DLTH - Earnings call transcript Q4 2018

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Operator

Good afternoon, and welcome to the Duluth Holdings' Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [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'd like to turn the conference over to Donni Case, Investor Relations for Duluth Holdings. ahead. go Please

Donni Case

and Holdings' Gary, today's to call Thank quarter welcome and Duluth fourth results. fiscal discuss you, to XXXX financial

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

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

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

Stephanie Pugliese

welcome of growth and significant quarter Thank and the This one was business. year-end everyone fourth and to our XXXX. accomplishment you, year call for past fiscal Duluth's for

of the three achieving million markets share year some in strong year non-store We expansion of rates including the store stores, direct top a markets. we revenue model before. infrastructure omni-channel of at states, more achieve ever out as XXXX, established one the strengthen include: new rates. three from in the store than continues consistently than market and ending revenue by $XXX were our and highlights these evidenced The prove both and growth implement this customers power over store improvements, omni-channel to double to objectives, achieved locations XX Our Texas, established base, XX% more goals of with key growth, year growth almost our presence, reach growth our have market

improvement Online or Continued inventory customer such of a including shopping double-digit spend the the of in planning center percent a average metrics system, with finally improvement, e-gift the platform, BOPIS, as an across and an growth and Belleville, in per omni-programs customer key to management system, customer customer. of from e-commerce our order launch the categories base infrastructure in ship along large active store In-Store and and Pick our Wisconsin; new annual Up scale as Buy and facing upgrade such distribution Implementation cards.

puts in share expectations. the Friday of is on quarter and showing a higher executing fell our Monday, sales and a deliver lion's through week We began us these profitability holiday our we Black While strong revenues December. on all the important position and shopping to future, were with first results track the season Cyber which stronger fourth of the short our for initiatives competitive of

systems Internally, traffic of deliveries challenges overall felt the lower customer were closer and macro and not. were that we we some not of others with January, of were got spending, in Christmas a to all impact some immune that implementation which across we we to a control slowdown late we our slowdown encountered and As consumer and channels. we factors through level, On the in in to response, our product. experienced attribute

of the system, reap extra store hit products of throughout in market didn't benefit productivity had to and cost the we season. As demand misaligned This the that and and sales of was a holiday throughout timing the network. time result, inventory not our optimally the added some to distributed high the full affected

For in were critical out Size stock of our program during example, year. of volume this women time Plus of we highest our some sizes of

orders Web underway Most delivered recognized growth and influence to saw we are presence e-commerce to in we the as site that the back direct new ecosystem. efforts across drive Critical our revenues drivers of planned revenues centers to year-over-year goods, continue omni-channel, later the key labor a retail stores. fourth retail especially stores We successfully model success, traffic as customer significant specific quarter increased the our stores in penetration, speed. XX% is visitors. longer store, more that market had which we know our importantly, when more as store It XX% entire we a market process note improvement higher in volume the with the being year. to took added important the This growth to top continued and in shift quickly increase expand also over these and expense This in new more of peak more in flow catalyst open we requires business, With is the for that than the increases even and due issues, a product the rates we to stability on engagement We to in total from to stores. to to important distribution markets. awareness direct. had to handle priority to and focus site term, last deliveries platform incurred that Total despite of is of considerable growth quarter. new business

our We fresh We but fresh of increased sales overall boost past several new our brand for do of pipeline staple, the assortments in better new color that sales more overall. traffic in to assortments product we create For and style, our on year, we short year customers to impactful are high men's and each this our programs introductions know around. to our and products importance of outerwear. particularly season. product volume fell new to accessories business and drives the options direct attracts example, a sizes, Unlike stores the expectation, can core planning the drives retail new delivering that

the will XX% category, men's continue to and significant We are also Layers, in build of seasons. our the in new our Base double which be and for increase we fall proven are Plus ready will we business, for planning the of that growth. out peak rest a Hardgear number and women's drivers women's of Alaskan SKUs Overall, and Size product will

in are In addition existing and and our to attract we a evolving customers on the on these of expectations we are more we elements retain first and working initiatives the improving through to and our experience. have targeted customers, not season of the new of personalized still assortment meet the quarter. all did through yet Web This store to marketing omni-channel ability past focused efforts customer-facing place marketing

customers of influence and Yet example, is know we For the and on growing. omni-channel directly were under-penetrated in to we specifically important spoke that sales that her. marketing women efforts

business our momentum part of our marketing advertising, investing visibility and mix. in the stores, leverage additional will this increasing We retail by within doubling, in improving and

men's Our Hardgear CAGR being and of growing year-over-year grew of XX%. Alaskan segments, fastest one the achieving XX% with business a three-year

results turn call but for first, few and apparel. to the guidance year, markets, in its of minutes, I'll Dave brand sub-brand beyond footprint its I over We by have expanding retail XXXX. share will lot opportunity grow this our with the our our this discuss details by to appeal In and plans leveraging year-round store outerwear to appropriate popular for financial a of a

Dave Loretta

XXrd retail Thank million XX% Stephanie, compared of we good as XXXX. the week for $XXX.X million. XXXX segments, $XX.X included and up last with growth driven to In extra you, million, retail in our afternoon by to sales was quarter, Net reported increasing sales and X.X% to direct sales $XXX.X both XX% and an growing direct $XXX.X fourth sales $X.X to million everyone. net million, This compared year.

was the was to $XXX growth week, million, segment and XXrd X.X% retail Excluding direct million. segment XX% $XX.X to growth

of million, XX% retail square we revenues In We stores, shipping a prior of to adding our the gross a quarter, to XX,XXX compared total year. stores $X.X approximately square feet. opened ended the year XX retail, and feet were new gross footprint. XXX,XXX the with For three decrease of total approximately a

on healthy business the Christmas we the year. by last point at to This to over close first into reversed year X%. holiday growing trend to prior last quarter our negative of December weeks heading eight mentioned, Stephanie some see trend that through two As weeks X% lagging with Christmas. were was sales mixed results with started sales but Direct direct

primarily other net some very for that XX our Our discovered sales of to promotional and In the related was The due over shrink system [during] to system in XX.X% sales good period selling rate by correcting and XX% last costs the store management a sales the was flash year-end offset that result enough our year holiday business inflated full finish were water We events our in stores. earlier through in million costs were see shipping goods and year sales cutover productivity The early in in but year. $XXX on which adjustments including period. the December point freight or last to as Gross goods season basis improved XX.X% are growing new to million strong but of inventory Gross XX in against adjustments were that immaterial addition year. of by adjustments have decline but decrease up this our clearance we the an results. the close, was increased year didn't over in by January. XX sales direct largely quarter January end in year didn't balances margin as $XXX.X gross profit revenues fourth online [ph] year determined to of basis point compared inventory the net product margins to last basis last points inflated or gains to year.

assessment and in that for completed our are effectiveness be our of filing. time to of related completing internal assessment controls expect We this will XX-K the that

XX.X% $XXX to and selling Moving million and increase This million administrative in compared general, million in XXX,XXX expenses, expenses. and marketing expenses, year. $XX.X advertising general selling, on last in $X.X included expenses expenses, increased and $X.X million to to administrative

expense XX.X% basis to points XX.X% of percentage net a year. to SG&A As compared sales, last XX increased

of retail a and call sales. increase and As result orders during was shipping gained labor. net in distribution new percentage into from February our of to increase net sales in fulfillment points XX.X% expenses increase primarily and basis General quarter due of shift shipping as selling net expenses The XX.X% Selling in The higher and higher to a technology, stores, increase decrease were higher advertising center due a The last to from XXX primarily and order to The XXXX, infrastructure. mix advertising and in of year. and of to X.X% compared increase in increased XX% of in season. plan shipments the compared and basis to catalogs as primarily late from increased XX XXX sales, to greater was peak back were back depreciation rates from catalog points per XX.X% shipping due the percentage to decreased costs expense, as a additional cost X.X% last due circulation well wage investments stores women's leverage and January sales to as to administrative an to to due largely costs increase expenses XXX percentage expenses year, men's as points direct rates the higher to made year. orders. a retail percentage well point the basis the in higher related in marketing as reductions fourth compared basis of net last we

estimated to customer continue in costs platform management expenses million maintain order we in $X.X service quarter. levels additional experience and tune high new we that As to stabilize an added the fine the did

million per $X.XX For to the year. $XX.X compared net our due last $XX.X in effective This tax of or the state $X.XX an reform XXXX fourth net XX.X% to income change per prior or income as share diluted was apportionment. income U.S. diluted income of of Adjusted or update reported a million $X.XX from greater to quarter net per includes we share. rate our diluted quarter, XX% net share of in million tax to result rates the $XX.X year tax tax for the

$X.X for of fourth $XX.X the million to additional of during $XX quarter last adjustments Our end related million line was EBITDA the our customer's increased partially compared with We outstanding of positions us has for in year. marketing XXXX well X% the and net to by $XX.X our in-turns. to making At products Inventory end offset adjusted million with strategic million closed fiscal at sheet stores on million and $XX.X on year X.X% the $XXX improvement to that to of inventory total $XX.X capital XXXX to compared healthy newness. capitalize preference last the quarter million fourth year. credit. million balance a $XX.X the XX million opened increased inventory working

and XXXX in more price the new first minimal million selling. and the us clearing on at a to a outlet expenditures to been in lower Our $XX.X XXXX million of that response first and far position to to expect compared inventory end the As through showed has via quarter allowing full progress focus quarter Total we favorable end $XX.X into products capital were XXXX we last year. increase clearance clearance of inventory the so

openings, new peak our our center year a discussed site. reflected that planning As on was Web investments management investment in and XXXX expenditure automation of new store plan with our we and our implementing year inventory outdated a focused system a replacing distribution order supporting strategy ago, foundational growth capital

on on channel XXXX XXXX net moving which $XXX be guidance is for weeks, to up and open of XX indirect. new XXXX million accounting XX% with we XXXX. the XX digit between We stores sales plan sales, to million net Now, financial to to the mid-single and retail growth in total based $XXX expect

impact by expect to stores gross to revenues We online the full slight margins activity by be and in improvement XXX with product XXX in be in points. negatively expected to where basis gross compared basis exception and continued trend flat of rate will points. XXXX is our to quarter, offset year points sales first profit XX clearance The heavier profit sluggish in roughly this shipping in rate basis decline to both

percentage expenses of of the as XX SG&A, a accounting adoption from due which of be and last item plus We of also $X basis the interest million expect expenses a incremental selling, sales to net a general shift points to XXX result points is lease and basis as new administrative year standard. expenses an lease over line to in lease the

continue increases the growth Excluding expenses XXXX. to will drive along the impacts, technology, these in placed projects to infrastructure channel related in depreciation service stores the with during higher SG&A

into offset primarily due costs in expenses retail first The a in on advertise related support impact of leverage and assortments. gain quarter, spring XX higher one as exception the first-half drop will the for the shipping of and be as investing expect so well will result, will in depreciation, fulfillment back more up these annualization the where technology we women's and As to to advertising the XXXX. XXXX than the be half. quarter to higher rates much sales additional deeper labor dates TV anticipate de-leverage higher partially based by basis We the summer points advertising, to catalog in

of a per XX%. diluted $X.XX rate $XX.X count average between We to This full-year $X.XX. earnings million XXXX of and diluted share tax a expect share be assumes and shares weighted

and million to increase. million XX% be to $XX or We adjusted between expect $XX XX% the a

$XX million initiatives. and expect be with on expenditures to stores in $XX omni-channel of of the capital million new growth spend to majority range the We

systems expect to and on flow we enter that the year to we investment and as leverage of free begin trends heavy fixed the period in sales positive cost profitability We foundational in in business capital steady-state our the top the turn growth. cash model. XXXX softness with ended closing, of In investments impacted

and plan. However, With I'll we are to plan the for call back that already solid turn that, have Stephanie. XXXX a executing over on

Stephanie Pugliese

Thank you, Dave.

deeper with customers. moving lot technology XXXX and capable innovation and than in omni-channel we enhance culture engagement limited products of customer evolving heavy of We creating not a model offer of faster that a expectations our rapidly strong to that the did platform is develop ever. Our our is to lifting

profitability these near-term we While strong initiatives generated XXXX. created our top some pressures maintained line business in and growth in

Looking the contact be points across forward see our all enrich the will engagement opportunities with focus on and maximizing our brand and investments we awareness to customer. optimizing

based the include Alaskan the momentum market greatest business, for the We penetration. players. and focused the areas and are greatest on opportunity increased men's parts intensely women's Hardgear with business These of

in proportionately growth introducing more efforts new product have awareness. and drive marketing are areas and to outsized our we We innovations these

and an with efforts of the BOPIS. will rollout We expand to goal stores across additional the engage to refine customers and continue XX including channel omni-channel holistic model of new our

report Regarding our they to XXXX to or that again. XX% can polled you of very BOPIS use I likely stores in trial BOPIS the during our likely expectations. customers that were seven exceeded indicated

in in all by our have new We this slide this available stores and it stores the expect of month make as end we'll existing all to well. of

product creates it, the the that multiple shipping, than gets trip at the pickup, in the have will of purchases when to store. see we ensures store BOPIS make encourages the customers and faster on It time the hand opportunities. it we As product customer to it

that variable accurately selling distribution top-up is the from our centers use peak the vendors, includes retail-ready our of season, This associated our for amount with across refine study this needs improving the speed location, and store, the by climate and implemented of different needs Hand-in-hand, our management system, the inventory by tool, by will respond more and investments. past increasing to we will leverage predict assortment of fully increasing will geography. planning of needs inventory customers mix all cost us and efforts. localize our We product inventory to which productivity the build ultimately more to marketing we from order throughout investments begin on focus on utilize on-hand customer's allow our assortment finally, accurately network. insights continuing that And will projecting improvements to and we to engage year, marketing to and more including

expect leverage in more more act important. is what to ability we our fully be customer on understand this spend Through increasingly truly the is driving model behavior and As our has future. to test-and-learn complex, become

ambitious brick We investments and our have achievable The for an training, ambition in have made but system, in also been and just mortar yet XXXX. talent today [technical agenda difficulty] IT and experience long not ever been. has strategy the remain control. through stronger than deeper brand entirely an Duluth omni-channel of building to fully that our term and it We committed we Trading is

With well-positioned We welcome our questions. for long our term are value forward thereby we business shareholders. your and move to create that,

Operator

We The John the D.A. question-and-answer with Instructions] go will comes session. Morris from [Operator begin first Davidson. Please now ahead. question

John Morris

Stephanie. Hi, Dave. Hi, thanks. Hi,

Stephanie Pugliese

Hi, John.

Dave Loretta

Hi.

John Morris

did wondering performance, you color us category on category so Hi. bit in what product give very you can if mention of performance. know I'm a I Couple little product of quickly, questions the it mentioned it, the saw you you on Stephanie, more terms

product example, think so volunteer well or and heard just the the and/or I both as question, of how you on that whether perform you I your and For maybe women? and you kind or whether impacted on weather not wanted that's to, the outerwear say the also men category that feeling it case performance, didn't as generally quarter, begs if on

Stephanie Pugliese

Sure.

slightly first level start me a at So, men's the higher on let versus women's.

to continues overall, into penetration another Plus our women's points up business, strong men's business overall. a the We in seeing some picked to the the in are of women's business of overall very our of and business and as and definitely we women's couple Size our even outpace we for example, business. particularly launches, product part first continues business quarter, go around growth Our increasing the newest and of momentum an be

few outerwear, bit The weighted were that our that pretty little we launches product more side had few really of quarter. momentum business but certainly the There expectations, had had couple on we we exceeded of that shy, would program things, of a scale in say products So, women's that some product expectations just large throughout our were twofold. overall there I had that struggles were meet fell overall. women's we decent a towards in the men's didn't new in a were that specifically a

but have our certain fell We pockets by were short. outerwear outerwear large, of good, that business and

of meet goods things. That of side expectations, again geared of We was the also part our that business the of didn't the product that hard an the begin selling said some to later some time more also stores saw towards to all congestion, little that in those out was of accessories we -- inventory peak problems there men's my get that, had that selling of bit deliveries expected port and goods prepared including that to -- a we some with, that mentioned remarks had the for were I in later trying we network, into -- to was to later our in in Specific full deliveries, that there was misaligned. on we deliveries season quarter, some than exacerbation some to performance, the the peak we certain had and added due tight then parts difficult.

inventory and also our peak didn't time some found network completely So, those that of some that in our we we to get we weeks. had of found -- we again fully for out DC

we anticipated retail taking in to cost more our burden Wisconsin on So center added which the to stores. inventory had than Belleville, replenishment distribution were we down slowed our and

is remember, our As the stores. you one that retail may Belleville DC replenishes

direct side So clogged up when system. on there the tends we to the impact whole it get

that the was were volume both the of the I'd ramifications terms things, as second of I around expense big what impact the weighted inventory both the misalignment those well. product but probably John, side thing impact, of say, of talked So in and the of sales had about terms they're also equally those, in things

John Morris

recovery Dave, line whether any I fair far things, color wondering, pretty quarter, all to helpful a top wondering you line the giving of of top pace comment beginning qualitatively want here I you the mean in you're we're comment guess, a of not so I'm can so on below seeing amount That's you you've to quarter of so the the whether or slowdown -- top first since well at lot it, but you through know item far some on or color. coming of the the what the recovery. comment wise. of I I'm and not the line wise late a if what gave you've degree kind can seen that on seen

Stephanie Pugliese

it to for top side, pass been I'll one, us. John, up has additional any then comments. the take and slow for On Dave QX that line

where that more the come haven't We has That responding customer business. men's the we're and stronger. been out trend particularly time this our really new a quickly women's QX, said, of seeing not saw side we reversal of in at product particularly the with sluggishness on

such thing March and in trend efforts rain, yet is So, would be marketing but have late a to And obviously move some bit half going going know, the latter We and as described of the February position. clearance those the of recovery is the second and year hot feel not well kind but some really I inventory, quite today sluggish, with are good weather point will, out on temperatures. to the the our first -- perhaps of issues I that an for actually as in we still markdowns new of of with lot all-out early inventory you to of a we about customer, of reversal, product ago, quarter we haven't introduce those women's as deeper seen did feel end quarter on about turnaround year, good, we come it's mention that fourth place have see some quarter a goods. but season good to is The you plans additional because and just moment we you additional of with of that if little the that we products which place. we -- inflection really where we took into the the to as last we keep spring that in

tell terms little really our in gauging of still call too product, a that. bit early to it's some weather of warmer So, and

John Morris

Yes.

for the best you. spring Okay. thank there, All

Stephanie Pugliese

Thanks, John.

Operator

The ahead. next go with Baird. Please Jonathan question comes Komp from

Jonathan Komp

Yes. characterize Hi, out. thank first operations just I you. some the that I follow-up comments, of more to of and factors want you the wanted inventory-related to on called

diagnosed of when of any does think you difficulty] kind on some difficulty]? those good factors all difficulty] [technical you'll the color more handle operating Stephanie, as factors [technical curious, have Just a on and [technical

Stephanie Pugliese

broke you little John, for a me. up bit

of So that commentary as I'll the see start I are we what about made a we evolving is and today improving. hear your well that question? comments and some I with where did fair that as -- on how Is that inventory

Jonathan Komp

[Technical difficulty].

Stephanie Pugliese

Okay.

some significant misalignment So day is amount we inventory in quarter quarter, of because volume. saw a part and every on our impact such an fourth pretty year, fourth really significant of is important obviously

deliveries So, or delivery one of of quarter. that is missed things than That two we fourth in have of an impactful control, we quarter, we of our being types in of in terms the fourth delays back any the I those or will, standard, if should you experienced to said, more misalignment are delays deliveries, haven't delivery order inventory very on-time that late the so quarter. same of other found can we days or experienced course say that

expansion new fourth were center, of a which the in we distribution That just our impacting the kind end of slow third quarter. Belleville of addition to retail stayed primarily fourth us off of transition at quarter, replenishment. our in affects In was coming quarter, restart

to is that anticipates is in tool that still things. planning perspective fine-tuning quarter, are that those put inventory The and the and improve needs an the curve. in opportunities tool late the assortment demand system. still place we're curves So we're optimize that past some sales to that there're of think we is working we stores and while inventory working And that from well, of in think definitely new on third we that piece we and ahead

with higher that volume be would be some out we're a of inventory and some we never to Looking able position stock in for SKUs and so highest are that, vendors items on to system. entire our inventory to volume opportunities at levels it type what across situation better in the things do like track fast working take of to these

I are we new -- goods. that more is finding have is responding season's and new that retail our The more the our other and remarks, and disproportionately the as we're we customer to thing mentioned as more looking in at business retail

types those in across able enough stock our of in the going to sure inventory stores we've are now our we And into of the got with to product and inventory online we be to back coming looking -- that that go so, stay that goods have XX we we're levels entire ensuring placement and on store system. orders the making depth Spokane have across -- of

Jonathan Komp

marketing [technical that difficulty] of talk talked a of Okay. to results drivers that your Can year. about could maybe more just forward product in about any difficulty] [technical degree color some tests - And later related units confidence that and or the you the those question of some share? you of that or or any initiatives kind

Stephanie Pugliese

Sure.

today, we So, some confidence reads of seen points shop of than in the mentioned the that that versus is will. of bit our our and amount better. in that we now results newness even is of goods product indication we more you well the as early have now will we that season trending women's it in have we've The kind a have now results the of in we've positive little women terms that business the now; transitional customer there product wear and times rates introduced right than doubled if juxtaposition gotten summer ahead of a buy very floor women's in of early guy some as is a couple of that of right on I've men's remember the some men our the proof have men's one women's

and would gotten have forward, small has we where important new of forward. that's like, the driver piece to collections an trending we've what we -- as plus we in business, haven't able doubled large men's out. introducing say we on you last newness sustain is of little on of closer be product, whole you guys some that programs the good an the that but I bit some looks in go that which about that -- our go what of get business to depth confidence scale piece until category other early response, have the seen available women. I'll of new these that kind got We've of keep inventory in a suspense in been in we're we had exactly size actually asked position skews proven proving that we a new our that itself The but products. we've The

we're feel about time us forward. to to going little there, take of because really going where I go there get so not we're good for It's yet. bit And a

that thing just is would other The marketing effort. mention I

of to have we got coming that quarter there. learn started of efforts we're We some starting late already the results of see in indicators and marketing our fourth test indicators first and mix off

marketing investments third we'll and that and that fourth for we'll results well. have as adjust off expect quarter of coming fourth be year for our We the the quarter utilizing to shortly

Jonathan Komp

the again? last systems Okay, a given some and one me, at business but you leveraging look of the stabilizing for a to great. in how from model do just now performance improve of that like the And you marketing think operating are bit of and changes, the far you you're maybe margin follow-up, when margin are maybe place, mix starting out

Dave Loretta

XXXX some of see. second-half operating talked what to to have expand a expected as we're that that margins start about the point expect where we and we is John, to Yes.

as third begin. guidance. we to that trend reflected cast quarter our of this kind in expect And that's I'd So, what's

Jonathan Komp

great. Okay, Thanks all color. that for of

Dave Loretta

Yes.

Stephanie Pugliese

Thanks, John.

Operator

next comes ahead. Jim Stifel. The with go Duffy from Please question

Jim Duffy

afternoon. Good you. Thank

Stephanie Pugliese

Jim. Hi,

Jim Duffy

Couple of a find responding showed the basis have comments more quarter. on your me, across December on just you trends promotion just like promotional question consistent stance during with the the for consumers they to check past? in trends a weren't year-to-year Did on that first, that's

Stephanie Pugliese

you it some that, was -- your partially just quite that global increased deep we that the Yes, we stayed it against and we you I know didn't and very also the see while think sales pretty some that response up know there was flash of of were was of expected. month We promotional still percent January. in X order take promotion our Jim,

We will as I've the markdown at with as didn't overall are talked that we did them if about sluggishness. that scale of the frankly some price large quite some new them well we react some just attributing having it program of just already customer full that to some that of was slowdown, that or things wide enterprise in had to that at that you see because impactful

Jim Duffy

the curious linearity and the quarter trends may the between direct of my Stephanie, business? I'm the next consistent was and be you And question, across fairly quarter Okay. retail but answered the the just

Stephanie Pugliese

what And in channel as sales but they've consistent segment we And see would driven kind aspects. all Yes. our that for seen in umbrella terms there quarters. I in I of was direct. is we or been Direct do of than at we've Jim, we -- an about fairly And would imagine. with prior more more in e-mail was retail us, also of saw it what proportion consistently all primarily mean for say you is across sell that that consistently that specifically, example of price that stores full of sluggishness promotional a a

Jim Duffy

comment And traffic that a for stores. of Thanks. something you times you trends? need couple with are can helpful. be? Is the referenced on, would any What more you help have seeing store in there newness to the Okay, then respect

Stephanie Pugliese

there Sure. I that quarter talk about can first is even when have traffic and we into Yes. I the quarter, seen continuation we of the -- just things sluggishness Number are say two would say the one board. that. came about across we off

seasonal mentioned flannel that's we brand And prior repeat more even that fall. That we than I product deliver core new in there a brand like is of proportion two a the new when when the will, new store ago, summer as see it of traffic something store revenues in seasonal the see then the shirt but sales the new retail store might when new newness that's driver set seasonal a spring new and with web by brand product and product. if versus minutes well driven away are of than television stronger that the again increase we at web that deliver a for as product traffic. or seasonal are at faster new the when is, goes be we to either ad And higher product Number catalog and our as or new versus that what a see that mentioned is we traffic featuring a new year, pace, it regard we one comes basics example that, is sluggishness things. I quickly just and traffic. few know back in So and you we at In end look direct.

Jim Duffy

Okay.

So be assortments adding you it seems getting some systems like sense Does to putting on to figured that which brakes showing know place. the your feet something is discussed? suppose, new the online out. different make expected stores, you're curious underneath in and are retail I take you're still retail time characteristics some stores stores to I'm is that's it before get the in tap you opening merchandise been

Stephanie Pugliese

at the opening the the that if using opening off are the stores again stores of and exceeding our the sluggish or still plan we're have that store are primary we're this looking XX model we're opening coming As year we we're filters, that a though you stores quarter achieving we even of the are will, that goals.

are of we foot the with wall the of in omni the about our in talked square EBITDA continued strength number sales of business things seeing a we goals on established well market. the times And as more All payback of side the direct investment. projection initial four model per that the store longer projections, as

filters will to that capital indications place. and and we all we want use there. omni-channel positive place growth really the That said, always make the the have in you there're So in the that model around are sure if the other obviously we

second for would a the right estate that manage we expect not just there that the available be it's us, experience customer to from because stores. our ability real The create available, staff and is thing and

And flows forward scale dealing in of the the on those working systems moving So, are of and again. of that with this the we large kind expect really if piece sometimes as were point, call refining as implementations But those on things. things system tail of opposed those far implementation, the to things, still we to after refinement are as we're with keep all turning and a very over we're behind we and focusing at obviously the year this us system's use the expansion. place, our what store

Jim Duffy

for you Thank Very good. that.

Stephanie Pugliese

you. Thank

Operator

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

Dylan Carden

curious trying decline in of are vis-à-vis customers, interaction years the year comes aging trend XX% of in sort speak of you've open so now between Yes. helpful? from then any and go one of how fleet around had points channels the XXXX, you the and new kind productivity able spread you understand in store? Any to year, that pull to the with two you retail out newer And the direct you channel you two guess data back to seeing in how Of some productivity give to would of management of Hi, the positive customer of that expect be update systems to from forward, year continue direct how quarter very kind was business, sort can of of of this second the thank momentum this these new stores implementation retention? to wider the year. to which much. second I'm in do much the I the order store and kind standpoint? any attribute a many

Stephanie Pugliese

a tick at to a to one Dylan I'm of time was so forget if okay. let know about that going me them please try I one off lot question, and

Dylan Carden

Yes.

Stephanie Pugliese

lack assortment of system DC where definitely as and we inventory in quarter were our higher to have timely on particularly versus stores the during the just the third that the didn't Specific of have and with planning of inventory we We some to three-fold. systems coming So impact of inventory the in results there some and we if about peak stores new how season might our retail. starting that our as an saw on volume had people the direct you full and in say the items. an definitely position the the both changeover you had it's hard inventory with productivity question impact, I know end the trend implementation your quantify at in peak mentioned OMS sales before the overall season that I've that. retail that well of was systems to line of would or lack of and impacted of the implemented and was impact will that impact is

all benefits it But you our the of for we not the in stores, in be remember stores. was impactful know go the boat to that roll-out that the terms only scheme so at grand all things. of seven that have in that's of will quarter One really forward fourth was of

And and real to that systems The I not it know but retail second impact of line some and about impact certainly fourth year. certainly the but issue to bottom it real had impact very a that's quarter our was in remarks. expenses that prepared were for issue talked our our was obviously trend for we've with the necessarily line implementations a bottom very

through focused fixing working The the frankly making third there was piece inventory and the we be energy levels were and were we sure newness had as to a members an that systems we there refinement terms were team impact bugs third of sure that assortment have those that retail sort all and able systems fourth through implementation quite as implementation of and spent And and replenishment of those we well and year. thing. making in this and be lot some that were refinement now came to on our on implementations as that of have the back quarter systems

are channels. channel, I time, do think retail now The business tried some lost I if of and know and retail things and questions point communicate that we back in our last you that drivers. customers across that the thing go to specific becoming was bit that the we clear is they will, last one some business some almost of I the other kind mindshare of on XX% of with done little the of where think shop retail would is a we at year So is, the I mention

stores often they that color product or seasonal new just oftentimes new their or back the for So online basics come retail into they a core will bought. the new something they brand order product, for but go or may and

to little forward specific a sales go our smarter being or while get that. bit So of bit a the customer in transactions presence done so demands overall retail. been opportunity the are and about talking amount are we the an lot influenced this decisions little by the newness we at retail, retail far XX% And strengthen greater we've impacted sharper, have like of channel how that drive about and a a and

The like other believe the -- customer metrics part kind how around of are was what your question of I stores? retail

Dylan Carden

provided in the these kind was year of where second around sort relative plea, you've see you sales in direct Yes, before that's to handy X some I of going within. markets metrics new to the growth

Stephanie Pugliese

Yes.

customer. So of let me talk the of first quick about view kind just some

of are customers. also often. occur They shop retention across kind go and they back just visits in often what more there's with that to Our forth retail genders explained to more customers categories, the by higher back on the of a I quarter spend a online. basics ago more between retail channels, driven of us, minutes to annualized with They are buy across rate likely particularly couple more an basis, and

little in rates a growth what little store In while added we overall penetration we contract with and the market volume a the about a same non-store seeing we dynamics we we've lower substantially average talked to rates which In for that is, do store, market, happens a terms or that are. just year, growth the now we've grow market direct than market. first see that the are that, with direct of business the the store, what instantly bit that see to enter still market a

non-store enter that being growth rates are still markets. the and we rates store year in double slower in even second are or market, in direct seeing store of still more so As quarter, the into seeing, we than growth the established being markets we in fourth

grand store contraction happening see a So do on in we're of second a the not some absolutely sales year to starts the where wall being positive to we that's market growing do before got direct of impact see but the still sales few that a XXth hitting again. a again seeing we've and their reignited four is where the pace has in opening re-firing sale, level market direct store month are kind store months direct ultimately. the the XXth, that are growth in We retail a up really fast the in

that there and a significant an a absolutely in is year And if so of second improvement growth retail seen period between lull, rate. consistently market in store you store, penetration that you being retail in will, direct direct of the present know, increase growth we've but

Dylan Carden

go threshold about that item consistent sneak very on confidence trended? given line to to more it they gross was more it one plans fourth similar I you ultimately year some or of last of think longer you you're kind this of hear Can shipping level of offset just sort I'm kind then it that aggressively? the much. kind I one should also and on the And profitability? guess on that guidance the is year I marketing year. not you going to quarter gives where and Thank or for shipping was for stay Great. on know curious on margin whether you down turn hesitation what last level saw year your leveraging the Thanks.

Dave Loretta

the other modeling the see is that our that also XXXX advertising, we'll learnings study being the into that terms do year in We of that of the first in comments as year going the periods out mix gross that some do apply margin XX of that. margin out we margin marketing this expect in to from But spend this quarter the bigger quarter with rate then because probably part decline and new our similar offset got product element expect a points we've year and on the of the that of decline play will analysis back we'll we will course the the the and last margin around gross the that after being the the to result have already was the of Dylan, learnings largely impact more so gross of through to expectation will us. year, basis shipping to first and revenue Yes, that's a continue call year past year back in half of part the available positive. of

activities the we're that drive confident targeted the be it'll there, for. but leverage that elements we're So advertising be will looking more on and the more that focused

So available us to that's in what's forward. going

Dylan Carden

Great. Thank very much. you

Dave Loretta

Yes.

Stephanie Pugliese

Dylan. Thanks,

Operator

question-and-answer you Thank also conference session, our for now and presentation. the attending This concluded. today's has concludes

now may disconnect. You

Duluth (DLTH) 4 Apr 192018 Q4 Earnings call transcript