DLTH - Earnings call transcript Q1 2020

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Operator

Good day, and welcome to the Duluth Holdings Inc.

First Quarter 2020 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. is event this note being recorded. Please like Case, Duluth now to turn Donni to over conference Trading the I’d and Relations. Investor ahead. go Please

Donni Case

Thank today's first to you discuss and Trading's Duluth call quarter to results. financial welcome

which and release, On Relations Dave am remarks, Loretta, Officer; provide we Investor here at on site with today's Steve turn will the earnings morning, Schlecht, prepared is we Our Web releases. press and Officer. call, available will under management Chief ir.duluthtrading.com to then today Financial our this questions. your I Executive issued Chief call

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

estimates, actual include, and results expressed XX-K outcomes upon Form future And forward-looking conference Officer from those of the turn with our Steve Chief and Duluth that by forecasts to as in I’d statements. are nature, most to this goals, described the subject Schlecht, in applicable. are materially risks not statements, be date other speak and of annual Executive only of or on cause and report uncertainties and their as uncertainties SEC could statements forward-looking Steve? the not should to but like call to, as of and those predictions risks relied filings These recent are involve projections, that, events. limited call to differ that assumptions Forward-looking Such over Trading.

Stephen Schlecht

stores right-size overhead, our stores resiliency, Duluth starting capacity. To borrowing the we expand matter went last thank COVID-XX joining went country. liquidity, future In days, spoke XX, to a from March opened When financial to and XX call. work our for we adjust you everyone morning our inventory XX and preserve to grip purchasing Good pandemic ensure was to we immediately just closed. of on today’s

by in these we some expenditures allowing able to year. to comments. were accordance build XX in curtail eliminating of out our this regulations. new to May, will four businesses in decided initiatives capital local With locations his with stores early quickly details also We Dave the reopen store to reopen states cover

of are stores would curbside As other today, customers With and couple closed a be for or regulations order to predict and space of access are catalog lean net comfort. stores all early sales with year-over-year, safety the stores represent our shoppers. in seeing customers easy the finished for our just year-over-year. only stores direct major with April digital not a service in are we half XXX on X.X% direct-to-consumer with it’s in stores established driving in permanent a happen. employing we trends. an This shopping carried half. closed, world. just our and our have all to up were We of the customer net safety. still XX% company them full are open heightened quarter strong too with April, exceptions mail consumer day. Even didn’t the decrease inside Direct direct ample all thinking sales shopping year long and plenty with in stores sales increase pickup heavily for if and roots there order alone dislocation so, of to with X% business All In started business We its of seven the retail of BOPUS local malls, providing weeks, not in measures offer stores million parking April. Anecdotally, employee those Since and additional ensure that finding our capabilities. using returning compliance to buyers, will

technology, distribution over years in investments the are last together. have and considerable that We two digital coming marketing made

we increase direct As it in in demand was the enormous a drove online our and surge business in saw during people place, XX% sheltered the quarter.

or a April due was and on challenged stores staffing were to last to from coming orders direct Yet, of XX% out were our a In distribution orders the centers demand situations door season while store peak closed. by we capability develop timely from get customer her backroom our ship for inventory of this. initiatives store just stores and to in Our our holiday the was demand direct one our shipped manager equivalent basis issues. of to from April, like year his assistant were

Our our ability campaigns fulfilling and of from enhanced in play our roles our key during brand the efforts tireless marketing our our to and all mobile Web to store, ship customers promise quarter. features, the site strong digital people

Beyond trends volume increased in sales, other this the emerged direct favorable quarter.

of rebranding direct advertising offerings XXx Trading Our the that women’s to that business we XX% this a growth. time. XXX%. can comfortable, product rate growth discovered In to while growth the products. from squarely solution-based also direct our very year-over-year are effort It with spot women’s to TV the durable, this new new This our what people transition attribute and we in Duluth targeted that quarter, compelling exceeded brand of indicates quarter apparel work first marketing, many accelerated sweet that buyer And during new are one want business, to pleased of sheltering is XXXX. home; digital We our leisure the at activities. in us resonated customers experienced

serve XX% with just sales were better equal editions people outlined accessories. venture summer in preliminary to continued pleased apparel much product XXXX. with the As to new trending year the year-over-year direct bulk this report outside up and our XX% May and essentially a on lineup sales than and gross ready sales. year. margins great Total trends I and of providing customers of basis home were last a May Direct for were spring walk, of better, to I’m are repairs buyer gardening, that May some for began a or to are for we our

The to a strategy. direct our important business may model first yes. answer growth is is of quarter performance still whether the question future the expansion our raise store The

will the However, of new store editions down. certainly slow rate

Our we role our confirmed this all stores play increased temporary system customer activity the saw stores, shock to closing markets the a of Even that. and a key store. with in with

fact, all exceeded growth market market store quarter. sales In direct in non-store classes the during greatly the

pursuit newness element our growth our product is strategy portfolio. Another the of of in

garden have XXX% newness embraced the this For quarter. of was up Plus increased year, results. overall our we to the of with good and sizes importance women's collection over business XX% past

and who new pant was There inspirational men's program, with and own women business well, success way. campaign fits. especially additional We the celebrating forged also their recently rebranded print a our women's continued with Soft as launched Dang underwear newness

an We plans new guy a this GRIT price-sensitive is are and line. October. It launch on Duluth with we think younger step to We share brand XX in excited to to younger this can the attracting board drawing this capture we direction. generation also have a no-nonsense other of important wallet in momentum Trading the moving

our we've reduced efficiency by us. XX uncertainty capital future a make to to is the and of This strategy measures While stores. critical still we considerable ahead continue accelerate it continuing yet for in and including that agility, reduces several growth. are weather original taken investments to prudent cutting that, unforeseen, focusing signals innovation also half Recognizing while there plan we expenditures XXXX our stores our X capital to on will

We strength have high the our brand in conviction and Duluth Trading the of omni-channel model.

bear enhance years very timely and over to some our brand few fruit. the past investments made beginning have the to customer experience, are and important presence and We they

is and I for of the focus their creation. entire times. Now I trying unlocking commitment doubt these on about to improved these the feel ever. more to closing, thank want will deliver retailers, and and value dedication team all confident No the our XXXX investments full potential future test excited time of mettle to our profitability than yet during In

Now, I over the Dave. turn will call to

David Loretta

good and Steve, Thanks, everyone. morning,

net sales temporary XX-week stores to sales quarter. The last For of our a closure million, compared approximately XXX XXX.X the the in XX% X.X% result the retail sales down we leading reported first to for in weeks channel the of was net decrease million of seven year. for decline quarter,

and shelter place, and people for focus While good required in deals. online were to garden digging shifted basics; many comfortable shopping to turned to

direct net to shoppers sales store our increased but significant in online the shift the noted, by XX% buyer As segment driven growth in new first in also direct. quarter XXX% of

We quarter. The compared women's especially category total women's business increased benefited increased year. the down men's XX% to the digital of XX% X% overall Our its year, quarter the the from to in penetration sales last in traffic to mix to our XX% last by increased channels. saw

to model we direct We are saw brand our business much investments in non-store to the markets the our As closures. the as of get in omni-channel in quarter off. direct the well Steve building in have we've as in compared store deeper mentioned, made lost up where markets. growth years offset paying XX% stores store XX% resulting markets penetration strong The of from revenue

we new prospecting pick advertising our up sales increase quickly hit, pandemic to the drive adjusted to As digital spend pay customers. and

New growth total buyer new accounts XX%. and increased were up buyer than other in every the category stores

during peak grew audience stable were mobile platforms to and year when home was the in moving uncertainty stores conversion the all Web usually we deeper in stores opportunity We inventory XX% discounts might inventory Total visits online holiday see heavy levels greater about categories last channels. seized offered and that Web we XX%, and a digital enhanced captive the Our With cash. site days volume the in to to continue traffic at were reopen, up compared while season. closed. convert was than the several

more the from inventory clearance maximize shipped stores the sell-throughs. to in We activated also be order to

product XX.X% aggressive XXX points a result year. promotions, the compared to last for of margin decreased XX.X% basis to As quarter gross more the

the on inventory levels at cash number due with to improving As see and the a able online chain, pushed at I orders. work of we've in XXXX end strong back balance to increase XXXX. healthy mitigate inventory By some inventory in balances advantage the We our flow. track, year-round to been higher strains going will and manufacturing supply demand quarter, and slow-moving order while working collaboratively that both time and channel of adjust payment take still preserving management to fiscal We expect help mentioned entered supplier of COVID-XX, winter keep our disruptions to we our inventory of spring to terms. objectives a inventory through. extended partners SKUs reduced year. temporarily Facing on actions to into initiated size and end were actions our the half inflated on quarter the fall the end we the mitigate orders last of to of disruptions flow through with some adjust impact The of we first take to of the then be second inventory the the These but will projected the sales the quarter next year-over-year to peak, year. we

expect that near-term also margin on We impact this results. second quarter pressure will gross

included take with stores the At the while the prepare closed, expenses. expenses to actions to and of in expense, a cash stores were retail kept the expense. we X.X company million XX.X partially to in This direct said, of we ago to implemented to general burn increased disruptions. the for million less increase Overall half from year cut offset selling a that Turning of million were customers were SG&A in of we quick to administrative stores X% a to were Measures were limited XX.X the number the in the expenses reduce quarter able of and decrease an period. and an staff closed the on million by fulfill channel. and That advertising business beginning the marketing pandemic, million to in extended XX% than X.X expense for increase compared shuttered. orders while X.X

sales, of SG&A related SG&A in XXX XX.X% to points disruption. was nonrecurring As charges the a to increased last to Included compared the year. net X.X XX.X% first quarter of COVID-XX in personnel basis percentage million

XX temporary and an points to months store charges, nonrecurring and of pay sales a stores. net greater XXX increase of increased administrative increased due and the year, growth and as to one during for to in staff XXX Short decreased and to with the pay on increase order basis expenses quarter to costs XX store the to XX.X% the new compared store X%. in last center the while Pump, in XX.X% percentage depreciation rate General over Richmond a the related due basis expenses We teams. net first were new stores the costs. shipping the the a of technology quarter Selling largely additional ended XX.X% Virginia, Excluding last SG&A opened points distribution suburb volume percentage as higher sales closed for

sales, of basis to offset basis percentage a and The As national decrease the compared advertising in of last digital advertising increase spend to and XXX costs TV partially XX.X% by XXX year. driven was XX.X% primarily decreased net points an marketing point in reduced by first quarter advertising. which was catalog

was EBITDA X.X million We in ago last an negative X.X XX.X the year million benefit compared income year adjusted period. rate to of of compared X.X with Our recorded first to million the in quarter XX.X%. negative million effective tax tax the

this release net in For dated a million XX.X net the to reported we the we to million quarter in year. an outlined XXX through diluted compared We May additional of with the or X million or XX.X of capacity. and million. first cash including last liquidity borrowing quarter, share total ended press of support line per In our of crisis, XX help to $X.XX our of a loss taken $X.XX X, outstanding on million our loss X.X million credit increase quarter measures

weather investments for our we're cash financial downturn, resiliency to company's long-term still effort critical and making While we a our to are future. every making prolonged preserve build

include We’re growth. drive moving initiatives upgrades data customer our revenue forward system that with and point initiative warehouse omni-channel of to sales priority to

expected million current new instead which overall XX X to Our openings of will this be expenditures plan. original capital plans the XX-store proceed This year. are in store XXXX by are cut XX% fiscal to with

enhancements will in the and center our of with distribution of network investments made Automation our addition DC our and improving and of have our we year, efficiency result costs. the past in the Belleville reducing the Duluth During growth facility, reopened to expansion have third capabilities for savings us previous down party recently store wind outlook the starting uncertain. when our we levels operations the just Because cost to stores, from return year. traffic ship this and logistics is allowed realize

a for in not are position to guidance we give financial such, As fiscal XXXX.

that can In today. challenging direct through times. strong to liquidity QX say I continued closing, are through However, saw we solid in position sufficient we back of the half results manage a financial the for in with these have

for our where we’ll to a With building brand is while From open scrutinizing the key We’re making believe acquire investments today, sit recipe expenses long-term for this the continue that, and we new we creation. customers. call questions. value

Operator

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

John Morris

some good e-comp work contribution in give time A the and directionally such costs in time challenging morning Good with you the with some feel incurring like if especially but sounds like room at same sounds Dave, us Thanks. Hi. channel. maybe for some you’ve the the a quarters? got really Now of you’re associated from nice go-forward DTC can to SG&A further. COVID, additional a cut costs it the you, channel, on question it

could couple over So be be you maybe continue down? quarters, of question. That’s year-over-year that next if feel us give change dollar or for first to my can a the down

David Loretta

start looking we John. that SG&A year reduced the throughout improvement of of the coming year-over-year expect G&A do see upwards that will out of the of on basis full that organization. some the pay and to talked at cuts lot category. $XX a Yes, where a SG&A, of year-over-year Hi, of we’ve be some that advertising decrease million we’re Certainly initiatives might about expense of taken we the the with some buckets Yes.

that kind got in goal full of front year that’s us. of So the number we’ve

John Morris

so what pretty into Can – digits, customer double is commendable the growth you like out have to a Would looks customers Obviously says a that how great. is, for share new growth. us the of kind the seeing know, has digits, can super which we really And prior new that low new guys. XX% you fold. significant would hearing see I increase future looked to there channel but the helpful. single and for companies give those been It for I there lot are understand context potential increase some for think bring what shift, growth about this? been, Okay, have pattern That’s as trend don’t we customer significant? you

Stephen Schlecht

I can that, Good It’s Steve Schlecht. John. to respond morning.

John Morris

you. Yes. Good morning, Steve. Thank

Stephen Schlecht

it’s are periods. new XXX,XXX last year customers. XXXX than At so on more for a brought first the numbers quarter. four through These just we May, four It’s for periods,

were – Now that’s in at both pickup we people late April channels. as brought This a year for trend months. off in XXX,XXX. to those XXX,XXX April four That’s the kicked home. really sheltered And March

John Morris

Yes, ahead, or go Dave Steve.

David Loretta

pandemic. We a part reaccelerate on out up in were February it of digit down were the to into but point new and even customers 'XX, of even of double that slowing and low some seeing first to was buyer acquisition in growth trend. 'XX started strong seeing kind we the the before of new coming It March

have we as some did well. So it momentum into going

John Morris

Right. has And business? women’s – men’s, growing the growth in women’s new with female versus a female been than than the business amount do be been with customers in anyway, faster new what terms or of of your that the more obviously your mix, you average growth growth for has the – higher female in customer would otherwise so business

David Loretta

women’s the growth It the to men’s of been in rate women’s growth, first a as greater of compared roughly absolutely the during has double quarter. category rate in

John Morris

rate the business female Sorry, men’s female overall. Dave. in That’s of new of customers double terms just or

David Loretta

in the and Well, customers in women’s coming category. that buying were

John Morris

Got it.

Thanks. Okay.

David Loretta

Yes.

Operator

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

Jonathan Komp

the you of a implication Thank how about those of lower or with haven’t of engagement thoughts since customers maybe seeing upon just Maybe reopen, customer and follow the cohort the a of Are guess lot it any questioning Hi. up performance. as kind can line in up existing you’re seeing morning. shared customer kind you environment unemployment just that customers? the for hold coming is in the an on back I maybe stores you. around Good past, what higher here? metrics expand is there you

Stephen Schlecht

front Well, was growth that were existing transacted channel card details with certainly, uncertainty of us repeat information. the getting of of the direct some we’re now. new business customers of around There came going that us the in a store without a credit drive downturn Jon, the that into to their customer is prolonged that portion who

were time the be of a already of pattern probably it were uncertainty brand customers the of made back just new know we to and to there’s and year. of new those good So but the early give marketing to think over online, going customers to buy the started then XX% the I permanent trends XX% shifted there’s customer we investments they’ll indication coming majority serve a product But that of the the they see been data who But us certainly existing promotions transfer business months was these customers with store that XX%; of well to in brand. repeat an of and between our that are customers us an some around the some and base. new the half we

Jonathan Komp

to can to Okay, coming quite margin promotional then maybe environment great. you out when higher acquired still margin customers, maybe looks you’ve here gross relate as And gross a just related the anything with inventory of that which think better about quarter? provide, performance the any but new certainly get that could reason you think certainly high and implications, the here question,

David Loretta

got. contraction lead that rate. good improvement business of Day gross in margin pretty we some improve that year-over-year May as to Yes, rate a seen Father’s we’re that we’ve up has already seeing

for in rate half in the – activities June when wouldn’t that some are the same in decrease slow. get and the things margin typically quarter. I But gross had first clearance We we we July planning look have back of

be improve of and that one may where or moderate will on. pull it going that certainly compared fiscal into the But the to that’s to we levers coming year to we’re this it think now we as be thought we year it coming year. willing into I goes then into this more be will

Jonathan Komp

SG&A the year, come $XX looking last speaking kind forward, million Okay. of just years? looking back that then could net Dave. level And on this think And year? expecting a then versus for future if dollar I Were how maybe reduction at that may to of cost much just comments, sustainable you as maybe layers a last one to you the

David Loretta

be sales to we that variable the of in Yes, a flex net be and the lot we’re volumes. XX and do that range going million costs expect based down amount that is up able to to on

nonrecurring we’ve growth had that going it’s the been some or where in. that permanent that this cuts we’re in, layered I forward to going attribute to as to we be cut. could otherwise million dictate temporary And the any permanent event mostly we get but extent So our about we new mentioned, variable store X.X of the to future expenses – really expenses able will cuts, that

Jonathan Komp

Okay, Thank that’s helpful. you. very

David Loretta

Yes.

Operator

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

James Duffy

Good me. you. couple Thank from for morning. questions all the details And of thank A script. the in you

of First, for Will second go the more receipt? around deep specifics some strategies? merchandizing respect can to planned you the half newness with seasonal you you will including planning inventory inventory categories? to how go in respect the deeper core are you’ve there? more categories you you’ve planned, With guys that And year talk how about receipts

David Loretta

in receipt We we seasonal of year-round our of to came – the of focused seasons. what the than a of balance Women’s that. is inventory up call good men’s Over a half on year men’s. makes focused that and has our categories plan on greater portion into than with the it newness, aspect more that half

the preserve we and us as late. gives when been what we’re some that’s those most the the reductions really our new making seasonal about we’ve we’ve done traction but of because make So best to able fall, think year-round in some the for adjustments of to

elevated meaning fact work newness that even rate the with levels I room line getting the on realize doing chase will and are But back to of well. growth sitting some overall adjustments over the some time give in as products to they’re them through, we’re making and we inventory that to take us of So don’t sales. gloss want preserve to

James Duffy

comment, building your patterns mentioned and year? the thus uncertain traffic Okay. far understand so but the on over I forth, respect you last quarter. the to high necessarily are promotional Dave, in has given of difficult What level second be And any to respond you that’s improved expecting cadence here then with thoughts balance appreciated? that to margin rate would

David Loretta

a at event quarter say Well, also third We how fourth as will quarter to operating and second going the promotional think last where activities were with flex cadence But in repeat. adjust plays point some in clearance that we sale margins. quarter. to did year as we look had the last third similar quarter introduced starting pleased pattern And the I’d and overall and the third the quarter the a this of to we’ll go, we quarter point the to year. look the last we’re fourth plans similar going improvement out in saw last a what I based year that balance we’re to through on selling fourth we then in

And focused so what on. we’re that’s really

until or digital we’re to and drive point decisions whether placement growth. some are got categories kind really to around point is flex this near-term, at But the make the not. of to of best we’ve the of the running us So digital where in that to gives drive short-term advertising going lever growth those on TV

James Duffy

that campaigns? to customer new curious. marketing the on up you follow to just attribute Can certain That’s one, I’m growth. last encouraging. back then And Okay.

Stephen Schlecht

search that some up women’s the drilling back attribute down can featured new women’s we customers. the example we for we where when to around we the new marketing growth there, picked definitely effort lot on certainly accelerate. paid, Yes. social how also in on of spend product, then of of rebranding to customer campaigns and that’s digital women’s terms; media, new prospecting book advertising that’s the broad women’s a And had paid, activity; We that saw it and times did some TV a prospecting

the markets. and new from spread came every country to they’re know So with buyers and that markets city the and some we locations obviously in down non-store many across store location

captured new that directed email be tools warehouse. customer part the of we that So more with going and following up campaigns as we’re based we’ll with and have outreach data to on that file

James Duffy

advertising my prospecting. levels? April rates perhaps through work understanding Do back the economics and still that to very during Steve, rates May, reflect even favorable were was for as historical

Stephen Schlecht

about media talking costs? you’re rates, say you When

James Duffy

Correct. Digital rates. advertising

Stephen Schlecht

Do that, any you Dave? thought on have

David Loretta

thing and got short timely about given we can to to model an set day. throttle term do pay-per-click the the down and that ratio is Yes, we’ve any very ability and ad what want we up on

costs nimble that to we you’re down throttle and So advertising. increase, that’s the it as the if can very with starts on digital to be point, what referring

to aspect. you’re TV media, If maybe referring that’s another then

James Duffy

traditional to Maybe up new media? look back on just you by driven that, was customer driven last one following as the growth, that more by or digital

David Loretta

don’t I unusual would think would on – dynamic. and was that was really Well, numbers. been seen by what a pace. changed similar that think we during digital. pandemic of the driven an have which online it, spent same there’s the element have more We incremental I Without time continued the consumers’ growth But

James Duffy

me in the indulging for guys Thanks helpful. questions. really detailed That’s

David Loretta

Thank you. Sure.

Operator

come question Blair. next our Carden from go William Please with And Dylan will ahead.

Dylan Carden

Thank you very much.

towards Hardgear to of seems to can same sales don’t curious, the expect questioning, out if if can that here segment year? kind I us what the and the up To of a now that some the percent lot. years. up what product releases And new know lines curious of where pipeline or of not makes here. Just here maybe be in project that coming new see you’d you couple along holding kind be kind a a the pretty in sense of of product stuff you gets to new Alaskan strength? of whether or also we well put give end attribute Thanks of hold And that on

David Loretta

in is Hardgear most. grows, overall slow business of grow. XX% the grew it roughly quarter. XX% percentage continuing Alaskan bit first makes important for the growth small us. that as an did is to The The thanks. The really the of Dylan, rate in And men’s that Yes. at a still down range XX% it category up it’s the to still but

We’re It’s kind that. we the as us be expecting even categories greater to of segment we now. a late lifestyle that’s well doing of into as right fishing head are continue is around to to growth that featuring for seeing feel some and of going the summer

we men, out price fall, a of coming products line pleased with XX we’re going products. price new a good So but with And an mentioned high the that. quality still to the lean to line in continue we GRIT expect that new new lower workwear really into entry are much Steve absolutely point road. entirely that that’s other potentially women��s take we’re core and to to items potentially some focus – as on possible. overreach as assortment if But call have new the anything some on out year-round into down and the overall the future for of and trying

Dylan Carden

brings that in business? are things around kind just an are things you a business fishing, the if speak, just those up shut on interesting of down. significant activities, seeing anecdotally, of based hiking, you’re only a support It your as to as activity, of part Is know that of so remain? sort like point many outdoor Maybe do kind

Stephen Schlecht

large a add that gardening. that it be catalogs item moment playing quarter. search that we’re I’d really past a overalls drove not is groups Yes, activity featured and one to nicely. of was certainly done our outdoor feature That so and right side, women’s I this of think We for us in big our And its into that term now having cover in it the is. on for can really

Dylan Carden

care. Take Thanks Awesome. guys. a lot,

Stephen Schlecht

Yes.

Operator

also And presentation. conference. concluding this attending session, question-and-answer thank you to for will today’s today’s like conclude We’d our

time. at lines your disconnect now this may You

Duluth (DLTH) 4 Jun 202020 Q1 Earnings call transcript