine months ended October 31, 2021, net cash provided by operating activities was $32.8 million, which primarily consisted of net income of $12.2 million, non-cash depreciation and amortization of $21.8 million, and cash used in operating assets and liabilities of $3.0 million. The cash used in operating assets and liabilities of $3.0 million primarily consisted of a $16.0 million increase in inventory and a $7.6 million decrease in income taxes payable offset by a $4.1 million increase in accrued expenses and a $24.9 million increase in trade accounts payable.

For the nine months ended November 1, 2020, net cash used in operating activities was $28.6 million, which consisted of net loss of $8.4 million and cash used in operating assets and liabilities of $46.5 million, partially offset by non-cash depreciation and amortization of $21.2 million, stock based compensation of $1.3 million and deferred income taxes of $3.5 million. The cash used in operating assets and liabilities of $46.5 million primarily consisted of a $65.6 million increase in inventory in advance of our peak season, partially offset by a $21.4 million increase in trade accounts payable.

Net Cash Used in Investing Activities

Investing activities consist primarily of capital expenditures for growth related to investments in infrastructure, information technology, and new store openings.

For the nine months ended October 31, 2021, net cash used in investing activities was $8.9 million and was primarily driven by capital expenditures of $9.1 million for a new distribution center and one new retail store, as well as investments in information technology.

For the nine months ended November 1, 2020, net cash used in investing activities was $11.5 million and was primarily driven by capital expenditures of $11.1 million for new retail stores, as well as investments in information technology.

Net Cash (Used in) Provided by Financing Activities

Financing activities consist primarily of borrowings and payments related to our revolving line of credit and other long-term debt, as well as payments on finance lease obligations.

For the nine months ended October 31, 2021, net cash used in financing activities was $50.6 million, primarily consisting of the full paydown of Duluth’s debt.

For the nine months ended November 1, 2020, net cash provided by financing activities was $50.7 million, primarily consisting of proceeds of $28.9 million, net from our term loan and proceeds of $23.7 million, net from our revolving line of credit to fund working capital.

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Contractual Obligations

There have been no significant changes to our contractual obligations as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021.

Off-Balance Sheet Arrangements

We are not a party to any material off-balance sheet arrangements.

Critical Accounting Policies and Critical Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the related disclosures of contingent assets and liabilities at the date of the financial statements. We evaluate our accounting policies, estimates, and judgments on an on-going basis. We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions and such differences could be material to the consolidated financial statements.

As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates described in our 2020 Form 10-K.

Recent Accounting Pronouncements

See Note 12 “Recent Accounting Pronouncements,” of Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1, of this quarterly report on Form 10-Q for information regarding recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in the market risks described in our 2020 Form 10-K. See Note 3 “Debt and Credit Agreement,” of Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1, of this quarterly report on Form 10-Q, for disclosure on our interest rate related to borrowings under our credit agreement.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Section 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires management of an issuer subject to the Exchange Act to evaluate, with the participation of the issuer’s principal executive and principal financial officers, or persons performing similar functions, the effectiveness of the issuer’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of each fiscal quarter. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

Item 1A. Risk Factors

We operate in a rapidly changing environment that involves a number of risks that may have a material adverse effect on our business, financial condition and results of operations. For a detailed discussion of the risks that affect our business, please refer to the section entitled “Risk Factors” in our 2020 Form 10-K, or other SEC filings. There have been no material changes to our risk factors as previously disclosed in our fiscal 2020 Annual Report on Form 10-K. ‎

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any equity securities during the quarter ended October 31, 2021, which were not registered under the Securities Act.

The following table contains information of shares acquired from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon the vesting of the employees’ restricted stock during the three months ended October 31, 2021.

				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
August 2, 2021 - August 29, 2021	949	$	15.59	—	$	—
August 30, 2021 - October 3, 2021	1,020		14.31	—		—
October 4, 2021 - October 31, 2021	—		—	—		—
Total	1,969	$	14.95	—	$	—

‎

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit No.
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 October 31, 2021 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.”

‎

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: December 3, 2021
	DULUTH HOLDINGS INC.<br>‎(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)

		20211031 EX 31.1 DLTH CEO

Exhibit 31.1

CERTIFICATIONS

I, Sam Sato, Chief Executive Officer, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Duluth Holdings Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 3, 2021

| | | --- | | /s/ Sam Sato | | Sam Sato | | Chief Executive Officer |

		20211031 EX 31.2 DLTH CFO

Exhibit 31.2

CERTIFICATIONS

I, David Loretta, Chief Financial Officer, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Duluth Holdings Inc. (the “registrant”);

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 3, 2021

| | | --- | | /s/ David Loretta | | David Loretta | | Chief Financial Officer |

		20211031 EX 32.1 DLTH CEO

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Duluth Holdings Inc. (the “Company”) for the quarterly period ended October 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sam Sato, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: | 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and | | --- | --- | | 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | | --- | --- |

| | | | --- | --- | | | | | | /s/ Sam Sato | | Name: | Sam Sato | | Title: | Chief Executive Officer | | Date: | December 3, 2021 |

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. This certification shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

		20211031 EX 32.2 DLTH CFO

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Duluth Holdings Inc. (the “Company”) for the quarterly period ended October 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Loretta, as Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: | 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and | | --- | --- | | 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | | --- | --- |

| | | | --- | --- | | | /s/ David Loretta | | Name: | David Loretta | | Title: | Chief Financial Officer | | Date: | December 3, 2021 |

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended October 31, 2021

For the transition period from _______ to _______

Commission File Number 001-37641

DULUTH HOLDINGS INC.

DULUTH HOLDINGS INC.

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED October 31, 2021

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DULUTH HOLDINGS INC.

Condensed Consolidated Balance Sheets - Assets

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

DULUTH HOLDINGS INC.

Condensed Consolidated Balance Sheets – Liabilities and Shareholders’ Equity

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

DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Operations

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

DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Comprehensive Income

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

DULUTH HOLDINGS INC.

Condensed Consolidated Statement of Shareholders’ Equity

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

DULUTH HOLDINGS INC.

Condensed Consolidated Statement of Shareholders’ Equity

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

DULUTH HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

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

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

A. Nature of Operations

B. Basis of Presentation

C. COVID-19

D. Impairment Analysis

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

E. Inventory

F. Prepaid Expenses and Other Assets

G. Seasonality of Business

H. Cash and cash equivalents

I. Reclassifications

J. Significant Accounting Policies

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

2. LEASES

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

3. DEBT AND CREDIT AGREEMENT

TRI Holdings, LLC

Credit Agreement

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

5. FAIR VALUE

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

6. VARIABLE INTEREST ENTITY

7. EARNINGS (LOSS) PER SHARE

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

8. STOCK-BASED COMPENSATION

9. PROPERTY AND EQUIPMENT

10. REVENUE

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Contract Assets and Liabilities

11. INCOME TAXES

For the transition period from _ to _