Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Duluth Holdings Second Quarter 2023 Conference Call. [Operator Instructions] Please note, this event is being recorded.

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 second 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

here we Vice Sato, and Sam management questions. will Officer. today Chief remarks, call, the I'm Officer; and call prepared Executive your then On President today's Dave open and President and Senior provide Chief will Financial Loretta, with to

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

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

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

Sam Sato

and thanks today's morning, for Good call. joining

orders will Dam Georgia store our online fulfilling review generate operational newest target being immediately located upgrade long-term to faster in start second and I'll our a of that planned, our is confidence growth, meaningful gives fulfillment an has, ramp-up and and strategic to center expectations that key inventories. that address quarter our future-proof news replenishing our Blueprint. over fully as begun our on two our exciting I on initiatives Big this Before date time. cornerstones October achievable. results, build us network cost delivery logistics support automated share I'm business, to efficiencies investment significant Adairsville, The our with will customers' Representing customer update thrilled our time highly for that is are for the to scheduled

more delivering I'll like team for key I'd this to milestone. on responsible members shortly, thank our this vendor and first, partners share all about but

efforts live of highly product automated fulfillment members the several In growth team going to equally a customers. our have bring deep our that functions in apparel and and addition share team in our and to innovative design serve extensive problem to new excited to with I'm for manufacturing. and solve our or of experience purpose onboarding the center, This market that products sourcing develop accelerates innovation on a

for improving loyalty of market, fulfillment and with long to over advantage, customers, while augment a representing and and of this cut-through will long-term has price stage full speed memorable. marketing value meaningful that The fabrications significant enhance supported pipeline This coupled fueling and allowing greater products, sourcing our our our new bringing to the team savings cost and Duluth center sets features while growth. selling us to generating proposition, first-to-market time. initiative, sustainable profitable go-live automated by product fun strong a record is highly competitive the strategic price the track strengthen of sub-brand

year increased by all as consumer environment. rates. online with second for for remains continued turning buyer to We the evidenced last conversion and Now collections to spring and performance orders quarter the higher and second offer in visits, quarter strong counts growth demand were our our more current as our summer shipped Customer compared sold, healthy. in demand units

the and value, staying business customers control what which on brand keenly our we managing what macro navigate dynamic we continue while elevating are focused we remains unique a seek As controlling in prudently, environment to sub-brand can positioning.

shape flow. good efforts and and in to receipt inventory prior our appropriately purchases our strong to and quarter ended disciplined our levels is below seasonal plan the Importantly, due sell-through year position

second Total subsequently the be of in the slightly store June. X% online were quarter. million, to pleased net trended which X.X% traffic last sales and attributed which year month We for very by $XXX lower flat May, beginning by down our quarter in which to were performance, positive can the in largely nearly was strong grew

rate Importantly, in-store resonated our assortments both our customer efforts as base. second year-over-year, marketing quarter and our improved and online, broadening conversion with

online transactions performance. XX% Sales increased higher on in X% up our quarter, Double all channel devices direct were clicking roughly of online XX% website mobile and of the volume driven our for through which nearly Visits mobile by for sales. on traffic, visits. to accounts accounted

We continue enables faster last devices load upgrade, rate. an easier fall’s from increase to XX in which conversion basis realize navigation, mobile on contributing our points web platform of times to mobile the and benefits

that of representing on increase from total, continue prove model With basis XX% the an service customer last expectations our an omnichannel balanced our strategy is with results digital-first direct channel with to of shopping year, our delivering our XXX points Duluth.

$X.X down profitable bottom quarter. the the satisfied EPS P&L. unlocking Moving line We we're EBITDA And for results, adjusted are growth. innovation keys to investments and are chain we fueling while product technology, delivered now not million the in and of making second longer-term supply the with

and million with multiyear quarter strategy our end supports line cash drawings none funded drivers operating of invest at flows. on the strength business $XXX sheet the year-end, balance credit being of Our growth by key while at expected to second no our in

last inventories and managed momentum programs year. have healthy to and have We support minimize that is which our end-of-season clearance, position the a strategically below in

for our key I increase and delivered sales in Garden like demand Planting. These collections we XX% results nearly quarter. the As a collections great and in deliver and spring continue strong, to Landscaping were of second collections and summer mentioned,

the heirloom quarter. one women's was bib Our number for style gardening again overall the

months. comfort to we've fleece designed warmth year-round cooler lining which a add are hero during with this product plans Our to a make item, soft option and

increases the base the during in also and garden, women's unders AKHG grew like collections. almost layer total in with heirloom business branded newer Our but the collections quarter, X% Duluth

our continues fabrications Success now to is and a apparel key total derived expansion Growing design, categories momentum. strategic styles and product in of represents which business into sauce initiative segment, secret apparel utilizing of the XX% and being proven women's gain from relevant combination sales women's a of across our outstanding is uses.

seeing Made-in-the-Jade that The of Bra, collection the unique range a seamless features the support features women's response bra was newly and in engineered XX% fabrics opportunity comfort a released sizes. soft-touch, nearly elements. quarter represents Armachillo with and and technology which infused with all-around from in up growth wide significant and is We're TeeLUXE great fits comfort,

of made more in interest pleased same to and functionality and see outdoor saw durable trails we're for ultimate with continued on the recreation lightweight structured design. our Run in the which year's We last -- success women's Access we the launch Stone endurance collection for notable AKHG, our a provides Point demand As offering. collection,

fall, cross-layer our For in success and during and of soft our fleece we're linings Bamboo within new seasonal expand sherpa of represents similar growth back and broadens the second AKHG long expect styles AKHG styles, we introducing in We're grew which AKHG also XXXX. as AKHG growth and continues the a colors in a And expanding half the shirts for quarter, opportunity significant periods. we Overall, XX% prints. cozy and nightwear in our use programs. Duluth. [ph] transition flannel new rate sub-brand assortment the

live and love our you ideas stories product Wayforger work and much they passion. the so design read imagery draw We from encourage community, Wayforger the our inspiration helps brands. embrace and enable and to about page loyal in web of to our their their offering the play sharing apparel help that of Duluth view that visit family I true brand the spirit shape our as they of folks

and collections new Longtail our the to core of for of increased and and in styles, fits. are the our Duluth early T and Duluth program colors We're Flex favorable well particularly with men's denim about winter features which the as fits Ballroom pleased demand new the washes combinations recent fall with our response assortment Double pants, as introduction enthused

plans for of to the robust marketing high the next We expect driver men's fall support pants volume few this be us a months. over with

polos great start even a down between off a nylon sleeve pants with We've utility. to well needs pair and also sleeve collection the or new long launched right which shirts, the called sharp site a combine casual durability button henley. that with collection our Cordura addresses job Designed with to is long strikes customers balance office business the regularly. the of styling recently transitioning The Powercord abrasion-resistant twill, men's Powercord, back new more are and who

more and smooth Buck fourth strongest, collection Excitingly, our in still photo new new Fire pant have we assortment full Year's new fitness January Hose our durable is addition that just key launching most our women's for pipeline we’ll launching products to innovative this a quarter. that year, of New underwear Fire This apparel includes soft a a be carpenter resolutions. and a several features printing, for pattern and allowing fabric in Naked the including items Hose extensive Flex time and AKHG featuring fabric, in new to date images,

been and printed out women. We've styles rolling underwear busy also new for pattern men and

favorite with Naked being Blue followed September. Our dropping brands several was a with customer is Ribbon favorite collaborations and in beer up Buck collaboration additional Pabst with

strategies Product increase brand newness, increased to and awareness. are marketing combined rates data-driven retention customer proving effectively with

loyal up driven much year by longer XXX retention with Our and is most year-to-date our that customers. rate customers term on prior basis of points

file customer frequency. Our active and per driven up overall is by is up buyer increased orders year-over-year purchase mid-single-digits,

acquisition return was year up from retained long. customer new in social on trend the the rates customers improving ad all on our channels, an and have been Within quarter spend XX% paid over

Our half to shifts marketing informed gains realize back of strategy appropriate, in provides we're efficiency nimble XXXX. and and looking when the

influencers expanded will acquisition powerful buyers. creators sources and focus, customer continue content and be of of to online new reach a new be will an New

and most through end my orders new a is remain efficient milestone As the Adairsville, road go-live automated we our the network, inventory strategic in fulfillment I on map. facility to store XX% Georgia process track center This our largest facility highly and up represents our replenishment in opening within fulfillment online customer QX. within by the mentioned newest, of comments, and this of of significant to

The and it peak cost base. fulfill portion help efficiency selling a We're unit processing poised customer needs builds per of gains to direct as in times as holiday the healthy to demands will our season. greater customers' reductions realize well the meet towards our us faster delivery as

We're Our innovation. receipt inventory is great of shape. product new accelerating in

experiences. And customer to service Our as omnichannel are deliver superior prepped teams marketing sharp are plans our as ever.

our With will the drive critical of investments to positioned to sustainable profitability. continue made the and needs and customers long-term well growth meet we've and make, we're

will details on more quarter provide quarter Dave for forward sharing now look and to turn it more our the our to I outlook third call on year. over Dave? second to and results

Dave Loretta

Thanks, and Sam, good morning.

X% net sales brings to X.X% compared were reported we last high X.X% our product last information. single XX increased sales nearly devices million quarter, enhancements year-to-date $XXX.X of $XXX.X roughly year, basis increase choice Sales to web on second conversion by and of the digits direct digital in and our become channel to and both, made million, desktop. year. and the Sales site the devices For in customers speed, an channel of mobile quarter, increased to down for driven to close points up with visits and mobile of our in across continues navigation flat

store continuing quarter. which in improvement increases trend the service channel compelling visits rate teams down also customer on with to outstanding retail the to the down Our conversion last traffic and year, targeted with in The were assortments are the from compared first and store store X% traffic X% drive -- an is offers. sales

price a As decrease demand slight shipped. and for orders Sam generating our largely was retail promotional positive higher of strong, and attributed level offering in a the value in seasonal and growth due of lower lower sold sales. full levels net average and was order sales clearance The to items and year-round mentioned, to selling

total. with more And Our quarter-end down than year-over-year total year. to basis inventory of high-single-digit clearance X% is low-teens summer down to XXX position roughly and penetration spring from last healthy the points is the goods to

fall began customer has the we year, items and last receive planned, offered and and than sooner winter strong. to new As seasonal been response

of flow We and and the spanning some have men's pants, for year-round tops also core demand of improved largest are our underwear. the programs, items experiencing build

in AKHG Total X%, part Duluth, First up down of offers, to drove higher division were increases use rates women's women's during enabling us We turning. keep with the was in while Layer men's quarter X.X%, and our for events the inventory categories. the nearly targeted incremental and sales through sell-through

Gross a the We reflects stabilization year quarter margins to did quarter. product relative end of price margin second the profit XX.X% last last of Our to year. sales. profit full and gross dollars year, declined compared near lower from gross XX.X% in see was mix last X.X%

SG&A year sales $XX.X and in This $X.X Turning to advertising administrative of $XX.X expenses, an the to or to or decrease X.X% and increase and in expenses. increased for of an million compared million XX.X% sales. $X.X second increase of expenses. million million XX.X% quarter expenses included a in selling million last of of $X.X general marketing

percentage compared well from XXX lower average as volume to points as shipping sales order orders a was of XX% increased of rate expenses net of year outbound the values. result as Selling increases shipped XX% basis greater a direct higher last with to costs and

due of fulfillment scheduling continuous declined to expense, compared stores selling year to fulfillment efficiency centers gains network. Within sales from across made our percent in leverage costs improvement related and last initiatives and and our variable a to as labor

in Advertising year X.X% XX.X% were as basis XXX to of compared $XX.X and last to and costs quarter marketing year. a $XX.X sales million points the percentage compared last decreased million to

investment compared through year was with to costs. channels reduced creative Our last channel ad in flat was our media brand along and digital spend and TV awareness streaming lower national

with and search traffic reactivation that results and activities in that email rates. and organic increased arrivals from drive stronger product focused increase on saw retention We helped web clearance the new messaging

maintaining high innovation, return during media features quarter, sales highlight productivity. social counts mid-single-digits realize to channels customer increased flat benefits. product per Overall, continue when the also spend and customer We through on we roughly while

were quarter quarter, increase and million administrative last to second net XX.X% year the the to $XX the incremental Similar or year. million of XX.X% last during compared $XX.X sales expenses the General development, and center expenses that fixed reflects or our fulfillment associated cost first product and costs. now additional is corporate sourcing area for operational of the the automated the in stock compensation new functions with and new personnel facility over

$XX.X was last the EBITDA $X.X or million for of Adjusted second to or X.X% of X.X% sales million quarter sales compared year.

was Our versus of per quarter the share net last in loss second share per profit a $X.XX year. $X.XX

We the on and net end flow from line of balance million The inventory quarter. cash ended working quarter balance million of Moving million, lifted to sheet. by $X quarter first zero $XX credit. cash cash increased $XX outstanding of the with our the our the the including flow free healthy $XXX in during and second million capital

with year share expenditures with on center lion's associated this We new of overall that of target million for remain capital fulfillment the spend $XX in funded cash Georgia. by the Adairsville,

live pleased customer greater production Sam As mentioned, ramp as faster base. and we're to activities QX well center on to to gains our of the see this direct to project course portion realizing related our go over delivery fulfillment times a as efficiency begin costs up selling of

receiving fall-winter of is fall-winter Our on period inventory more spring-summer, versus position down sell-through earlier X.X% ended to on balance the same from planned spring-summer the and healthy the year a reflecting last in with mix quarter and goods a strong weighted seasonal goods.

result to hand over actively last the inventory down during and optimize XX% units a managing on season year Total turnover. markdowns as of from clearance sales are

share half net We of are million, for year but outlook $XXX $XX sales and have EBITDA per million EBITDA loss We sensitive. $XXX $X.XX. EPS see full $XX our reduced estimates, million the first $X.XX year half somewhat adjusted of and consumers and reflecting the confirming in our a we now results of a remaining price guidance million second adjusted to to which expect to

to points. profit XX full be up SG&A expect XX XXX points to We to will be gross year margins basis basis and down flat

my and Financial and to on it's Vice privilege team Officer down President Dam the success the Company, and want the opportunity decision I across the have in and a I the the I outside execute but September Blueprint, I best want well-positioned honor I employment to this as step Duluth talented pillars an a Big to accepted an future. the that Sam is continued believe wish Chief been of alongside back work individuals take to it to against many organization. turn and to Before all strategic XXth. address I Senior to moment Sam, emphasize

I'll now to back pass it Sam.

Sam Sato

Chief have all contributions opportunity enough Mike utmost to over the Accounting talent functions. XXXX. who Mike the with Vice current his extensive Officer, I'd experience Officer. Mike confidence since bench years its Services Dave. anchored deep well his current honor our replacement three I leadership, it's across this and can't many at seamless has Duluth him Interim success strengthened Financial Murphy, I the endeavors. finance Dave's Business at in in wish years. to Company, search Accounting closing, Financial and with finance on thank as organization I will of leadership been to Officer be Under serve Chief future eight as and Thanks, will Dave joining for for at an take In for as six a has like this as elevated served First Duluth past Chief been KPMG. a a as Dave to partner President Dave. years much we his permanent welcome transition Prior for position and

And with for the that, we'll open questions. call

Operator

Instructions] from [Operator BTIG. come Stichter will Janine question first with Our

Janine Stichter

cadence and some a was May what the throughout of the was sounds improvement you like I on bit I could quarter. in weakest you you you think saw more It June. elaborate saw hoping the said

product some you. margin from of love top Thank quarter. it standpoint from maybe product versus you around I So the then in much initiatives maybe stabilization How of standpoint, end environment the shopping some margin also about both customers the stabilization you hear some some like just Day. a that to on the spoke line just versus mentioned there? to Father's And it's thoughts events what been and of I'd think changed a where towards key

Dave Loretta

Dave. Janine. Hi This Yes. is

were out for Day toughest Father's as I'd of us. and a retail pretty event as into Both was say saw into -- did play big to a well But us channel. high the direct build as kind the best traffic were in we positive and the July. and month we growth and May So, being with direct July things was continued month our rate quarter the entered down. stores the June, for improving.

to blend margin of find impact pressure the business, -- So X%, results with when the together, but pressure the continue as traffic drive the XXX basis were under impact remarks, margin it down the part ways out last to call transactions impact of being and the just did to now I we out into July, down was starting certainly as you from as points period year. pressures we're really starting first came business. on when But margin gross my the we did last to year's comp of --

far, up August, to look so top slightly margins But as last gross And year. still is are we the line down. through

a stabilized us continuing we're margin that for top So, and front. good turn the but in line, trend, has to of kind a started seeing on has way

Janine Stichter

Great. then product for actions in maybe the been longer? you place you've to speak taking need through, or more that pricing reductions potential on keep And sourcing these just might cost of to product flowing like the prices promotional you benefits keep as to for the some seem promotions or

Sam Sato

Yes. Yes. Janine, this is Sam.

with pricing be strategy. to brand and and balance We to So, be offers. we're the consumer sensitivity our of with to our going integrity the continue try targeted

sale, have a a fire there. There's balance So, going speak. so to not to we're

and more to flexibility several structural is As to I -- our sourcing pricing bit long And with the ultimately us change -- of members group. term intent new remarks, our challenged. of prepared more a now when the onboarded gives said creating model a we've over business in my

over to but opportunity we the margins ramp-up see couple term. tremendous the the increased next a so, over And years, certainly us drive long of product for occur gross think will

Operator

question next Jonathan will Our Baird. from come Komp with

Jonathan Komp

to little just the to on right the environment. in the elaborate follow and why in up seeing margin maybe here? move a lowering brand participating I price full the thoughts holding participate the and further guidance, want strategy you're on promotions to that's the the the Can revenue, year but promotional you again

Dave Loretta

pressure out the there, start is robust. yet we're that still I'll there, the consumer from there's Yes. feeling Jon. pricing Clearly, demand

As to more we a the them said, us we value units. needs consumers sold proceed. But telling shipped price more be to orders, are is what the point for

last styles a bringing momentum. the -- while X.X%, So, the we're innovation the our that in confident entering has two some the seeing as an items some where men's, some was core categories down the third we're optimism and in to of standpoint of us confident newness that the our out improving line top we're is got category, in about brand the of And trend here, play in men's we're quarter quarter that with are of market. keeps men's from And from seeing quarters. some other that the it's

fact, year, sustain results. pressures the In drive we're significant a -- we new items back that think really market this the amount that on keeping But are bottom to to weighted line still we're which of bringing pleased is half with. the of going margin impact pricing top line,

Jonathan Komp

And I to year a maybe Big a year not terms the this dollars. you're in guiding profitability Sam. transition EBIT think Dam still, just follow-up, the of much being of When Blueprint,

growth that you you maybe the talk might margin that levels benefit And, are So, current years? about at the today? right you strategies, temporarily the what's pursuing business future impacting can have

Sam Sato

as Yes. two is mean, my Dam Yes. and beginning our exciting our really the I center talked Blueprint highly of the sourcing I group. Thanks, remarks, pillars to Big Jonathan. at fulfillment automated

think really they from structural you mid- and profitability, to implication relative are in a business when about that so long-term sustainability two the critical sales of and both And change that unlocks. the and of growth

is a products. perspective, part faster just we deliveries, also not business to on our sell from So it's in online and click how expectations, the much delivers the more about especially and CPU but consumers' of from us, fulfillment from only a but perspective, doorbell cost efficiencies majority being of not efficient the general, of

it to growth, business, the avenues or a not from consider And as center other anything business real continues and so, fulfillment has that current the our wholesale unlock grow that scaling be key fulfillment perspective. of only becomes for our and as network part to else, we an but application delivery

last announced critical not of it's component, the piece, Duluth in of core first just who Innovations. And Material innovative about is, and products bringing a that operation, as the The at and year, and sourcing high-quality, vertical product hiring that's Director a of a solve we problem. design terms our are of well-priced development,

And pricing change experienced so, flow-through. in bring group model will our longer and investing a dynamic to more allow sourcing for and also and a term greater profits

So of that things. investment yes, choppy calling think challenges what the two, the our in are P&L and I enterprise. the to that the these the is enablers to and the these we through And our related products for past. the conditions for price consumers term, macro then in Duluth on innovative near some really One we're our still two in selling loyalty enablers, in but ultimately full and times bring the ultimately, been affinity are based what showing, consumers back we've have market. And our to brand sensitivity higher leads

So, will that's sustainable. part then, in more to and of the I'm that that ensuring in business us got right a infrastructure cost-efficient place we've scale occur. that And it's take the confident advantage about way that

Jonathan Komp

That's helpful. Okay.

more looks like annual ratio when the inventory it to year to Prior XX%. Just last XX% full to it Dave, for -- a was like current sales, look relative that I COVID, inventory inventory mid-XX% to me, about one relative the at sales.

today Thank when requires years the what some highlighted inventory to there factors business the you you. inventory you ago, or with other the comfort looking more aspect base? current several is So, relative of at are that

Dave Loretta

product initiatives, -- times us on operate we're the turn Yes. sure and term, the our still lead and with longer two customer. got initiatives Sam size to described, even ranges, coming this quicker, about we've the was some in issues and making fullness sales. logistics enable of that some really be fresh relative the we're inventory really to and more getting to products more our in, us have environment focus measuring new years, allow chain new we're the from off the inventory will the as the that's to In in less relevance the where of those and shorten supply last assortment, sourcing [Technical categories Difficulty] with

improve say, turns are to So, I'd this inventory going year.

in customer that direction. moving down But urgency to we're standpoint. right and stifle demand a the the the So isn't manage from

initiative, the even we're brand to will because And robust And and that inventory those confident but newness. with exceed a so, -- investments. that year keep of prior it's return we've any secondary primary turns realized is period

Operator

Stifel. Our question next will Jim from Duffy come with

Jim Duffy

some Dave, for messaging specifically most half second my follow-ups. of and and I thanks strategies marketing to please in I'll relates the mix messaging media year? I'm let as help to to Dave, and have specific easy it think the interested off branding years. versus Thanks. for products? And then, all all to I'm these just going you speak focus of the Sam, questions Sam. can you

Sam Sato

sure. Yes,

So, us. our this great specifically, on business. as customer got of right at engage the Jim, dynamic to current know, level, been more and we're more customers. complex just that's And fluid and focused learn combinations we've a part we is you about with to marketing -- And high loyal a the continue

continue up And serve and folks customer on improving to new a engaged with new And component. we're we want to is so, obviously, into keeps product to acquisitions continuing new critical content brand focus that and as make bring them on to our our an build well the sure trend. that brand as customers

including to bets to for to of big found it social current as of owned visits video to brand through big we that want we And we the base, in social during funnel comes media different specifically around really content, traditional do we other features, channel that, television, of an continued pretty a top bring, it's of our in a network talk or combination place we YouTube lift So, and platforms, site. example, terms and specifically about have certain consumer get where streaming. comes stories largely it's across our when we products, the places. success, product lift and good and building, them, When through our from it the comes when certain a whether get spectrum, that then year Wayforger times programming, lot when instance, to of

So, it's become Streaming -- really audio of we're mix media. to a targeting into really is what broad us. important has

that's of part our so, a And big initiative. become

where it's We're greater transactions. deeper and we're where broader ultimately around on trying the we when brand personalized really, on to education influences And into understanding visibility create funnel, a to that based so, invest. basis. leads awareness, we're much and doing a go then to And attract trying targeted more innovation where that our that we product

Jim Duffy

in half women's But you're and The core speak new newness men's men's marketing is of for seeing a core I the follow-up to consumers suggest allocating how in decline. understand question, offering coming have drive that? that of the to AKHG lot through can the Okay. second that recruiting or women's trying and you versus gains to offering in related spend the or you year. AKHG growth stabilizing you're

Sam Sato

Yes.

that denim Longtail for and to core in Flex exciting we're demand was see improved newness X.X%, styles, And QX. whether it of we're is we're additional starting for fits big what washes I increased but or really we're bringing new for offer and seeing what's and some Double So to it's our the our fits. T men's an business was colors program pant bringing from down men's trend our the quarter think is

which most we're pant, of it Hose evolving to like durable to to I items believe Hose business long Fire we're many which that are in remarks a our the doing things bit, that my about renew back Flex core Fire and bring we'll our some new programs, program, date. core as new growth. over the that term, talked fabric Those we core So, evolve prepared of is

women's, our more continue feedback and and we women's strategic and more but and season-over-season to allowing sales to And getting internally the Specific excited, into being our profitability, in extend see really top-line growth not adjacent only categories. to and us her our offer brand so from we're us talked really white space focused we're ago for but really initiatives. one become X.X-year or has not great we a of about opportunity, only

business As have more wants intimates really base women's learned what we've marketplace, gotten potentially feedback an yet and layer, has a grow of it of our to in that having And market be market. competitive that missing design really, great about and done development job continues assortment. product just expand. introduced as and what's a team and part and she bringing example, to it the our And and

tremendous it's was And really total. to it's it ago, a think optimize than today, our X.X-year we've got women's opportunity much XX% so, offer, I which while larger of a that

long a scheme you about terms go building so business. think way in got we And things, when of to that that in the of

that's for we're marketing, then way a those lastly, frequency types stories we specific to the in and to brand tell. of in and it an your And but We're as around And don't him to for businesses going her. really invest from in position, only appropriate, question it not terms do look at that either/or. going of a we

at creative monies certain but have we're year off to or refocus trading and consumer rebalance throughout don't and feedback. year, And We it really allocate look of based dollars. and change on so, initiatives at things the to the consumer some of the that the demand relative flexibility the beginning teams brand seeing our we as

Jim Duffy

And purchase just cohort, you behavior Thanks. a to standpoint curious has of men a any helpful. than That's you're lifetime higher frequency between differences whether your seeing allocation or male capital, I'm Sam, can and she women. consumer. speak of your higher value is in from that repeat

Sam Sato

me fascinating always level, been hard and Yes, what's think something it's Duluth interesting. develop. it's is At I a at to that high to

it, you eyes you and XX-XX ratio a isn't men And him. make of buyers. have so XX% lot you women's are have have talked buyers men's, for and keep we've that. your buying of And about And business while that female that our sure on women have we is XX% when we to a

our opportunity so, also our belief us she's to led for assort there's and And what's a shopping for better stores brand. that specifically compelling to offer her that's an provide our because more

size more we've seeing, added seeing seeing it's necessarily as we're for than sure, with frequency say and say we're totality, in customers increase. shopping. would is just women's more additional our I men expanding expanded categories, women. wouldn't as women's what so, most into the and business, we're in loyal frequency, I we're basket And

Operator

Blair. with William Our next Dylan Carden will come question from

Dylan Carden

here. want of just understand make kind to I of the sure I the balance guidance

with in coming incremental inflection is the cleaner still out nice, the overhang. second least promotional downside kind of the here, on inventories. right? seemingly quarter of Do a the sales year margins You're have But to of that I

Dave Loretta

that Dylan. that made an was really That's That's right, we pressures continue. will think update the overhang, we the pricing given

Dylan Carden

the in sort giving of given this, ticked more up on as are incrementally? that guess, I activity? call, what of why I give ways you promotional kind been You've question the to the inflection of opposed do different not of hold I embedded not -- is, price but up feel margin? that so, guess, guess, Has asked kind through heightened you the kind And

Dave Loretta

recovery haven't that improving prior -- Well, anticipated but seen that more year. to to to it, continue. six see starting that stabilizing the but over relative going little pressure pressure play that heightened and we of a recovering standpoint no, be the back and to out, see months not mean, we We for more half We year. -- price, it the we're full planning the the might it's from we're last been I expect entered would not

first the of significantly back implies gross get full-year particular. XX compressing in XX the first part So, to the guidance quarter, And the year, year points half I from that's the down articulated. margins that of and to guidance basis this profit to

in. again So, keep the all moving and inventory customers through to that the that the period be assured goal engaged they're would keep

Sam Sato

spending targeted The is I when of terms big we thus The events, full of think an promotions just customer the more they're or that a add distinction that in there do becomes more their purchases reducing. selling important couple price of responding here. our Dylan, run promotions were periods, events and down. because frequency those I'll issue driving is our during to purchasing and

offers to and the degree And to there we purchasing those our out are but amount so of do is greater just in that we're we targeted be those discount more just not. ultimately, seeing when we customers going than put periods balanced what during products, and we're and a that things, the responding degree

Dylan Carden

it. Got

price presumably kind constant new way look next -- as full the in the sort kind And low-XX on year? to you're of factor kind leverage of think as margin negative but range, there looking looking the SG&A at here, quantify margin, the distribution? at selling of of guess, recovering swing we or margin, so, or we Is some gross I holding you on next year, can operating how efficiencies about should that opportunity any that

Dave Loretta

this at team Dylan we'll not call that We're provide that -- provide stage, for Well, coming about probably to the -- quarter me up. a fourth on year. it's -- appropriate and next will

look the -- and and of incremental on back much, quarter, growth, our can you we doesn't immediate. need it see part but is to -- sales fourth when leverage year in So into be just this SG&A we

We in the in expect really of leverage the SG&A half quarter and on fourth the year. back

where at doesn't take the line it in start of it through, kind model. So, to flow to is business see we're top much which

Dylan Carden

for of the then, bigger distribution are How expansion new a have forgot, you And about I business. thinking Okay. wholesale? right? I apologies, that allows Do wholesale --

Sam Sato

in a it totality. XX% replenishment, it allows of is our business online end the have QX. and of of for -- XX% plan inventory Well, facility about to the That by that about fulfill retail Yes. store larger

combination the And wholesale or manner. so, talked, has the business. of do a retail and not bolting down a potential to the do that it's whether acquisition, opportunity that cost-efficient for the us current as general, it's of the even, to just in And a capacity at but it business DTC on businesses our highly network only going an road, we've to grow

Operator

today's the question-and-answer presentation. as conference. as Thank well our concludes session This attending you for

disconnect. now may You

Duluth (DLTH) 31 Aug 232023 Q2 Earnings call transcript