Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Duluth Holdings Inc.

First Quarter 2023 Conference Call. [Operator Instructions] I would now like to turn the conference over to Nitza McKee. Please go ahead.

Nitza McKee

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

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

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

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

turn Chief that, the to with President over and I’ll And Sato, Executive Sam Officer. call

Sam Sato

call. Thank you for today’s joining

a positions and in strategic capital. quarter, first initiatives. for results, in in-stock that customers and collections increased several is demand our last increase from the we’re Fiscal We’re inventory summer total pleased fulfilling to XXXX efficiency from that greater demand share fourth the start quarter spring growth to year, our the positive business progress including off working on quarter overall are good several the making sales and net reflecting driving in trend for an better strong and great business with the reversals

committed the to can-do goals XXXX expect to to weigh we focused still remain currents announced the It achieve and go-to-market flexibility build economic is business near-term for in AKHG Big X provides consumer objective, durable Dam functional in as align cases. planning use of Company our price Duluth serving strategies strategies outlined our platform by to growth needs we sub-brands. distinct sensitivity, and year cross the our conservative our we of to long-term our on While was wear. customers’ a on lifestyle with rebranding Duluth work Trading our customers Duluth of for ago that Blueprint

hands example each customers garden, planting in dig A is are our build calloused to size was fixers collection long-term and and in and like the we has character. believe across us. growth for breadth year compared category up who first target represents to as Our XX% This a landscaping our apparel to fingernails in of last nearly tinkerers both category which great fine-tuners, build and and who that serving dirty gear. customers healthy year continued expand quarter and

time and our These outdoor recreation of in of in to their who outdoor they folks makes believe is experiences. part invest worth live be the free AKHG it and the is those it experiences the grind adventure. brand outside for outdoor work

and up was women’s, share seen AKHG growth reliable see along men’s the to recent tends I’ll we sub-brand overall quarter. AKHG, XX% that from more our a by tremendous first has last shortly year’s response of to customers. self-service women’s where collection launch to also them, with details addition fun For regarding spring start continue ends. performance, last year’s from positive the our I’m excited Since but share product of

acquisitions that that underdeveloped are AKHG. with we brands and Duluth categories opportunities or to similarities Additionally, leverage new customers some adjacent, and brand with our we develop platform crossover see for have potentially in through

business on and or touch our the move incremental rather We’re where about forward who our recent acquire current more in from we sharing when right, don’t brand far expertise into opportunities participate. now, look categories stray either to currently results. not are, I’ll We develop we growth to within the going but is categories underpenetrated time

quarter of loss nearly the year us increase of our plans sales results last track Today, $X.X on first a provided of keep with of line $XXX.X EBITDA we share full and million, net call. per million. adjusted in outlook reported were an net and positive on These $X.XX X%, with our

period down same inventory fourth quarter X% roughly the Our from the levels and from X% quarter. ended down last the year

Our and and inventory year-round mix appropriately disciplined flow positioned goods. in well plan our purchase to efforts clearance a seasonal of receipt has resulted

consumers we their rates, consumers in discretionary inflation Given persistent are pressures the with high are and seeing basket price remain selective purchases. interest facing macro as and higher sensitivity

nimble and the plans but strong, last executing brand and X% Dave customers on our at to teams evidenced sales remained our strong of highest of the be for our like commend our level. financial results, on I’d serving However, growth year. as by further unit share focused continuing underpinnings our will our to over details

Our trend it improvements but several the starts we importantly, demand in took, actions new quarter with to can attributed be most this innovative products.

success see our we fabrications expand when technologies proven customers and already products. love new that to continue into We

our for cooling under protecting designed long and tops women. and Our Armachillo material, serving collection a is wicking men’s tops sleeve sun. the men new protection from attributes skin as originally sun the underwear, UPF line Sunperior fabric provide lightweight for for These plus base of XX

Hose XX-inch cooler CoolMax cargo our gusset category, Duluth Flex job. with extra With hot extra on standard room band fabrication waste and the with along work for cotton, In season elastic coverage hot under sun. the and features a flex ease them allows short guys combined the a our we dry who plus and inseam, need and stretching for bonus to to in hero adding twisting provide features than when technology wicking keeps the the shorts Fire

we suspect AKHG and offering new for to #X was was address features, for protection call built-in convenience and Collection beach in the on To as customers’ the splash the durable umbrella. in sun Lost affinity that the swimming hike the We flexibility the be active our this on men our women shared going extra the to collection new hole to Lake been quarter. the reviews have a UPF great under call-outs get last our positive lounging or Swimwear with water, and for

odorless lightweight We No an to garden on we’re customers new feedback or that benefits the And our will strong fabric pants customer continue innovate formulation. shirt size Zone based while insect-repelling DNA. the job. for new on it’s problem Like sweating simultaneously our jacks, collection infuse serve purpose which our a and amplifying and away in you’re our and when design materials range, and a finish data our the analytics, solve of features that keeps extending of features overalls, bugs Fly innovative and because

contributing buyers sales The a impressions younger increased drive in and with the around marketing engagement visits, sports-heavy the during increase channels positive content key points to college call Duluth with positioned trend Also national conversion. we linear landscape categories. to product and and new to to of media this drive sports-related significant across and in focus period. TV March We particularly Madness. web across We demand new combined our interactions saw to was spike action were basketball holistic quarter multiple and an results brand and customers, a placements in streaming X-week awareness create leveraged on influencers

funnel priced conversion are Madness capitalize relevant. All buyers the with lower These events generating to of tactics to awareness on retention also up buyers offering. offering spend greater followed at still With effective to and first promotional It media pivoted awareness products seasonal are customers with annual reactivating current generated high a special introduce by the in Most new levels we event, that featuring and Duluth’s strong of broader March the select campaign, seasonally lapsed our with Do Days categories.

consumers is convert capabilities text that online and marketing Our a email, on TV, based through the and are our on Enabling multi-level and consumers. to on approach segmentation our architecture of a then social requires investments media attract, is media consumer to keys product in or When or data of healthy consumer they to recommendations this behaviors and ads return advertising to optimizing take investment their content with buyers. our building search the anchored they’re are personalized where streaming notice they understanding reason analytic retained mix and strives Therefore, sees buy an research or retargeting enticed where through modernizing compelling action social ads what and a on needed. strategy and affinities. paid online, a strategy given and versus the new inform

XX basis is contributing sales a higher website the last for resulting Our Duluth growth positive fast, a in a against undertook replatforming nearly remains customers’ experience website X.X%. of delivering us. we conversion rate over The experience of to fall expectations for consumer focus friction-free direct points, on

the with us through of balance shopping plans continue to even the to making easier. enhance have site year experience We our

example, our into more For plan management with imagery search search we to function, making incorporated improve advanced the result product and personalized functionality. it

on and to of video that are include use product product compelling stories photography we the our Additionally, innovation product elevating and highlight ability pages expanded tell durability. to

down during Traffic XXX to That the our retail per by control. improving on to basis customer deeper being in transaction increase quarter, X% and down retail an what’s contributed during said with product net channel units metrics shopper Tightened year-over-year. mid-single-digits our and conversion the focusing to their selling training the stores quarter. sales remained close drove efforts knowledge service in increase in point a challenged and

the on floor initiated last the our St. space and store the gain were provide division. remodel XX growing store Charles, to women’s to greater the insight retrofitted Missouri stores that continue of test with We fall for

contributed new Our positive design will openings. model in store’s future serve Store and of for Charles remodels a as has Future and that St. trend the store to

are to largest of investment we feet, remains fulfillment square Southeast track facility representing XXX,XXX in Lastly, sites the most Georgia on will on date. our our budget. to largest and With our in progress single center that center automation fulfillment Adairsville, be on robotics this the with investment efficient roughly pleased and and report

and the the of peak ramp during the direct begin processing to upcoming XX% few goal orders servicing with of up orders excited over season. over next We’re hiring months

I’m growth lifestyle are for logistics, analytics. in outdoor continuing invest while that’s innovation health product and to the new through platform through our needs and confident positioning us our pipeline, sound attract marketing that business customers the informed brands our our customers’ to Expanding and data the long-term in to and cut-through adventure. making in new is to through address technology deeper of rigorous we’re customer well investments brand experience our work by actions hands-on

are for priorities this value goal by ultimate informed all measure being increased stakeholders involved. with Our the

to it quarter details turn I’ll more over provide Dave results. Now to first our on

Dave Loretta

good morning. and Sam, Thanks,

were channel reported XX we sales direct quarter, with year basis $XXX.X million of up quarter year. million, from markets was trends mobile to across volume $XXX.X devices first last compared X.X% the better in Online conversion the store non-store Sales points slightly X.X% both from versus For net up in desktop. direct and up in last markets. our

A our channel with increase combination conversion functionality to and that enhancements efficiency. our website speed proven tactics reduced marketing friction to along helped of

channel increase year. in rate the was X.X% Our traffic an in down retail XXX year, with to which store to quarter last trends compared traffic to from conversion the compared last close down an our is fourth points of X.X% basis improvement traffic and

priced. on shared as of items trend price sales be we last last mix we sale full customers call, or anticipated half on As year, year, in back the below with of our more clearance our last the responding to was to

As such, by units our prior sold. unit an down offset year, retail in average increase the was from but

as actions capture inventory make to quarter earlier as from our in receipts the with marketing seasonal campaigns. well both more us sales year than Our pull during well improve impactful and and positioned categories flow core the support key to offering last

quarter Sam holistic the of and earlier years anchored future men category on that shared, continues landscaping women As growth. this collection traction to gardening, for and of many build gained and development has our a planting in

items sold X% in Our first price that reflects deeper a gross margin decline sales gross on the full XX.X% lower last discounting gross quarter $XX.X $XX.X million profit the million profit on year. and and represents This year margins promotion mix from to clearance. and to of last impacted year this was compared dollars on XX%

price clearance same at sold year. last items of the as roughly was Mix

margin the million the with of $X.X lower representing and mid-single-digit greater a move units offset bucket However, as by of gross quarter inventory, through was this the the to total planned. in of expedited degree percent discount finish was XXXX. during quarter partially of The product first the freight order of clearance expensing

product year-over-year. quarter points begin XXX Excluding down as comp contraction product expedited gross margin the expect the second in charge, the basis freight margin to was We in close to we gross do to compared gross down much pricing year as margin emerged. the heightened customers points last be quarter XX that in total year. to sensitivity will profit basis We estimate the to period when last as second improve

expenses. quarter XX.X% center XX.X% volume million order well of net million $X.X kept an a an points as SG&A outbound of or flat in orders direct in first to expenses administrative sales. decrease sales store year value. or We result last expenses. and expenses to marketing compared X.X% a costs basis percentage included sales to of shipping in selling $XXX,XXX of XX year XX.X% quarter $XXX,XXX to the and total Turning and the advertising greater of XX.X% of a and and a increased as our controlled increased of increase and percentage of operating during last increase shipped the $XX sales. expenses general for was fulfillment $XX.X Selling of average expenses, million lower higher This variable from labor to variable compared costs with a

increase Advertising the last sales Madness in of percentage reduction year. quarter to national costs, the TV decreased quarters. in to points XX and will to asset March costs as X.X% million a creative which in streaming to million and last later and development placements marketing offset compared year $XX.X than a presence more XX% was An support compared $XX.X basis into shift by advertising were

our in robust. are the assortment demand and Sam plans and of engagement As remains merchandising customer for noted, sharing execution our marketing growing

younger in Big time, efforts which that rates, retention both and strategic our increases more buyer a data Blueprint. a strategy nimble insights analytics objective enabling are Dam marketing is is our and driving flexible a growth customer customer Our of in and key file while over in acquiring

expenses additional net personnel or million administrative live go year. quarter million and during compared XX.X% to depreciation million XX.X% as expenses represents Southeast last of sales and the the as $XX.X last center increase from to fulfillment were in $X.X quarter. first fixed for cost General the well $XX.X or year new scheduled third

higher our of internal of and was expect the to our X.X% Net of compared similar last $X.XX deleverage in per last million second million was share for a year. line EBITDA reasons. per slightly or $X.XX $X.X X.X% quarter loss We first Adjusted was in sales sales for quarter year share versus $X.X loss or with expectations.

$XX sheet. the balance in with of Moving working including cash to quarter our million, outstanding the of $X and credit. million net We line capital on ended zero $XXX million

beginning technology. due Our million associated cash fulfillment the the capital warehouse new quarter, investment the management balance is the $XX and fulfillment center primarily in to capabilities from Southeast automated down outlays and of with

early efficiencies coming see gain our season in this as customers’ speed the We’re capabilities this and expectations shopping year. chain advancement for live excited represents to transformational positions truly selling in months as to online and a us us meeting as that in project supply our operational forward accuracy moves it go growing peak

$XX the operations at of was flow year which our half capital quarter. and total plan we end will remains capital cash from flow. XXXX the expenditure expenditures confirm cash million, first cash free the will in approximately expended for positive nearly the in with fund year we expectations, To expect the Our

two-thirds roughly with same in is Our and planned. year-round inventory from in the products a in down seasonal healthy balance as one-third quarter the last ended mix the position period year X% products of and

with the the continued confirming XX $XXX profit points, million following outlook. year to basket to full margin for our price flat sales to million. back be as sales Gross half be and expenses of in percentage Full entirely year reflecting net fiscal are quarter. of the as SG&A net of year. year XX leverage with coming basis We for flat up expenses guidance basis sensitivity XXXX to points the our $XXX manage with down prudently a improvements fourth we to to coming in continue

be software subscription million line last of expected expected to liabilities of cost EPS $XX $XX $XX interest and from to are on rates. million. borrowings are imputed $X.XX to as EBITDA Depreciation which year $XXX,XXX of as expense, million due $X.X to and to including lease costs implementation year $X.XX. increase well Full to adjusted finance includes expense, amortization and interest our higher roughly Our interest credit million of

confidence In closing, our and XXXX with have achieving goals remains we’re of pleased and what despite consumer dynamic in the start annual macro environment. a

and the of our actions customer environment, flow while strategic foundation platform new well to inventory brands positioned channels, us future Our growth advancing setting to to manage weather objectives into costs growing enable and engagement brand expansion, investing customer the for extended and still adjacencies. have

we will And that, call with questions. for the open

Operator

Instructions] BTIG. question comes [Operator Please first go with you. The Stichter from Thank Janine ahead.

Ethan Saghi

this Saghi Thank for on for Ethan have You taking questions. morning. Janine our

what could quarter? off, what in give the levels on around top details the business could And helpful. super – more men’s in on the year? any acceleration be you planning of in on give the inventory would of more some you’re us First you for just first if That details half that, drove second the then the

Sam Sato

Hi, Sam. Ethan. Thanks. is This

I’ll the improvement business. the part prior on trend take with the from significant we’re first So men’s pleased the quarter. Yes,

double-digit in are pleased ending compared with QX, men’s, decrease slightly that. We to down a really but

remarks, season. as strength I seeing particular, summer see of really spring new gone offer. We big about lighter Armachillo, consumers to said business spring our is really it weight Breezeshooter. these on year-round He’s a seasonal fabrics men’s like well technical responding our is fabrications goods. and of interesting colors. the chunk reacting the Dry the on strength we’ve we’re through in to Fly, What’s pockets my And continue to well across And as and prepared in

store more bring discretionary especially to And find and continuously spend as ways challenged. so or him online, have the to innovate into we is

with and reception acceleration business, we’re products the that we’re particular, progress yes, of introducing. in showing to so, really the new pleased that he’s and And that the

Dave Loretta

the the address question can I inventory Ethan, back half of for year.

track are with This were below in So levels year. below coming last last inventory we quarter, we on year, about first X%.

in start expect of And then last XX% of below upwards the year we’re year. end QX at to continue the to XX% kind and and mid-single-digits. QX to even going And so to that QX more decline of

adjust that to good and traction chain able given the this flow been we’re business we’ve feel So on inventory about supply the year. got trends we’ve that

Ethan Saghi

for one super last Great, helpful. that’s one quick And then me.

from the saw about kind cautiousness and so like And first you’re just second highlighted you’re You the what sales quarter that? cadence cautiousness the in far? quarter in Could now of heightened of you consumer. consumer, the talk seeing things about from the you just seeing talk the

Dave Loretta

sure. Yes,

in The soft first even out and in quarter into then for April. us improve began March to and February started better

for So that and throughout top-line. and business that the customers in overall we pressure that increase out full really looking called in Sam deal. collection mentioned. slight time, positive that margin to swim period was the items overall quarter But in the the we decent April of those was pretty the had But triggered newness the continued what there the brought garden

helped positively. and the really innovation newness pull So period

we’re trend on. the that’s So

Ethan Saghi

Thanks much. so Great.

Sam Sato

Thank you.

Dave Loretta

Thanks, Ethan.

Operator

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

Jonathan Komp

Thank a changes either and or you bit to plan seeing behavior online, to comments Could current sensitivity you the environment good anticipate? you’re sensitivity. the observing? around you you. on do little react to the expand Hi, specifically where follow-up morning. how the the in just to then you’re want And any I price store,

Dave Loretta

across a sensitivity The the board. bit little for is, most part, to the Jon, pricing,

results, is in year. last think I and – back a those really little half bit of last a from feeling continuation that’s it more that men’s was but reflective

and other particular seasonally I So when that year-round. really items on more better those is to those got can than an we right, point categories we’ve pricing are outcome any item think don’t the categories impact than

that’s we’re in So than I’d – seeing category. kind seasonal the say, categories, when year-round better it’s the better of where impact promotional

Sam Sato

is Jonathan, year a Unit the believe this remains Sam. the brand, for high. over I’d is add we quarter growth at strong. look our versus sales when that X% it of ago. up was Demand we underpinnings

As XX%. I AKHG brand, remarks, up our women’s stated grew in XX%. prepared Total my nearly

Dave to right, going to business. sensitivity a is we’re and said, there discretionary price capture while yes, some around is when basket so, offer size, spend the that continue to of as And

well to Importantly, think purposely growth, year the we’ve our been but inventory talking a And how doing ago. sales X% start intend last I while compared is this planning managed, a inventories. now planned, relative on we of what is growth down inventory quarter to we’re and about being

I’ve to time, with – We’re generating mindful going same in we past, are well pressure of And we’re not really but undue top-line stock competitive, and right at stated just flow-through got sales. do so mix of chase as inventory the only but be good that not the our to a to position good At under expense we’re unprofitable to in is position, to the baby balanced. profits. the going not out be the now. bloated, in to And well speak. really But because throwing we’re a bathwater, we’re going the not we’re inventories

we’re and perspective. be going to we smart so strategic And a compete from how about price

Jonathan Komp

just two the very I Dave, year like want about XX% year. just in implied first, I fiscal the Great, then looks to to full for If And guidance. compare guidance it Okay. up range the XXXX, to the it revenue helpful. last XX% follow-ups, by ask that’s maybe

think X%. I about was up quarter First

confidence core So to then other business, given business does I it why just, trends the the success innovation you’re And talking April, of you’re the your new product just seeing you. into still make model? along contributors consider here? Thank based understand go any it Is or the there. or May Sam, want on on we just to as adding some to acquisitions on the some complexity sense about the

Dave Loretta

and relative each that that, in that that is going I’d the guidance quarter on out this play about will the certainly to are periods. prior Jon, forward. I we we we see feel trend say, mean, sales Yes, the on quarter good guidance, reflective

gains big any expecting QX QX. not are or We in QX or

know, terms touch that? I still want don’t to be range of do to annual guidance. the within would Sam, So, But on us in I that you expect acquisition, of

Sam Sato

question. Good sure. Yes. Yes,

to really something other to So us, acquisitions wholesale other said the in grow it, distribution have are with thinking are strategic discussions, about of not we This do, I that and line. types an framework with those in past as or something about that models. opportunities are from it’s it’s opportunities we going as that but infrastructure think is that we along definitively suggest shared something to be is for business, certainly our perspective

that have vet target We framework we project identified specific purpose we strategy acquire is filters the potential to service us a of or to to some that But build part I into of would and sharing our formal is work us where to allow acquisitions. enter capabilities new use completed of brands that. distribution channels profile that have pretty think allow importantly, Jonathan, the infrastructure enablement or to us new have

here are that it’s time thinking that. ourselves to a but if So, about in suggesting the something the are not near-term, do good that us we and arises we positioning for and certainly, it’s time it’s

Jonathan Komp

misspoke have may the comparison. I apologies, And sense. on makes That

clarify, acceleration just – deceleration like get it the to your assume you full that trend So major would guidance. to year in don’t David, or a looks you the and

may since clear, misspoken? am I so Just have I

Dave Loretta

Jon. that’s right. That’s right, Yes,

Jonathan Komp

Okay. Thank you very much.

Dave Loretta

you. Thank

Operator

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

Peter McGoldrick

Are size and through Peter wanted promotional just difference to in you frequency Thanks relative our make-up of How taking for you Duluth Hi. seeing talk questions. customer? customers, women’s is your purchase? about customers newer or on Jim. for could acquired the consumer? sports to basket television their the heritage both engagement, This younger I is the men’s start, McGoldrick

Sam Sato

Sam. this is Yes. Peter,

I of couple say. things a will So,

our As XX XX XX in old. average target we is customer currently Big described versus our to years our of Blueprint, north Dam customer,

that And there. seeing And are we so as purposeful we are we consumer. being stated, trying success target younger in to

new opportunity In is And It the there. target of in really total under of half of future our was female. age is to was where that customers customer perspective, somewhere a just importantly. want customer for size through is the because younger it’s a nearly consumer. all than was nearly we QX that fact, count because it buying we we And From of and our our important need of which The interesting slightly XX so growth, in percentage was clear our somewhat spend our lot were that women’s analytics years, is acquired our of count. range, lower she affirmed us women’s clothing. his half of business what

And dividends good for us, intention pay needs, so was today. I only think unlock our starting but her to on not to it’s focus a

And attracted our we we in stores specifically so are investments this her, what compel is her have offer the have is, her, with starting of in results. around how speaking are pay continued of to And women’s to and shop some didn’t our channels seeing to really we made us that her, are engaging what marketing consumer. invest we to the of she to have expand as our dividends we We offer always see other we shops. just in really female have we with breadth places versus necessarily to

Peter McGoldrick

this question And how representing and this something view distribution brand? and as give on discussed on one then that you business And business. was Okay. aspirations? Could volume your this had wholesale us How revenue terms the is an you in wasn’t of driver I today doors update beyond? a wholesale do the year big

Sam Sato

is a us our largely for Tractor is target Wholesale our It’s today and still that just we – Yes. really to of intent strategy. The a kind are a Supply partnership. limited investment in as infrastructure learn real of test phase. for

shopping us distribute center but service automated be to only are our but direct-to-consumers So, not as wholesale fulfill retail example, additionally will us store to an Adairsville inventory accounts. that us with needs, the fully allows able allow online, also to be will that that, fulfillment to

investments wholesale. again, purpose across internally. to components these to a is that of for I been the the against day of And brand we is opportunity. our from And one of perspective house making team. to obviously wholesale significant are infrastructure think enable in back so personnel, documented we a well the has some that invest really the have like we strategic opportunity allow us other think will But There is

Peter McGoldrick

on. it pass Thank you. will I

Sam Sato

much. you very Thank

Operator

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

Dylan Carden

Yes. much. very you Thank

Just curious, And direct of is of the period, the that outlook of the the margin through for handled end kind inform how holiday capacity the for utilization of kind total center? of for that your channel units the year? sort of being XX% does that some target

Sam Sato

we Adairsville this Dylan, sales and XX% than Yes, of actually Adairsville or that’s fulfillment just up. are demand, handle out of has greater XX% direct The XX%. as will capacity ramping is Sam. our center Hey it’s

centers, an more is expensive we capacity built XX%-some obviously, part, current reflected and that for model, the amount so gain of our it – is labor-driven in And grows But opportunity reduce efficiencies. of the some will is CPUs fourth most be for the greater of us other quarter. into there even as demand the fulfillment to that in largely

Dylan Carden

Excellent. you And kind you doing the if benefits that. of quantified have Can I from remind contribution me wrong, correct me?

Dave Loretta

Yes.

So, in leverage of But points points could basis at the expenses year, next again, back and weighted. XX year operating we this basis we quarter basis our have period. end leverage to full once full to through year a that estimated roughly of XX capacity XX on selling you fourth and points basis really year, go full

Dylan Carden

drive meat the sort I of you kind get initiatives as kind harder comping both where are from and are is But continuing far against comparisons you the as up maybe of efficiencies then of around And even depth on on far to bone as feel those costs? of marketing that Excellent. efficiency as promotions, promotions kind of concerned. do

Dave Loretta

Dylan, selling talking or…? about the costs, costs are I you am sorry,

Dylan Carden

to am of be is guess about I I promotional rationalizing talking an it there in ongoing Yes. journey seems activity. kind –

more funnel or again, we to of the targeted, to some of on a sense? Does And of I efficient you And that kind sort bottom pulling on make rather period, some of business? about more more reduce so of costs being guess marketing, of kind then kind approach, as how those feel make of activity? look you where more opportunity are the that normalized out

Sam Sato

Sam. thing. Let is me promotional this handle the Dylan,

stayed after relief see seeing year ‘XX, earlier, kind bit of are little the but QX sensitivities us. us QX. out kind price, around QX that So, highly promotional of hoped said coming have as what through of that’s and with really we would a in I into with We of a had has stayed

are into QX, you now reduction get a think will see And to you We in that. start activity. and so promotional as we expecting QX

really For been us, inventories as said well. I have have planned earlier,

team our flow. great our job Our receipt purchases done planning and a of has

so sensitivities to we unprofitable and on got to to have chase a promotional to inventory to a sales. are bloated position to be relative And price, certainly their extent an while address the remain not headwinds perspective have in consumer certainly from competitive to we

to continue remain And price and to basket selective we But are cadence in consumer. promotional really QX we see the and highly so will from we be that our we expect activity. sensitivities promotional going will how and purposeful

Dave Loretta

and the to tack see points of there, the question flat year to marketing that around Yes. basis XXX close guess I leverage up. Dylan, this on the sales are will we spend to on slightly

just savings because pulling allow years gotten that’s TV the linear shift nimble the So, is $X more out seeing upwards less There upfront been the we less spend be consuming digital cable and us efficient on to continued for have how over of million And that of last much of on some full $X and year. a it million spend. and to we are processes of their couple TV dollars side. people dramatic has media of are ad so

through leverage will we and through digital streaming and ad the to side efficiencies on found and continue that we accordingly. spend So,

Sam Sato

Dave’s just Yes. will Dylan, I one final response. add to comment

effect team the around In our on leverage, our that is the having I is brand spend. addition and story to efficiency marketing real think the really

of so And the brand versus health long-term effort immediate conversion and conversion result tactical top in complex, tactics of tactics holistic that a near-term it’s awareness funnel through it’s all brand and from awareness and way creating the sales. balance a

look single to content this still wire. flex are see marketing, to playing allocation doing and day, continues team television, able daily are their dollars. and spend results across levers and our on our working almost teams they and our identifying where they Every pulling change of basis of a So, digital Digital, that. on targeted. at are consuming they really are different come great the us different as doing highly market The it’s while great but are are they news allocating engaging fragmented job with and consumers in a linear about we

in our big March dialing saw at understanding ongoing where like awareness, consume near-term. translate cases, And consumers placing opportunities are some that customers, So, also I and in. getting more think better they just are drive our content is Madness, team in to we they just they then bets but then convert to those

Dylan Carden

you just you sort offering that work Is of the of extension? positioning. maybe brand? space grow sort that as acquisition on some of of a don’t Excellent. within of opportunity there promotional given either area just at But look to much to of focused as are as more or are to one an of opportunities competitive white maybe in going know seasonality you the think kind remove you vertical category the do across how And I extension, is extension, that need internal this and the kind far kind the speak

Sam Sato

is, absolutely. always we always are aside, where our opportunity talked, the business. and or And product also space either – participate within Yes, I are that innovations wear thinking in new teams innovation about the have but of expand in, we as an opportunities within product we mean have is new servicing our lifeblood not the the categories not acquisition work that. consumer the specifically to Duluth, are only currently

with grow number in part And really starting of example landscaping grow we to is, similarly, reason to out us. into that’s we We So, expanded about of we that the is, surface. men’s, of silhouettes. a started business and this this the different that lot And are a overall, great the just on kind the men’s believe bib landscaping talked category business. garden the we a scratching call are continues and for have gardening

team So, or great categories, seeing other the the other categories our within traction, of that’s example getting genders is product that it a to expand collection. category starting that’s into

be as From have addressing I within an expanding is wear that you customer And our perspective, to opportunity just our about there in beyond Duluth. so, brand. base opportunities and adjacent yes, as think outdoor talked consumers we for really a and continues acquisition rec good big work the past, it’s really

Dylan Carden

good. both. Very Thank Excellent. you

Sam Sato

very you much. Thank

Operator

our session for you attending as for presentation. Thank today. call today’s well concludes question-and-answer as our This

You may now disconnect.

Duluth (DLTH) 1 Jun 232023 Q1 Earnings call transcript