DLTH - Earnings call transcript Q3 2018

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Operator

Good morning and welcome to the Duluth Holdings Third Quarter 2018 Earnings Conference Call. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Moira Conlon, Investor Relations for Duluth Holdings. Please go ahead.

Moira Conlon

welcome XXXX call financial and Holdings' discuss Jamie, quarter third results. you, to to today's Duluth Thank

Our your earnings under and prepared release, Chief Officer. available the am on On which open today then Executive we questions. issued Investor here up management Loretta, call website we this Officer; Relations today's and will at Chief Stephanie call, remarks ir.duluthtrading.com with Press Dave I our Releases. to Pugliese, morning, Financial is provide will

like to call similar would as you that statements, Before can today's I we expect by phrases. such remind comments on of will which and begin, estimate, anticipate, words forward-looking include the be identified use

conference that differ statements. of turn These Forward-looking And go expressed projections, statements relied I call over additional of be to forecasts forward-looking estimates, information. now and could with not by Please date Stephanie, materially in Stephanie. to SEC results the speak and statements uncertainties call for ahead. the our goals, to cause like events. outcomes of or from nature to would future this are actual assumptions those to filings should their as predictions only involve the that, and forward-looking as and subject please upon refer risks

Stephanie Pugliese

on over us products, Thank I’m to position billion the our quarter, brand $X XXXX strong key omnichannel awareness presence new delivered and execute team those how more report our core our we initiatives experience. you, our that revenues I our conference prepares selling to continued through increasing new reach this focus third and years. of But Moira, sales new Direct fortifying minutes, season our for of customers customers' driven have for $XXX few quarter that XX.X%. a talk four and innovative and quarter next and in second sales percentage through are ready Retail our about net year-over-year will enhancing on third direct achieved In pleased increased growth experience our holiday goal at call. to increased first, XXXX. a efforts number in quarter welcome everyone year XXXX stores by we Throughout the and marketing impact the quarter to rate. peak several largely of recognition. adjustment, all in X.X% the had XX% growth over are stores Net opened And new to shoppers. sales includes and marks four year-over-year. This sales After rate, our growth that now point grew which consecutive million, of grew revenue enhancing product rate and opened improved XX% channels. a the that XXth for the quarter first

strong in basis digits. XX% year-over-year women’s saw We’re of on margin track an to results XX Gross growth the our points profit annualized rate in women’s direct and and ended year-round quarter. higher reliance the improve and efforts well direct. reflecting rate ongoing categories maintaining quarter seasonal year, very by on fulfillment we promotional in primarily a or less XX% position performed with growing over XX.X% across division, We Core and while this all men’s categories driven inventory with mid-single a in meet clean last men’s growing activity terms, product to XX%.

increased and new achieved there well, challenges. e-commerce some quarter, saw where an we very expected slowdown a transition growth of and fine adjustment monitor but in worked the to The While direct some goals through went tune our we also of team was August the this expenses for period platform our halfway. to

seasonal our and implemented down Belleville retail temporary This update our being stores in in to sell new in a for when We expected than replenishment late flow replenished technology inventory our caused transition existing have and slower center. upgraded distribution product. we software the a delay

incurred customers refine our to while standard. the costs we management maintaining order labor call Lastly, systems, continued our service we in as center more

identified of All improved the were November. challenges these throughout into and quarter and

customers expect quarter. as improved all season, existing new ever this second for year. our in our We’ve entered fourth new those before. successfully for plans ability our to And completed We than back important peak expenses of the the we seven and in stores to line the reach addition opened customers the serve store we’ve get year with better the expansion of half

dilutive XX XXXX in scratch. to now the of to all expectations. Maine. effort Portland, goal expand initial the incredible coast meeting fiscal are tireless of store geographically We markets, exceeding this most deal XX stores and have have we to across Overall, year from experience achieved Portland, customers Dittrich, states to we’re XX XX To who our from Oregon the ambitious to or work and and an great our have We team retail stores trading our stated achievement, Al a for built store this coast was country.

has team he place. leadership Now that his in

have Chief We Operating all operations. oversee Al dilutive Officer to promoted

our retail As be sales. of penetration successfully before, measured and our can we’ve direct stated market growing the core through is at the omnichannel and strategy combination of

high to current non-store our markets. is brand. We base overall than is value our customers market more and our We at strategy leading market growth grow double positive to immediately working. this continues small, bring channel established store rate we While increase the to direct that continue indicators see penetration new the of

To in our In build successfully further experience to marketing awareness mobile have to ability implemented and our addition to major scalable content investing support several and building improve base product we efforts, infrastructure visibility. our to initiatives develop model personalized and through to strong e-commerce we've and and a improved store brands our growth. date, omnichannel

in-store in retail deployed seven buy pick up have online, We locations.

customers are the We in seeing adoption locations to XXXX. to out more roll plan by rate quick and we this

capacity. in addition, live this background seven with those we and In be and expanding stores initiative locations stated locations will ship-from-store went to advantageous macro

in holiday season. across and all to electronic stores system we time now our gift the ability the upgraded We POS for have have card issue

Finally, shipping We replenishment. ago, as tremendous moment to place customers have can't upgrade efficiencies said nothing team coordinated to to capabilities thank we these excites our our mentioned their retail centers completed That the season. in like and our for and distribution a enough in have peak innovative effort introductions. for create more selling I enhanced direct product

This quarter, we've including and Agiloft launched Outerwear. Flexpedition several new products,

receptive introduced for also our We Plus Size women our through line audience.

Plus We this to line And XX% are since customers, purchased repeat brand. of bringing almost substantially of who the with in repurchasing in XXXX. are to quarter new a was grow We new rate strong our plan customers women launch. the Sizes

we holiday the Now season. I for will see conclude my remarks what ahead with

have infrastructure capable before. ever mentioned I've we a stronger as First, more and already than

new getting expanded the We have investments new and about Every some this collection. crown out we catalog including us are holiday outerwear exciting TV across stand and and Hardgear advertising help that from our season. year smarter digital we noisy product will an launches, believe Alaskan

position. on Our systems sales prior not in strong a in forecast, years. new stores as are are back With in stocking inventory our selling based place, we

to allow opportunity. quarter. to still that will accomplish will us We the demand We up our almost stock we lot to we year, base the customers a XX and network closer to customers, that customer have ramped we And reach avoid stores know to believe larger been throughout be have and on later at this including buying reacting having a recognizing the have to each distribution that Christmas centers capitalize sales bottleneck. monitoring

discuss financials a over reiterating our EPS our year are to to the for I season. to more sales and look and and that, guidance With Dave the call We holiday forward turn successful in detail. operations will

Dave Loretta

percentage driven increasing quarter growth recognition third sales Thank both with million, retail $XXX.X points increasing and segments, reported was an sales $XX.X sales million Stephanie, year. to XX% you, good direct sales Today new XX.X% our the Net $XX.X of million. compared net million added growth XX% direct the we The to increase morning. last retail to by the direct standard revenue adoption to rate. and $XX.X of and X.X of

were from year. period direct the XX% the in down $X.X quarter, shipping revenues the Within same million last sales,

retail square for in feet market opened four us. In additional to of our XXXX, Of approximately we During retail November, the half opened stores, the adding new are three total we've quarter, stores seven XX,XXX in second we footprint. the new in gross six stores. opened

of customer to greater After strategy year, in with than we higher store. than see direct markets omnichannel market market sales physical traction. those Xx store a stores have to we've direct growth gain two continues markets markets direct growing customers than for a had in a that without Our growth where converting opened without more to presence stores. stores to been Xx are sales And years, for

Turning the back financial results. to

XX.X% last to of $XX million or XX.X% year. gross net quarter million was third $XX.X sales sales net or Our profit compared of

business. and expenses advertising and $X.X $X.X last full line, and general to marketing million quarter, in has increased the expenses, an million $XX a in in This improved the of points of selling expenses Selling, priced result in the increased and promotions, our general fewer revenues million $XX.X which year. a shipping lower XX of Excluding profit administrative to of in margins compared more basis our increase XX% component women's administrative $X.X million as selling included bigger impact and million become gross expenses.

costs, advertising XXX sales, XX.X% increase points to basis of expenses to comprised points basis of higher This As increased is expenses last SG&A expenses. and basis a XXX net in and points percentage general XX.X% of XX year. basis compared points administrative selling of marketing XX higher, and

largely fall the Within recognizing also support of last to adopting to centers second, primarily from certain year our to an quarter items: quarter; retail the women's television decline call the of increase XX-basis-point spend and expenses second temporary Within to fourth new first, advertising third season marketing due the quarter revenue and a and the in third earlier selling system. the from third, the increase to and three impact adoption. the costs Plus costs additional accretive the distribution to higher due the while productivity the at recognition the to stores quarter due and was Size the shift marketing, winter the and for launch; advertising impact catalog women's a selling expenses, was in XX-basis-point higher start versus in

we the partial costs consulting in expenses, As offset e-commerce to XXX-basis-point to was continue Within new to increase general additional the this, retail and administrative and management proportionally. a related staff, sales realize leverage expenses depreciation and order platforms. shipping to due increase as

addition, G&A Included our the in expenses preopening base new retail from $X.X store were to compared million million $X.X In year. store largest contributed of SG&A increase to higher costs fixed expenses. in last

and For loss per net with $XX quarter million second or share a we diluted million a loss reported line share $X.XX last of million, $X.X per the our of ended balance $X.XX of on cash $XXX,XXX million compared the capital credit. net outstanding revolving $X.X diluted or to a We quarter, net of year. working $XX of

terms in significant working capital, made of In we improvements managing inventory.

built sales improvements XX% last inventory the to These X.X% enhanced quarter, we supply our only in reflect chain the vendor third was through flexibility While into relationships. increased up compared year.

season returns of the flow. -- planning and and web improved that just than benefits our lead rather stores benefit into to to Additionally, inventory have in on our both inventories cash systems inventory from our at the good as free We terms products by selling to and feel high outlet expect we will about throughout holiday ongoing quantities location. the realize clearance position we stores. head through focusing the positive outlet Also,

XX% sales accounting with We’re net this direct $XXX and for reaffirming plans. digits. to stores opened total for of in net segment of million segment the retail sales with consistent We our our to XX year grow million our mid-single $XXX expect outlook to the up XXXX

also guidance assumes following. year the full Our

infrastructure expansion million will retail technology, compared A percentage XX year. gross XX offset selling people, in advertising, which and our basis expenses points to million down increase with to rate to SG&A of of Our be $X.X partially in expenses last net in reflecting by and margin XXXX. basis $X.X the related and XX as store leverage pre-opening overhead flat and a in sales, points was expenses, new to increased to investments million $X

EBITDA between depreciation per counts XX.X share marketing building stores related between anticipated lease. earnings office and corporate we've expense months the interest due year were excited This to to and and tax $X.XX about full treatment closing, the million These nine of be to offset capitalized of the made expenses. new In increases our million, XXXX progress in diluted we We now expect year. diluted the assumes XX%. rate $XX shares shares are of and by We the and and the adjusted be $X.XX. as a first and savings overhead primarily expect a higher million $XX of to

selling to place have that, holiday and We our With a foundation open on to I'll financial strong call are guidance. questions. the full-year the Operator? meet track season in for

Operator

first Our go question. ahead from Please today comes Instructions] Komp [Operator Baird. from your Jonathan question with

Jonathan Komp

Maybe on to business just a couple questions direct start. the of

you on a and is firs accounting we that little what give impacts Just the bit that on just should think change, about? could any detail more future

Dave Loretta

where customers based order the revenue on of in standard, there And transition to our impact shipped as that to recognition recognition for Jon. the would actually the a sale under the Sure, is the we their The order a that booked timing of when at past, to our the of relates receive estimation being as control orders us was it order is. ability determine our with Where the hands. order new at the doors. of in shipped shipped the time

impact means, quarter shipped past, of into that that in of the the sales period sale at the would within the at And those now end we've actually door. so next fiscal ship we package this the quarter shipped the the recognized differ whereas we

to quarter, at third of quarter. a impact any the were other and And have direct percentage the a front increase about sales are sales our because we the really period the quarter. of to terms quarter, the it at because year, level third bigger this basis, end end quarter same of of On it at if October, two of end the quarter to affect peak other fourth end you January at in relative had the sales at the the then full-year nominal about relates at is expect So adjustment the growth. backend to of impact the a just the their end full points of year-to-date the lower for a simply within the compared think

the that nearly level have of same be won't this period. impact So we

Jonathan Komp

rate And you the it for systems accelerated the and bit said business, the then the growth underlying a little some is broader direct quarter guide there like question on in the within a sounded quarter. volatility

So trajectory, for then, maybe something in think the apply we you segment. roughly obviously, quarter on for the color little I digits a more and confidence fourth share can that can your up mid-single

helpful. any had So color things shake into and there you the would fourth how drivers quarter on up be it

Stephanie Pugliese

Sure.

We -- with in was first we start saw third direct, the from in in terms and of of saw to Jon was transition couple we direct what to quarter slowdown a some optimized. that need a ECP everything inbound and happened several weeks in of In as will an customers the links down, one, sure of we August a I the system. some that things. the pathways expected for make we flow to to that of expected the refine Number sometime the would refine

working of the of marketing, via ECP heavier some our wanted August smoothly The on customers other we build in before digital position, thing the transition volume up to back we our sure activity that was purposefully hold or will, large for in advertising some of promotional. because happened to if relates system that the was as very make you traffic our to it terms that we email, promotional

that So got part to October. we a quarter had into direct Traffic strong of the in where growth. though, deeper was the actually beginning third quarter we

was was was Beginning September quite us. good of okay, lull transitional more time very a for August, So have this us. October planned we in frankly, for it of

like business where quarter. overall expected the we so the And we view was for third direct

later a later also my mentioned customers into into Monday. period. entered we the notes, Friday quarter, Cyber it strong see time in Black the Christmas that very and fourth weekend, are as comes as Obviously, had As holiday we shopping I through we

we’re days later longer so last anticipating shipping into and period We’re did watching time year three the or And single the every we’re reacting Christmas this day. business year, we than that.

we people have later any and highly in As it's are are, Christmas, et Giving with week different There Thanks and as people are patterns fourth as shopping of quarter, cetera. kinds an between shopping extra competitive.

that One systems watching our other feel very add, specifically, I just always And very, talk very fourth as when we very, want systems about do place. that put we thing we the so closely. good and the I in we’re about business quarter very to

disruption had of any customer We systems. have minimal with our

our improvement our the for We through a some systems. sites. It in to us have and had speed, tuning desktop money mobile refining in fine than has example, of cost we bit more expected little in

our we little customer representatives, to needed part my customers, that than additional and transaction load -- rush for care in the to And did well, rather taking that Some example, the the a to are our than screens incurred, of money that service were they extra prepared of has longer was time are try but a our quarter, looking we that costs allowing the them are through customer with I bit care us at in it customer take cost expected. our reps it expenses remarks. mentioned the

Jonathan Komp

if incremental, could up you're a those? think reach the the rollout I'd maybe curious one And capabilities be some to in bit to omnichannel of expand some you be look in just as beginning especially maybe tying of at most of some I those as the learnings following next last terms just Stephanie, of the what the of you year you initial could systems,

Stephanie Pugliese

able already it's hand-in-hand kind store that have a other we with when be we Yes, the we throughout through continue background initiatives pick plan quarter out because we seven handle online up the roll right that excited have. the of we're initiative up particularly that do buy We The about set goes in-store then to in that up that one, first from to the shipped year. have the stores -- to the for functionality now. to set and

to through of go we as continue XXXX. roll through will we those both the So out stores

a and is see thing when card, earlier, customers. that Christmas system. one last-minute pick-up is are on over that before several already nice or a Another place, And to last I have excited positive with week, gift. we ability for very a my we're see interesting that mentioned an weeks, old date, this for to learn e-gift put us particular weren't happens our to the systems that that days, the which all think and deliver customers actually added is something think to quite that's growing in We've that any we able issue ability next seen few I that if in And of for and from in functionalities we to I'm our this new with customer every comments we now the I future at be going those lot do of that single looking it'll have the to we card email e-gift time. a have what to in

it flexibility a So our giving. of around lot will customers give gift

Operator

Carden question. Our Please question William with from next comes go your from Dylan Blair. ahead

Dylan Carden

here And tools controlling allow that. the I disruption more have as kind some store inventory measure, that? using store, of the systems remarks, sales per my influence curious management, can you that per far broadly some down, or nice prepared By that you of to looks there you're might -- foot productivity store on That. from sort sales metric? sort delivery. that the whether you inventory on was was if then of just the Can retail new maybe it doing job you square like as digits. speak sort guess side. upon of heard mid-single a do I'm expand in of you're and of right, that not I call But kind to it

Stephanie Pugliese

Sure.

to the answer the that implemented first too questions talk in system over the inventory me made, in on through flows your happened about we've to because and Let about quarter what that quarter. of third remarks we've some happened the and what stores

on planning X stores, in would to stores they what which for this pre-inventory So in based inventory the of week prior. system, and our assortment recently replenish Phase the sold past, allows other particular we have timeframe, most implemented words, us we

weeks replenish based two put behind with to have one the a inventory there and the ability for to sales in available system having forecast. the customers. be stores on Today could in we we place, So that our we

obviously two the So to geographic system, example, big our next that’s to for we’re long-term. us as win advance the an that is as be localize which to looking abilities them phase for going those stores will think weeks, for anticipating additional continue needs and in four of The us to assortments really to give going important. weeks. our a very forward of be footprint inventorying we We stores, expand

stores was forward were transitioning that's So very we’re because that where transitioning went We we that happened system. this slower four a Belleville, and we taken that return is all high-yield we from. than that we've a conveyor specifically replenish in a that was inventory more for had center That stores productivity our expected. team. added were our automation well and distribution center, distribution the happy for third system step of our really to our the a The What pick-pack timeframe automated us. center with distribution quarter

again, system, that So the on than new that we new expected. process the little is a up transitions, and running slower team

costs additional that. some incurred on have We

would I enter terms that we that. the we mention of little year October, inventory the of to last than Giving implementing we were thing started scale our that is overflow missed or as stock our really more teams weather with later you demand to was of better were much then our missed, a though rightsize of then lined pants, -- late flannel in days to supply very if working plan X.X%, and to hard to is weekend, that, had with some transition as of some our they our really fall based stores. is, as just way look up we've got report And but of they've also, our little core really cost demand. the some that the us original position on have much, that into we to and about through large and and a of that by programs, obviously so. of vendors, that larger for slowdown in weeks cost week in been quantifying which of layers, were result as a fulfillment example, in very stock The of flow inventory, the fall, for Thanks better, that reached money. that I’m allows stores accurate stay bubble of great a position us things to that bit last as happy We lower program. kind inventory inventory in level of work We particularly future. we good the XX mid-November, again, a to created like overall And early will. larger of stores, flow heavier-weight know position the the customers inventory system because longest flow more a goods We and a some know, us forward, the frequently, our into don’t I for bit productivity, They of

Dylan Carden

bit And new one maybe Any Dave then more guidance? as now gross expected than little pressure on here, comments per modestly the last albeit. margin that a just

Dave Loretta

pricing period. elements anticipating one that more to bit be pressure we that fourth is plans the competitive out becomes as not get through promotional. the of the control our more Slightly in a But of we’re Yes. set that quarter, that we become

but it largely of we've an and offset that that wanted see interest cautious, SG&A with do outlook being to in provide the on the in marketing So note, side.

Operator

Jim your with from comes Duffy question from next Please our go Stifel. question. And ahead

Jim Duffy

of seen Couple you curious the to benefits new traffic, the any I'm seen share you've questions can flow. -- systems complications really the platform Have to metrics development from I from any web with web understand conversion, implementation platform. me. implementation? some and benefits you the new inventory on quantifiable

Stephanie Pugliese

first and process on creating significant XX% of we one -- immediate that, people ultimately to our mobile the on to the to a in of at a that's points increase And the site. a get site Jim, anywhere higher their allowing convert good front, improvement, through know customer XX% speed, particularly we shopping saw kind entry Yes, rate. experience, faster from

more nice also XX% is driven a increases -- which third seen up traffic year-over-year, traffic increase. significant actually to website the We than XX% quarter, up have in really than more in

yet increases not in overall. have significant conversion seen We

Some of of that traffic potential significantly. so with that our in And these that prospecting know that customers. though the traffic do fact is traffic have to we has increased some

So come that's back longer continue with as preposition more a us the to and they get term to brand. comfortable

that The piece with does almost and increased that, lower every a of mobile tablet, than conversion rate at our now, faster there at desktop is out right other has traffic as retailer traffic convert and a rate.

mix our is well. continuing to evolve as So

and over conversion, term couple past as of longer We have that we fine improving well. seen, we that the a know improvement in will proposition, tuning that's work and on months, but continue to on that, and

that be in calls. on our shared study also marketing mix will we're by Some we've that of informed prior looking that

Dave Loretta

websites last us volumes volumes that I'd or a other come year regard. Black weekend Monday we on are in couple probably troubles higher one customer is in elements see any we stability I a I and where simply also of being play. of to that some really Cyber And add know the Friday, Jim, the read significantly some in having with impact new didn't guess, the that platform volumes core cases realize to had of the peak into were

as initial So an we're with outcome. pleased that

Jim Duffy

of online share only can is uptick impact are in-store on any And any I you early recognized its on the stores, buy you but pickup retail seeing there there and seven in statistics and productivity?

Stephanie Pugliese

quite right early -- Jim, buy. it’s We have -- far what and seen we’ve you're so

stores. single buy every said, they only value pick seeing as and come have of at really I which an bringing there, to store, quarter are in-store buying. over else increased of people that We to in-store those up. terms from about also up order orders little buy in that We of we not tend feel week, from seen a per number per initiatives are pick the online traffic with about now, is, while up to standpoint Right quarter online shipped good the store, we orders but week the past purchase ramping in of XXX their know customers that they double into store are and the initial the something that the

expect continue as out for not an we a we be but traffic that incremental driver only roll driver, coming customers So the both to revenue that in. will

that pickup about them and and last thing to online of fifth we’ve were the store stores out we and just about The -- buy other seen to week, our initiative. is, in-store talking

is store a that customers we what them. purchase have they using that trip that to to willing so and they're ready of in they function that want assurance, it found are for want to sure that upfront the things One the make as

So big rollout as store in say, more I by we that’s visibility, should get think to continue going inventory be visibility, win us. to a location, and we to for

So that’s XXXX for us.

Jim Duffy

very the demand? some be is you're want clearly capture where you of are guys to assortment to Or on areas like then anticipated inventory, would to it there be? tight, And than where you lighter

Stephanie Pugliese

the it goods, some up wanted much one as say little where is overall is winters really had pants, we a of to base phrase warmth lined tightening inventory, layers. several a frankly, inventory that be. the on our colder that’s light is. bit function couple of and We've The necessarily And fall not of weather would are in as I we past quite years.

higher is we than little some gotten anticipated. But one customer place. that’s weather. the bit the a we've And nice Now cold demand

Operator

call that session. and question today’s remarks. gentlemen, turn to back for ladies and like any will over I'd we conclude answer closing Pugliese to Stephanie with the conference And

Stephanie Pugliese

and a all in conference we you your season. today’s few safe And us Thank of and holiday you wonderful you Duluth, in see will family all call. for at a we months. behalf participating of wish On

Operator

now you Ladies presentation. We concluded. has and conference attending gentlemen, the today's thank do for

You now lines. may your disconnect

Duluth (DLTH) 6 Dec 182018 Q3 Earnings call transcript