10q10k10q10k.net

What changed in DULUTH HOLDINGS INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of DULUTH HOLDINGS INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+127 added−143 removedSource: 10-K (2023-03-17) vs 10-K (2022-03-25)

Top changes in DULUTH HOLDINGS INC.'s 2023 10-K

127 paragraphs added · 143 removed · 111 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

47 edited+3 added−11 removed223 unchanged
Biggest changeFurther declines in shipping and handling revenues may have a material adverse effect on our gross profit and gross profit margin, as 12 Table of Contents well as our Adjusted EBITDA to the extent there are not commensurate declines, or if there are increases, in our shipping and handling expense.
Biggest changeFurther declines in shipping and handling revenues may have a material adverse effect on our gross profit and gross profit margin, as well as our Adjusted EBITDA to the extent there are not commensurate declines, or if there are increases, in our shipping and handling expense. 12 Table of Contents We rely on third-party service providers, such as UPS and the United States Postal Service (“USPS”), to deliver products purchased through our direct-to-consumer channel to our customers and our business could be negatively impacted by disruptions in the operations of these third-party service providers.
These advertisements feature both our animated characters and female models, and are intended to be humorous, irreverent and quirky in order to grab the viewer’s attention, while highlighting the particularly innovative, solution-based features of our core products and the Duluth Trading name. 5 Table of Contents Social Media .
These advertisements feature both our animated characters and female models, and are intended to be humorous, irreverent and quirky in order to grab the viewer’s 5 Table of Contents attention, while highlighting the particularly innovative, solution-based features of our core products and the Duluth Trading name. Social Media .
Customer response to our digital marketing and catalogs is substantially dependent on merchandise assortment, merchandise availability and creative presentation, as well as the selection of customers to whom our digital marketing is directed and our catalogs are sent.
Customer response to our digital marketing is substantially dependent on merchandise assortment, merchandise availability and creative presentation, as well as the selection of customers to whom our digital marketing is directed and our catalogs are sent.
Our reliance on suppliers in foreign markets creates risks inherent in doing business in foreign jurisdictions, including: transportation delays and interruptions, including due to port congestion and the failure of suppliers or distributors to comply with import regulations; the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions, import/export laws and regulations, and local intellectual property laws and rights owned by third parties; 11 Table of Contents changes in U.S. and non-U.S. laws (or changes in the enforcement of those laws) affecting the importation and taxation of goods, including disallowance of tax deductions for imported merchandise, imposition of unilateral tariffs on imported goods, duties, quotas, enhanced security measures at U.S. ports or imposition of new legislation relating to import quotas; economic and political instability in the countries and regions where our suppliers are located; compliance with U.S. and other country laws relating to foreign operations, including the Foreign Corrupt Practices Act, which prohibits U.S. companies from making improper payments to foreign officials for the purpose of obtaining or retaining business; increases in shipping, labor, fuel, travel and other transportation costs; the imposition of anti-dumping or countervailing duty proceedings resulting in the potential assessment of special anti-dumping or countervailing duties; political instability, war and acts of terrorism; and the occurrence of a natural disaster, unusual weather conditions, or prolonged public health crises, epidemics or pandemics in foreign countries from which we source our products.
Our reliance on suppliers in foreign markets creates risks inherent in doing business in foreign jurisdictions, including: transportation delays and interruptions, including due to port congestion and the failure of suppliers or distributors to comply with import regulations; the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions, import/export laws and regulations, and local intellectual property laws and rights owned by third parties; changes in U.S. and non-U.S. laws (or changes in the enforcement of those laws) affecting the importation and taxation of goods, including disallowance of tax deductions for imported merchandise, imposition of unilateral 11 Table of Contents tariffs on imported goods, duties, quotas, enhanced security measures at U.S. ports or imposition of new legislation relating to import quotas; economic and political instability in the countries and regions where our suppliers are located; compliance with U.S. and other country laws relating to foreign operations, including the Foreign Corrupt Practices Act, which prohibits U.S. companies from making improper payments to foreign officials for the purpose of obtaining or retaining business; increases in shipping, labor, fuel, travel and other transportation costs; the imposition of anti-dumping or countervailing duty proceedings resulting in the potential assessment of special anti-dumping or countervailing duties; political instability, war and acts of terrorism; and the occurrence of a natural disaster, unusual weather conditions, or prolonged public health crises, epidemics or pandemics in foreign countries from which we source our products.
The success of our direct-to-consumer channel depends on customers’ use of our digital platform, including our website, and response to catalogs and digital marketing; if our overall marketing strategies are not successful, including our maintenance of a robust customer list and ability to effectively customize our marketing efforts based on understanding customers preferences, our business and results of operations could be materially adversely affected.
The success of our direct-to-consumer channel depends on customers’ use of our digital platform, including our website, and response to digital marketing; if our overall marketing strategies are not successful, including our maintenance of a robust customer list and ability to effectively customize our marketing efforts based on understanding customers preferences, our business and results of operations could be materially adversely affected.
Our maintenance of a robust customer list, which we believe includes desirable demographic characteristics for the products we offer, has also been a key component of our overall strategy. If the performance of our website, catalogs and email declines, or if our overall marketing strategy is not successful, our business, results of operations and stock price could be adversely affected.
Our maintenance of a robust customer list, which we believe includes desirable demographic characteristics for the products we offer, has also been a key component of our overall strategy. If the performance of our website and email declines, or if our overall marketing strategy is not successful, our business, results of operations and stock price could be adversely affected.
Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations.
Compliance with these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations.
Our use of imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, risks of damage, destruction or confiscation of products while in transit to a distribution center or at points of export or import, organized labor strikes and work stoppages, transportation and other delays in shipments, including as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, unexpected or significant port congestion, lack of freight availability and freight cost increases.
Our use of imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, risks of damage, destruction or confiscation of products while in transit to a fulfillment center or at points of export or import, organized labor strikes and work stoppages, transportation and other delays in shipments, including as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, unexpected or significant port congestion, lack of freight availability and freight cost increases.
We rely upon third-party land-based and air freight carriers for merchandise shipments from our distribution centers to customers and our retail stores. Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather and increased transportation costs, associated with such carriers’ ability to provide delivery services to meet outbound shipping needs.
We rely upon third-party land-based and air freight carriers for merchandise shipments from our fulfillment centers to customers and our retail stores. Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather and increased transportation costs, associated with such carriers’ ability to provide delivery services to meet outbound shipping needs.
We seek to ensure the consistent quality by employing Duluth Trading-certified factory auditors to selectively examine pre-production samples, conduct periodic site visits to certain of our vendors’ production facilities and inspect inbound shipments at our distribution centers. Distribution Centers We operate distribution centers located in Belleville, Wisconsin, Dubuque, Iowa and Salt Lake City, Utah.
We seek to ensure the consistent quality by employing Duluth Trading-certified factory auditors to selectively examine pre-production samples, conduct periodic site visits to certain of our vendors’ production facilities and inspect inbound shipments at our fulfillment centers. Fulfillment Centers We operate fulfillment centers located in Belleville, Wisconsin, Dubuque, Iowa and Salt Lake City, Utah.
In addition, if the cost of fuel rises, the cost to deliver merchandise from distribution centers to customers and our retail stores may rise and, although some of these costs are paid by our customers, such costs could have an adverse impact on our profitability.
In addition, if the cost of fuel rises, the cost to deliver merchandise from fulfillment centers to customers and our retail stores may rise and, although some of these costs are paid by our customers, such costs could have an adverse impact on our profitability.
To stay ahead of our competition, we continue to develop innovative solution-based products for which we create unique selling propositions that incorporate humor and storytelling. Intellectual Property Our trademarks are important to our marketing efforts. We own or have the rights to use certain trademarks, service marks and trade names that are registered with the U.S.
To stay ahead of our competition, we continue to develop innovative solution-based products for which we create unique selling propositions that incorporate humor and storytelling. 6 Table of Contents Intellectual Property Our trademarks are important to our marketing efforts. We own or have the rights to use certain trademarks, service marks and trade names that are registered with the U.S.
Fiscal years 2021 and 2020 were 52-week periods. Duluth Trading is a lifestyle brand of men’s and women’s casual wear, workwear and accessories primarily sold through our own omnichannel platform. We offer products nationwide through our website and catalog. In 2010, we initiated our omnichannel platform with the opening of our first store.
Fiscal years 2022 and 2021 were 52-week periods. Duluth Trading is a lifestyle brand of men’s and women’s casual wear, workwear and accessories primarily sold through our own omnichannel platform. We offer products nationwide through our website. In 2010, we initiated our omnichannel platform with the opening of our first store.
These and other potential impacts of COVID-19, could therefore materially and adversely affect our business, financial condition and results of operations. We rely on sources for merchandise located in foreign markets, and our business may therefore be adversely affected by legal, regulatory, economic and political risks associated with international trade and those markets.
These and other potential impacts of economic uncertainties could therefore materially and adversely affect our business, financial condition and results of operations. We rely on sources for merchandise located in foreign markets, and our business may therefore be adversely affected by legal, regulatory, economic and political risks associated with international trade and those markets.
If the level of usage of these channels by our customer base does not grow as expected, we may suffer a decline in customer growth or net sales. A significant decrease in the level of usage or customer growth would have a material adverse effect on our business, financial condition and operating results.
If the level of usage of these channels by our customer base 10 Table of Contents does not grow as expected, we may suffer a decline in customer growth or net sales. A significant decrease in the level of usage or customer growth would have a material adverse effect on our business, financial condition and operating results.
We cannot control all of the various factors that might affect timely and effective procurement of supplies of product from our third-party suppliers and delivery of merchandise to our customers. A majority of the products that we purchase must be shipped to our distribution centers in Wisconsin and Iowa.
We cannot control all of the various factors that might affect timely and effective procurement of supplies of product from our third-party suppliers and delivery of merchandise to our customers. A majority of the products that we purchase must be shipped to our fulfillment centers in Wisconsin, Iowa and Utah.
Since then, we have expanded our retail presence, and as of January 30, 2022, we operated 62 retail stores and three outlet stores. Duluth Trading was founded in 1989 when two brothers in the home construction industry were tired of dragging tools from job to job using discarded five-gallon drywall compound buckets.
Since then, we have expanded our retail presence, and as of January 29, 2023, we operated 62 retail stores and three outlet stores. Duluth Trading was founded in 1989 when two brothers in the home construction industry were tired of dragging tools from job to job using discarded five-gallon drywall compound buckets.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge on or through our website at www.duluthtrading.com under the “Investors” tab as soon as reasonably practicable after such reports are filed with, or furnished to the SEC.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge on or through our website at www.duluthtrading.com under the “Investors” tab as soon as reasonably practicable after such reports are filed with, or furnished to the SEC. ‎ 8 Table of Contents ITE M 1A.
ITEM 1. BUSINESS Unless the context indicates otherwise, the terms the “Company,” “Duluth,” “Duluth Trading,” “Duluth Holdings,” “Duluth Trading Co.,” “we,” “our” or “us” are used to refer to Duluth Holdings Inc. The following discussion contains references to fiscal years 2021 and 2020, which refer to our fiscal years ended January 30, 2022 and January 31, 2021, respectively.
ITEM 1. BUSINESS Unless the context indicates otherwise, the terms the “Company,” “Duluth,” “Duluth Trading,” “Duluth Holdings,” “Duluth Trading Co.,” “we,” “our” or “us” are used to refer to Duluth Holdings Inc. The following discussion contains references to fiscal years 2022 and 2021, which refer to our fiscal years ended January 29, 2023 and January 30, 2022, respectively.
Trademarks that are important in identifying 6 Table of Contents and distinguishing our products and services are Alaskan Hardgear ® , Armachillo ® , Ballroom ® , Cab Commander ® , Crouch Gusset ® , Dry on the Fly ® , Duluth Trading Co ® , Duluthflex ® , Fire Hose ® , Longtail T ® , No Polo Shirt ® , No Yank ® and Wild Boar Mocs ® .
Trademarks that are important in identifying and distinguishing our products and services are Alaskan Hardgear ® , Armachillo ® , Ballroom ® , Cab Commander ® , Crouch Gusset ® , Dry on the Fly ® , Duluth Trading Co ® , Duluthflex ® , Fire Hose ® , Longtail T ® , No Polo Shirt ® , No Yank ® and Wild Boar Mocs ® .
Additionally, digital advertising costs may continue to rise and as our usage of these channels expands, such costs may impact 10 Table of Contents our ability to acquire new customers in a cost-effective manner.
Additionally, digital advertising costs may continue to rise and as our usage of these channels expands, such costs may impact our ability to acquire new customers in a cost-effective manner.
The level of customer traffic and volume of customer purchases through our direct-to-consumer channel is substantially dependent on our ability to provide a content-rich and user-friendly website, widely distributed and informative catalogs, a fun, easy and hassle-free customer experience and reliable delivery of our products.
The level of customer traffic and volume of customer purchases through our direct-to-consumer channel is substantially dependent on our ability to provide a content-rich and user-friendly website, a fun, easy and hassle-free customer experience and reliable delivery of our products.
Our Class A common stock has ten votes per share, and our Class B common stock has one vote per share. Given the greater number of votes per share attributed to our Class A common stock, our Executive Chairman and Chief Executive Officer, Stephen L.
Our Class A common stock has ten votes per share, and our Class B common stock has one vote per share. Given the greater number of votes per share attributed to our Class A common stock, our Chairman, Stephen L.
We may not be able to maintain and enhance the Duluth Trading brands if we receive unfavorable complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, results of operations and growth prospects.
Our business depends on our ability to maintain strong brands and sub brands. We may not be able to maintain and enhance the Duluth Trading brands if we receive unfavorable complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, results of operations and growth prospects.
Our Growth Strategies The Company has completed a comprehensive review of current operations, logistics networks, marketing and technology capabilities, and unique brands and products.
Our Growth Strategies In 2021, the Company completed a comprehensive review of current operations, logistics networks, marketing and technology capabilities, and unique brands and products.
There can be no assurance that we will be able to successfully anticipate or identify our customers’ needs and preferences and design products and product features in response. These risks could have a material adverse effect on our brand as well as our results of operations and financial condition. Our business depends on our ability to maintain strong brands.
There can be no assurance that we will be able to successfully anticipate or identify our customers’ needs and preferences and design products and product features in response. These risks could have a material adverse effect on our brand as well as our results of operations and financial condition.
Although we have a majority of independent directors on our board even though we will are a controlled company, there is no guarantee that we will not take advantage of this exemption in the future.
Although we have a majority of independent directors on our board, we are a controlled company. As such, there is no guarantee that we will not take advantage of this exemption in the future.
While our reliance on a limited number of distribution centers provides certain efficiencies, it also makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health pandemics, such as the ongoing COVID-19 pandemic or other unforeseen causes that could delay or impair our ability to fulfill customer orders and/or ship merchandise to our stores, which could adversely affect sales.
While our reliance on a limited number of fulfillment centers provides certain efficiencies, it also makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health pandemics, or other unforeseen causes that could delay or impair our ability to fulfill customer orders and/or ship merchandise to our stores, which could adversely affect sales.
Create unique brand positions, across men’s and women’s, for Duluth, Alaskan Hardgear, Buck Naked, and Best Made to address customer needs for various occasions including work, outdoor recreation, casual lifestyle, and first layer.
Create unique brand positions, across men’s and women’s, for Duluth, AKHG and Buck Naked to address customer needs for various occasions including work, outdoor recreation, casual lifestyle, and first layer.
Retail Store Environment Our retail stores are designed to bring our brand to life by creating a unique and entertaining experience, including engaging sales associates, a compelling and complete product assortment, custom made fixtures to fit our brand, free wireless Internet and complimentary coffee and water.
Retail Store Environment Our retail stores are designed to bring our brand to life by creating a unique and entertaining experience, including engaging sales associates, a compelling and complete product assortment, and custom made fixtures to fit our brand.
Operational Risks The Coronavirus pandemic may continue to adversely affect our business operations, store traffic, employee availability, financial condition, liquidity, and cash flow for an extended period of time. The outbreak of the Coronavirus (“COVID-19”) continues to affect our business operations and it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic.
Operational Risks Economic uncertainties may continue to adversely affect our business operations, store traffic, employee availability, financial condition, liquidity, and cash flow for an extended period of time. The ongoing economic uncertainty following the pandemic of the Coronavirus (“COVID-19”) continues to affect our business operations and it is impossible to predict the effect and ultimate impact of ongoing economic uncertainties.
Our rights to some of these trademarks may be limited to select markets. We also own domain names, including “duluthtrading.com.” Employees As of January 30, 2022, we employed 1,106 full-time and 1,905 part-time and flexible part-time employees, 1,636 of which were employed at our retail stores. The number of employees, particularly part-time employees, fluctuates depending upon seasonal needs.
Our rights to some of these trademarks may be limited to select markets. We also own domain names, including “duluthtrading.com.” Employees As of January 29, 2023, we employed 964 full-time and 1,582 part-time and flexible part-time employees, 1,539 of which were employed at our retail stores. The number of employees, particularly part-time employees, fluctuates depending upon seasonal needs.
Our distributed order management systems provide us with omnichannel capabilities that have a global view of available-to-promise inventory management. Competition We operate primarily in the apparel, footwear and accessories industry, which is highly competitive.
We continually aim to have more efficient supply chain and distribution systems operations. Our distributed order management systems provide us with omnichannel capabilities that have a global view of available-to-promise inventory management. Competition We operate primarily in the apparel, footwear and accessories industry, which is highly competitive.
We believe the foundation of our success is our culture of “poking average in the eye” by seeing things for what they could be and should be and finding a way to make them exactly that, and we like to do it all with a big, toothy grin.
We have created strong brand awareness and built a loyal customer base. We believe the foundation of our success is our culture of “poking average in the eye” by seeing things for what they could be and should be and finding a way to make them exactly that, and we like to do it all with a big, toothy grin.
We have built strong, long-term relationships with our vendors. In fiscal 2021, 53% of our purchases came from our largest supplier, an agent partner in Hong Kong who manages multiple factories across Asia, including Cambodia, China, Indonesia and Vietnam.
We have built strong, long-term relationships with our vendors. In fiscal 2022, 56% of our purchases came from our largest supplier, an agent partner in Hong Kong who manages multiple factories across Asia and Latin America, including Vietnam, Indonesia, Cambodia, Bangladesh, Pakistan, China, Mexico and Egypt.
In addition to the dual class structure of our common stock, our amended and restated articles of incorporation and amended and restated bylaws include provisions that: permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a shareholder rights plan; provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at annual or special shareholder meetings. 21 Table of Contents These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing the members of our management.
In addition to the dual class structure of our common stock, our amended and restated articles of incorporation and amended and restated bylaws include provisions that: permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a shareholder rights plan; provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at annual or special shareholder meetings.
The following table presents net sales and net income for the fourth quarter as a percentage of the fiscal year. 4Q 4Q Net Sales 4Q 4Q Net Income Fiscal Year Net Sales % of Fiscal year Net Income % of Fiscal Year (in thousands) 2021 $ 270,761 38.8 % $ 17,359 58.4 % 2020 $ 255,960 40.1 % $ 21,831 160.8 % Regulation and Legislation We are subject to labor and employment laws, truth-in-advertising laws, privacy laws, safety regulations, consumer protection regulations and other laws that regulate retailers and govern the promotion and sale of merchandise and the operation of stores and warehouse facilities.
The following table presents net sales and net income for the fourth quarter as a percentage of the fiscal year. 4Q 4Q Net Sales 4Q 4Q Net Income Fiscal Year Net Sales % of Fiscal year Net Income % of Fiscal Year (in thousands) 2022 $ 241,766 37.0 % $ 7,447 323.2 % 2021 $ 270,761 38.8 % $ 17,359 58.4 % Regulation and Legislation We are subject to labor and employment laws, truth-in-advertising laws, privacy laws, safety regulations, consumer protection regulations and other laws that regulate retailers and govern the promotion and sale of merchandise and the operation of stores and warehouse facilities.
Our catalogs serve as an important customer acquisition tool by driving visits to our website and retail stores. Customer Service We are committed to providing outstanding customer service and believe in treating our customers like next-door neighbors. Our retail stores are stocked with a comprehensive assortment of our products and staffed with knowledgeable and well trained sales associates.
Customer Service We are committed to providing outstanding customer service and believe in treating our customers like next-door neighbors. Our retail stores are stocked with a comprehensive assortment of our products and staffed with knowledgeable and well trained sales associates.
The approximate square footage of each facility is included in Item 2 of Part I of this report. Information Technology We use technology to provide customer service, business process support and business intelligence across our sales channels. We continually aim to have more efficient supply chain and distribution systems operations.
We also have a fulfillment center in Adairsville, Georgia with operations scheduled to begin in fiscal 2023. The approximate square footage of each facility is included in Item 2 of Part I of this report. Information Technology We use technology to provide customer service, business process support and business intelligence across our sales channels.
In order to be successful, we must design, obtain and offer to customers innovative and high-quality products on a continuous and timely basis. Failure to effectively respond to customer needs and preferences, or convey a compelling brand image or price-to-value equation to customers may result in lower net sales and gross profit margins.
Failure to effectively respond to customer needs and preferences, or convey a compelling brand image or price-to-value equation to customers may result in lower net sales and gross profit margins.
Areas under analysis include greater automation across the logistics network; technology that will improve operations, generate positive impact and sustainable returns; support growth through multiple brands and seamlessly integrate new brands into the portfolio, and attract the talent, skillsets and expertise needed to scale the business.
Areas under analysis include greater automation across the logistics network; technology that will improve operations, generate positive impact and sustainable returns; support growth through multiple brands and seamlessly integrate new brands into the portfolio, and attract the talent, skillsets and expertise needed to scale the business. 4 Table of Contents Omnichannel Our omnichannel business strategy allows our sales channels to work in synergy to seamlessly deliver a consistent brand experience to the customer, including consistent marketing, pricing and product presentation.
Our omnichannel services include order-in-store, buy-online-pickup-in-store, and ship-from-store as well as retail store and mobile shopping experiences.
All sales channels are fully integrated, including stores, website, catalogs and customer contact centers. Our omnichannel services include order-in-store, buy-online-pickup-in-store, and ship-from-store as well as retail store and mobile shopping experiences.
You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our financial statements and related notes. The risks and uncertainties described below are not the only ones we face.
RISK FACTORS Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our financial statements and related notes.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming.
As a result, management’s attention may be diverted from other business concerns, which could materially adversely affect our business and results of operations. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.
In that event, the trading price of our Class B common stock could decline, and you could lose part or all of your investment. Strategic Risks If we fail to offer products that customers want to purchase, our business and results of operations could be adversely affected. Our products must satisfy the desires of customers, whose preferences change over time.
Strategic Risks If we fail to offer products that customers want to purchase, our business and results of operations could be adversely affected. Our products must satisfy the desires of customers, whose preferences change over time. In order to be successful, we must design, obtain and offer to customers innovative and high-quality products on a continuous and timely basis.
Reductions in customer visits to, and spending at, our stores caused by COVID-19 would result in further loss of retail store sales and profits and other material adverse effects.
Reductions in customer visits to, and spending at, our stores caused by economic uncertainties would result in further loss of retail store sales and profits and other material adverse effects. The extent of the impact on our business, financial results, liquidity and cash flows will depend largely on future developments, all of which are highly uncertain and cannot be predicted.
Removed
We have created strong brand awareness, built a loyal customer base and generated robust sales momentum.
Added
If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of our Class B common stock could decline, and you could lose part or all of your investment.
Removed
Omnichannel 4 Table of Contents Our omnichannel business strategy allows our sales channels to work in synergy to seamlessly deliver a consistent brand experience to the customer, including consistent marketing, pricing and product presentation. All sales channels are fully integrated, including stores, website, catalogs and customer contact centers.
Added
Business activities continue to face economic uncertainties, including but not limited to increased inflation and interest rates, the prolonged COVID-19 pandemic, and global chain constraints. The economic uncertainties may continue for an extended period and have adversely impacted, and may continue to impact, our business. As inflationary periods continue, consumer fear may adversely affect traffic to our stores.
Removed
Additional Information In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, led to significant travel and transportation restrictions, including mandatory business closures and orders to shelter in place.
Added
These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing 21 Table of Contents the members of our management.
Removed
The Company has focused on protecting the health and safety of our employees, customers and suppliers, working with our customers, landlords, suppliers and vendors to minimize potential disruptions and supporting our community, while managing our business in these unprecedented times.
Removed
All retail stores were temporarily closed beginning March 20, 2020 and began re-opening the first week of May through the third week of June. All of our retail stores are open, but prolonged COVID-19 safety concerns has continued to impact store traffic.
Removed
The ultimate impact of COVID-19 on our operational and financial performance still depends on future developments outside of our control, including the duration and spread of the pandemic and related actions taken by federal, state and local government officials, international governments to prevent disease spread, and the availability, safety and efficiency of a vaccine.
Removed
We continue to actively evaluate all federal, state and local regulations to ensure compliance with store operations. ‎ 8 Table of Contents ITE M 1A. RISK FACTORS Certain factors may have a material adverse effect on our business, financial condition and results of operations.
Removed
As the pandemic continues, consumer fear about becoming ill with the virus and recommendations and/or mandates from federal, state and local authorities to avoid large gatherings of people or self-quarantine may increase, which may adversely affect traffic to our stores, result in further reduced store hours or result in store closures.
Removed
The extent of the impact of COVID-19 on our business, financial results, liquidity and cash flows will depend largely on future developments, including the efficacy of the vaccine related to current and future variants of the virus, new information that may emerge concerning the severity and action taken to contain or prevent further spread within the U.S. and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted.
Removed
We rely on third-party service providers, such as UPS and the United States Postal Service (“USPS”), to deliver products purchased through our direct-to-consumer channel to our customers and our business could be negatively impacted by disruptions in the operations of these third-party service providers.
Removed
As a result, management’s attention may be diverted from other business concerns, which could materially adversely affect our business and results of operations. We will need to hire additional employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

1 edited+0 added−1 removed0 unchanged
Biggest changeITEM 1A. RISK FACTORS 10 ITEM 1B. UNRESOLVED STAFF COMMENTS 23 ITEM 2. PROPERTIES 24 ITEM 3. LEGAL PROCEEDINGS 25 ITEM 4. MINE SAFETY DISCLOSURES 25 INFORMATION ABOUT OUR EXECUTIVE OFFICERS 26 PART II ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 27 ITEM 7.
Biggest changeITEM 1A. RISK FACTORS 9 ITEM 1B. UNRESOLVED STAFF COMMENTS 22 ITEM 2. PROPERTIES 23 ITEM 3. LEGAL PROCEEDINGS 24 ITEM 4. MINE SAFETY DISCLOSURES 24 INFORMATION ABOUT OUR EXECUTIVE OFFICERS 25 PART II ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 26
Removed
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 28 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 39

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeLocation Number of Stores Primary Use Gross Sq Ft Leased/Owned Retail Stores North East Connecticut 1 Store 9,792 Leased Maine 1 Store 12,951 Leased Massachusetts 1 Store 16,360 Leased New Jersey 2 Store 24,741 Leased Pennsylvania 2 Store 34,945 Leased Rhode Island 1 Store 14,528 Leased Midwest Illinois 3 Store 38,410 Leased Indiana 1 Store 14,557 Leased Iowa 1 Store 12,249 Leased Kansas 1 Store 15,385 Leased Michigan 3 Store 45,588 Leased Minnesota 4 Store 61,900 Leased Missouri 2 Store 27,692 Leased Nebraska 1 Store 15,757 Leased North Dakota 1 Store 14,557 Leased Ohio 4 Store 58,420 Leased South Dakota 1 Store 9,166 Leased Wisconsin 4 Store 53,246 Leased South Alabama 2 Store 31,312 Leased Arkansas 1 Store 15,656 Leased Florida 1 Store 14,557 Leased Georgia 1 Store 20,041 Leased Kentucky 2 Store 28,582 Leased North Carolina 2 Store 41,672 Leased Oklahoma 1 Store 15,536 Leased Tennessee 2 Store 27,325 Leased Texas 6 Store 92,212 Leased Virginia 2 Store 31,828 Leased West Alaska 1 Store 25,409 Leased Colorado 3 Store 52,643 Leased Oregon 2 Store 39,463 Leased Utah 1 Store 15,602 Leased Washington 1 Store 15,656 Leased Other Mount Horeb, WI Photo Studio 7,000 Leased Belleville, WI Outlet store 17,890 Owned Oshkosh, WI Outlet store 12,777 Leased Red Wing, MN Outlet store 15,560 Leased Mount Horeb, WI Corporate headquarters 108,000 Leased Belleville, WI Distribution center 220,000 Owned Dubuque, IA Distribution center 216,000 Leased Salt Lake City, UT Distribution center 228,800 Leased In fiscal 2021, we opened one retail store adding approximately 11,000 gross square feet to our stores.
Biggest changeLocation Number of Stores Primary Use Gross Sq Ft Leased/Owned Retail Stores North East Connecticut 1 Store 9,792 Leased Maine 1 Store 12,951 Leased Massachusetts 1 Store 16,360 Leased New Jersey 2 Store 24,741 Leased Pennsylvania 2 Store 34,945 Leased Rhode Island 1 Store 14,528 Leased Midwest Illinois 3 Store 38,410 Leased Indiana 1 Store 14,557 Leased Iowa 1 Store 12,249 Leased Kansas 1 Store 15,385 Leased Michigan 3 Store 45,588 Leased Minnesota 4 Store 61,900 Leased Missouri 2 Store 27,692 Leased Nebraska 1 Store 15,757 Leased North Dakota 1 Store 14,557 Leased Ohio 4 Store 58,420 Leased South Dakota 1 Store 9,166 Leased Wisconsin 4 Store 53,246 Leased South Alabama 2 Store 31,312 Leased Arkansas 1 Store 15,656 Leased Florida 1 Store 14,557 Leased Georgia 1 Store 20,041 Leased Kentucky 2 Store 28,582 Leased North Carolina 2 Store 41,672 Leased Oklahoma 1 Store 15,536 Leased Tennessee 2 Store 27,325 Leased Texas 6 Store 92,212 Leased Virginia 2 Store 31,828 Leased West Alaska 1 Store 25,409 Leased Colorado 3 Store 52,643 Leased Oregon 2 Store 39,463 Leased Utah 1 Store 15,602 Leased Washington 1 Store 15,656 Leased Other Mount Horeb, WI Photo Studio 7,000 Leased Belleville, WI Outlet store 17,890 Owned Oshkosh, WI Outlet store 12,777 Leased Red Wing, MN Outlet store 15,560 Leased Mount Horeb, WI Corporate headquarters 108,000 Leased Belleville, WI Fulfillment center 220,000 Owned Dubuque, IA Fulfillment center 216,000 Leased Adairsville, GA Fulfillment center 494,144 Leased Salt Lake City, UT Fulfillment center 228,800 Leased The leases on our retail stores expire at various times and are subject to renewal options and rent escalation provisions.
ITEM 2. PROPERTIES The following table sets forth the location, primary use and size of our leased and owned facilities as of January 30, 2022.
ITEM 2. PROPERTIES The following table sets forth the location, primary use and size of our leased and owned facilities as of January 29, 2023.
The leases on our retail stores expire at various times and are subject to renewal options and rent escalation provisions. We consider these properties to be in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity to meet our anticipated requirements. 23 Table of Contents
We consider these properties to be in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity to meet our anticipated requirements. 23 Table of Contents

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

9 edited+6 added−4 removed6 unchanged
Biggest changeSchlecht has served as our Senior Vice President of Product Development, Visual Merchandise and Creative since February 2020 and has previously served as our Vice President of Product Development from March 2016 to February 2020 and Director of Product Development from September 2013 to March 2016. Mr. Schlecht holds a BSBA degree with a minor in Statistics from Denver University.
Biggest changeSchlecht has served as our Senior Vice President of Product, Merchandise and Inventory since March 2022, and has previously served as our Senior Vice President of Product, Visual and Creative from February 2020 to March 2022, Vice President of Product Development from March 2016 to February 2020 and Director of Product Development from September 2013 to March 2016. Mr.
Officers are appointed annually by the Board of Directors at the meeting of directors immediately following the annual meeting of shareholders. There are no family relationships among these officers, except as disclosed below, arrangements or understandings between any officer and any other person pursuant to which the officer was selected. The information presented below is as of March 15, 2022.
Officers are appointed annually by the Board of Directors at the meeting of directors immediately following the annual meeting of shareholders. There are no family relationships among these officers, except as disclosed below, arrangements or understandings between any officer and any other person pursuant to which the officer was selected. The information presented below is as of March 17, 2023.
Homolka previously served as Chief Property and Design Officer and Vice President of Real Estate, Store Design and Construction at Cabela’s from October 2015 to February 2017 and Vice President of Human Resources and Asset Protection from January 2012 to October 2015. Richard W. Schlecht 41 Mr.
Homolka previously served as Chief Property and Design Officer and Vice President of Real Estate, Store Design and Construction at Cabela’s from October 2015 to February 2017 and Vice President of Human Resources and Asset Protection from January 2012 to October 2015. 25 Table of Contents Richard W. Schlecht 42 Mr.
Name Age Office Stephen L. Schlecht 74 Mr. Schlecht is the founder of our Company and has served as Chairman of the Board since May 2021. Mr. Schlecht has served on our Board of Directors since our founding in 1986. Mr.
Name Age Office Stephen L. Schlecht 75 Mr. Schlecht is the founder of our Company and has served as Chairman of the Board and Senior Advisor since May 2021. Mr. Schlecht has served on our Board of Directors since our founding in 1986. Mr.
Loretta has been our Chief Financial Officer since July 2017. Mr. Loretta previously served four years as President and Chief Financial Officer of Nordstrom Bank and led all financial and operating functions of their proprietary card operations. During his tenure, Mr. Loretta was responsible for financial reporting, budgeting, forecasting and long-range strategic planning as well as operational leadership.
Loretta previously served four years as President and Chief Financial Officer of Nordstrom Bank and led all financial and operating functions of their proprietary card operations. During his tenure, Mr. Loretta was responsible for financial reporting, budgeting, forecasting and long-range strategic planning as well as operational leadership.
Homolka has served as our Senior Vice President of Human Resources, Retail Store Operations and Contact Center Operations since February 2020 and previously served as our Vice President of Human Resources, Store Operations and Asset Protection from January 2019 to February 2020, and Vice President of Human Resources from February 2017 to January 2019. Mr.
Homolka has served as our Senior Vice President of Talent, DE&I, and Retail Operations since February 2020 and previously served as our Vice President of Human Resources, Store Operations and Asset Protection from January 2019 to February 2020, and Vice President of Human Resources from February 2017 to January 2019. Mr.
Following his time at Nordstrom, Mr. Loretta launched and operated his own company, Pacific Time, LLC, a unique food and beverage business, from 2014 to 2016. Mr. Loretta holds a B.A. in Business Economics from the University of California, Riverside and earned an MBA from San Diego State University. Christopher M. Teufel 53 Mr.
Following his time at Nordstrom, Mr. Loretta launched and operated his own company, Pacific Time, LLC, a unique food and beverage business, from 2014 to 2016. Mr. Loretta holds a B.A. in Business Economics from the University of California, Riverside and earned an MBA from San Diego State University. David S. Homolka 56 Mr.
Schlecht, our Senior Vice President of Product, Visual and Creative. Samuel M. Sato 58 Mr. Sato was appointed to our Board of Directors in May 2021, and since that time has served as President and Chief Executive Officer.
Schlecht holds a B.S.B.A. degree and an M.B.A. from Northwestern University. Mr. Schlecht is the father of Richard W. Schlecht, our Senior Vice President of Product, Visual and Creative. Samuel M. Sato 59 Mr. Sato was appointed to our Board of Directors in May 2021, and since that time has served as President and Chief Executive Officer.
Sato began his career in 1985 at Nordstrom Inc., where he held various leadership roles within merchandising. Mr. Sato has been involved in the retail industry for over 30 years. We selected Mr. Sato to serve on our Board of Directors because of his extensive experience in the retail industry and his significant executive management experience. David Loretta 54 Mr.
Sato began his career in 1985 at Nordstrom Inc., where he held various leadership roles within merchandising. Mr. Sato has been involved in the retail industry for over 30 years. David Loretta 55 Mr. Loretta has been our Chief Financial Officer since July 2017. Mr.
Removed
Schlecht holds a B.S.B.A. degree and an M.B.A. from Northwestern University. We selected Mr. Schlecht to serve on our Board of Directors because he is the founder of our Company, has over 50 years of experience in the direct marketing and retail industries and has extensive leadership experience and strategic vision. Mr. Schlecht is the father of Richard W.
Added
Schlecht holds a BSBA degree with a minor in Statistics from Denver University. Mr. Schlecht is the son of Stephen L. Schlecht, the Chairman of the Board of Directors of Duluth Holdings Inc. Neala Shepherd 46 Ms.
Removed
Teufel has served as our Senior Vice President of Information Technology and Logistics since February 2020 and served as Chief Information Officer from October 2017 to February 2020. He also previously served as our Vice President of Information Technology and Logistics from April 2019 to February 2020, and Chief Information Officer from October 2017 to April 2019. Mr.
Added
Shepherd has served as our Senior Vice President, Customer Experience since March 2022, serving as caretaker of the brand and voice of customer experience across all facets of the Company. She previously served as our Vice President of Merchandising and Marketing from May 2020 to March 2022 and Vice President of Marketing from February 2019 to May 2020.
Removed
Teufel has also previously served as Vice President and Senior Director of Technology at Nordstrom from 2001 to April 2016. Mr. Teufel holds a B.S. in Accounting from the Daniels College of Business at the University of Denver. 25 Table of Contents David S. Homolka 55 Mr.
Added
Prior to joining Duluth Trading, she served as Senior Director of Marketing for The Buckle, a leading specialty retailer in fashion apparel, from October 2017 to 2019. Previously, she spent 15 years at Cabela’s in a variety of leadership roles across Marketing, Advertising, Creative and Brand, most recently serving as Senior Director of Marketing from September 2015 to October 2017.
Removed
Mr. Schlecht is the son of Stephen L. Schlecht. PART II
Added
She earned a B.S. degree in Communications / Marketing from Oklahoma Christian University in 1999. AJ Sutera 56 Mr. Sutera has served as our Senior Vice President, Chief Technology and Logistics Officer since August 2022. Mr. Sutera previously served as the Chief Technology Officer of JD Sports Fashion / Finish Line from March 2016 through August 2021, where Mr.
Added
Sutera oversaw the Company’s information and technology functions and digital operational solutions. Before that, Mr. Sutera served as the Chief Technology Officer for the Hudson’s Bay Company from 2013 to 2016 and Chief Technology Officer & Digital Operations for Saks Fifth Avenue from 2007 to 2013.
Added
Earlier in his career, he held senior technology roles with companies including JetBlue Airways, Liberty Travel / GOGO Worldwide Vacations, Volvo North America, and General Electric. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed2 unchanged
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans is set forth in Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. ‎ 26 Table of Contents
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans is set forth in Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. I TEM 6. [RESERVED] ‎ 26 Table of Contents
Our Class A common stock is neither listed nor traded on an exchange. Shareholders of Record As of March 15, 2022, there were approximately 82 holders of record, based upon data provided by our transfer agent, of our Class B common stock, one of whom is the sole holder of our Class A common stock.
Our Class A common stock is neither listed nor traded on an exchange. Shareholders of Record As of March 7, 2023, there were approximately 76 holders of record, based upon data provided by our transfer agent, of our Class B common stock, one of whom is the sole holder of our Class A common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

49 edited+7 added−16 removed38 unchanged
Biggest changeFiscal Year Ended January 30, 2022 January 31, 2021 (in thousands) Net sales 698,584 638,783 Cost of goods sold (excluding depreciation and amortization) 321,260 307,257 Gross profit 377,324 331,526 Selling, general and administrative expenses 333,225 307,311 Operating income 44,099 24,215 Interest expense 4,717 6,263 Other income, net 55 65 Income before income taxes 39,437 18,017 Income tax expense 9,887 4,637 Net income 29,550 13,380 Less: Net loss attributable to noncontrolling interest (152) (197) Net income attributable to controlling interest $ 29,702 $ 13,577 Percentage of Net sales: Net sales 100.0 % 100.0 % Cost of goods sold (excluding depreciation and amortization) 46.0 % 48.1 % Gross profit 54.0 % 51.9 % Selling, general and administrative expenses 47.7 % 48.1 % Operating income 6.3 % 3.8 % Interest expense 0.7 % 1.0 % Other income, net — % — % Income before income taxes 5.6 % 2.8 % Income tax expense 1.4 % 0.7 % Net income 4.2 % 2.1 % Less: Net loss attributable to noncontrolling interest — % — % Net income attributable to controlling interest 4.2 % 2.1 % Fiscal 2021 Compared to Fiscal 2020 Net Sales Net sales increased $59.8 million, or 9.4%, to $698.6 million in fiscal 2021 compared to $638.8 million in fiscal 2020.
Biggest changeFiscal Year Ended January 29, 2023 January 30, 2022 (in thousands) Net sales 653,307 698,584 Cost of goods sold (excluding depreciation and amortization) 309,872 321,260 Gross profit 343,435 377,324 Selling, general and administrative expenses 337,204 333,225 Operating income 6,231 44,099 Interest expense 3,653 4,717 Other income, net 376 55 Income before income taxes 2,954 39,437 Income tax expense 708 9,887 Net income 2,246 29,550 Less: Net loss attributable to noncontrolling interest (58) (152) Net income attributable to controlling interest $ 2,304 $ 29,702 Percentage of Net sales: Net sales 100.0 % 100.0 % Cost of goods sold (excluding depreciation and amortization) 47.4 % 46.0 % Gross profit 52.6 % 54.0 % Selling, general and administrative expenses 51.6 % 47.7 % Operating income 1.0 % 6.3 % Interest expense 0.6 % 0.7 % Other income, net 0.1 % — % Income before income taxes 0.5 % 5.6 % Income tax expense 0.1 % 1.4 % Net income 0.3 % 4.2 % Less: Net loss attributable to noncontrolling interest — % — % Net income attributable to controlling interest 0.3 % 4.2 % Fiscal 2022 Compared to Fiscal 2021 Net Sales Net sales decreased $45.3 million, or 6.5%, to $653.3 million in fiscal 2022 compared to $698.6 million in fiscal 2021.
Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” The inventory value is adjusted periodically, if needed, to reflect current market conditions, which requires our judgments that may significantly affect the ending inventory valuation, as well as gross margin.
Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” The inventory value is adjusted periodically, if needed, to reflect current market conditions and inventory composition, which requires our judgments that may significantly affect the ending inventory valuation, as well as gross margin.
The Company regularly assesses and adjusts the estimate of accrued sales returns by updating return rates for actual industry and company trends and projected costs. While returns have historically been within our expectations, future return rates may differ from those experienced in the past. Changes in these estimates can have a material impact on our financial statements.
The Company regularly assesses and adjusts the estimate of accrued sales returns by updating return rates for actual company trends and projected costs. While returns have historically been within our expectations, future return rates may differ from those experienced in the past. Changes in these estimates can have a material impact on our financial statements.
The cash provided by operating assets and liabilities of $36.1 million primarily consisted of a $26.4 million decrease in inventory, a $10.5 million increase in accounts payable, and a $9.9 million increase in accrued expenses, partially offset by a $4.7 million increase in hosting software implementation costs, a $3.2 million increase in receivables, and a decrease of $2.4 million in prepaid expenses.
The cash provided by operating assets and liabilities of $36.1 million primarily consisted of a $26.4 million decrease in inventory, a $10.5 million increase in trade accounts payable, and a $9.9 million increase in accrued expenses, partially offset by a $4.7 million increase in hosting software implementation costs, a $3.2 million increase in receivables, and a decrease of $2.4 million in prepaid expenses.
The interest rate applicable to the Revolver or DDTL was a fixed rate for a one-, two-, three- or six-month interest period equal to LIBOR (with a 1% floor) for such interest period plus a margin of 225 to 300 basis points, based upon the Company’s rent adjusted leverage.
The interest rate applicable to the Revolver or DDTL was a fixed rate for a one-, two-, three- or six-month interest period equal to LIBOR (with a 1% floor) for such interest period plus a margin of 225 to 300 basis points, based upon the Company’s rent adjusted leverage ratio.
See “Forward-Looking Statements.” These forward-looking statements are subject to numerous risks and uncertainties, including those described under “Risk Factors.” Our actual results could differ materially from those suggested or implied by any forward-looking statements. Management’s discussion focuses on fiscal 2021 results compared to fiscal 2020. Fiscal year 2021 and 2020 were 52-week periods.
See “Forward-Looking Statements.” These forward-looking statements are subject to numerous risks and uncertainties, including those described under “Risk Factors.” Our actual results could differ materially from those suggested or implied by any forward-looking statements. Management’s discussion focuses on fiscal 2022 results compared to fiscal 2021. Fiscal year 2022 and 2021 were 52-week periods.
Gross profit as a percentage of our net sales is referred to as gross margin. Cost of goods sold includes the direct cost of purchased merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost and net realizable reserves; inbound freight; and freight from our distribution centers to our retail stores.
Gross profit as a percentage of our net sales is referred to as gross margin. Cost of goods sold includes the direct cost of purchased merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost and net realizable reserves; inbound freight; and freight from our fulfillment centers to our retail stores.
This non-GAAP measure may not be comparable to similarly titled measures used by other companies. ‎ 30 Table of Contents Results of Operations The following table summarizes our consolidated results of operations for the periods indicated, both in dollars and as a percentage of net sales.
This non-GAAP measure may not be comparable to similarly titled measures used by other companies. 29 Table of Contents Results of Operations The following table summarizes our consolidated results of operations for the periods indicated, both in dollars and as a percentage of net sales.
This non-GAAP measure may not be comparable to similarly titled measures used by other companies. ‎ 29 Table of Contents Free Cash Flow We believe Free Cash Flow is a useful measure of performance as an indication of our financial strength and provides additional perspective on our ability to efficiently use capital in executing our growth strategy.
This non-GAAP measure may not be comparable to similarly titled measures used by other companies. Free Cash Flow We believe Free Cash Flow is a useful measure of performance as an indication of our financial strength and provides additional perspective on our ability to efficiently use capital in executing our growth strategy.
This represents the point at which the customer obtains control of the product and has the ability to direct the use of the product. We recognize shipping and handling fees as revenue included in net sales when generated from a customer order upon shipment or at the point of sale.
Store revenue is recognized at the point of sale. This represents the point at which the customer obtains control of the product and has the ability to direct the use of the product. We recognize shipping and handling fees as revenue included in net sales when generated from a customer order upon shipment or at the point of sale.
Credit Agreement On April 30, 2020, the Company’s credit agreement (the “Credit Agreement”) was amended to include an incremental DDTL of $20.5 million (the “Incremental DDTL”) that was available to draw upon before March 31, 2021, and matured on April 29, 2021, for a total credit facility of $150.5 million.
On April 30, 2020, the Credit Agreement was amended to include an incremental DDTL of $20.5 million (the “Incremental DDTL”) that was available to draw upon before March 31, 2021, and matured on April 29, 2021, for a total credit facility of $150.5 million.
For a discussion of fiscal 2020 results compared to fiscal 2019, refer to the Company’s Annual Report on Form 10-K for the year ended January 31, 2021. Overview We are a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and catalog.
For a discussion of fiscal 2021 results compared to fiscal 2020, refer to the Company’s Annual Report on Form 10-K for the year ended January 30, 2022. Overview We are a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and catalog.
They also include marketing expense, which primarily includes television advertising, catalog production, mailing and print advertising costs, as well as all logistics costs associated with shipping product to our customers, consulting and software expenses and professional services fees.
They also include marketing expense, which primarily includes television, digital and social media advertising, catalog production, mailing and print advertising costs, as well as all logistics costs associated with shipping product to our customers, consulting and software expenses and professional services fees.
In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of January 30, 2022, we operated 62 retail stores and three outlet stores.
In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of January 29, 2023, we operated 62 retail stores and three outlet stores.
At the Company’s option, the interest rate applicable to the revolving senior credit facility will be a floating rate equal to: (i) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.25% to 2.00% determined based on the Company’s rent adjusted leverage ratio, or (ii) the base rate plus the applicable rate of 0.25% to 1.00% based on the Company’s rent adjusted leverage ratio.
At the Company’s option, the interest rate applicable to the revolving senior credit facility was a floating rate equal to: (i) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.25% to 2.00% determined based on the Company’s rent adjusted leverage ratio, or (ii) the base rate plus the applicable rate of 0.25% to 1.00% based on 33 Table of Contents the Company’s rent adjusted leverage ratio.
No valuation allowance was recognized for the years ended January 30, 2022 or January 31, 2021. We establish assets and liabilities for uncertain tax positions taken or expected to be taken in income tax returns, using a more-likely-than-not recognition threshold. We recognize penalties and interest related to uncertain tax positions as income tax expense.
No valuation allowance was recognized for the years ended January 30, 2022 or January 31, 2021. We establish assets and liabilities for uncertain tax positions taken or expected to be taken in income tax returns, using a more-likely-than-not recognition threshold.
Net Income Attributable to Controlling Interest Net income attributable to controlling interest was $29.7 million in fiscal 2021 compared to $13.6 million in fiscal 2020, primarily due to the factors discussed above. Non-GAAP Financial Measures See the above section titled “How We Assess the Performance of Our Business,” for our definition of Adjusted EBITDA and Free Cash Flow.
Net Income Attributable to Controlling Interest Net income attributable to controlling interest was $2.3 million in fiscal 2022 compared to $29.7 million in fiscal 2021, due to the factors discussed above. Non-GAAP Financial Measures See the above section titled “How We Assess the Performance of Our Business,” for our definition of Adjusted EBITDA and Free Cash Flow.
Revenue Recognition Revenue for merchandise that is shipped to our customers from our distribution centers and stores is recognized upon shipment following customer payment, which is when the customer obtains control of the product and has the ability to direct the use of the product, including, among other options, the ability to redirect the product to a different shipping destination. 35 Table of Contents Store revenue is recognized at the point of sale.
Revenue Recognition 34 Table of Contents Revenue for merchandise that is shipped to our customers from our fulfillment centers and stores is recognized upon shipment following customer payment, which is when the customer obtains control of the product and has the ability to direct the use of the product, including, among other options, the ability to redirect the product to a different shipping destination.
We use Free Cash Flow to facilitate a comparison of our operating performance on a consistent basis from period-to-period and our ability to generate cash. We define Free Cash Flow as net cash provided by operating activities less purchase of property and equipment and capital contributions towards build-to-suit stores.
We use Free Cash Flow to facilitate a comparison of our operating performance on a consistent basis from period-to-period and our ability to generate cash. We define Free Cash Flow as net cash provided by operating activities less purchase of property and equipment.
The New Credit Agreement matures on May 14, 2026 and provides for borrowings of up to $150.0 million that are available under a revolving senior credit facility, with a $5.0 million sublimit for issuance of standby letters of credit, as well as a $10.0 million sublimit for swing line loans.
The New Credit Agreement originally matured on May 14, 2026 and provided for borrowings of up to $150.0 million that were available under a revolving senior credit facility, with a $5.0 million sublimit for issuance of standby letters of credit, as well as a $10.0 million sublimit for swing line loans.
We believe the accounting estimate related to product returns is a critical accounting estimate because it requires us to make assumptions about future potential returns and changes in demand, both of which are highly uncertain.
We believe the accounting estimate related to product returns is a critical accounting estimate because it requires us to make assumptions about future potential returns, which are highly uncertain.
Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At January 30, 2022 our working capital was $106.5 million, which includes cash of $77.1 million.
Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At January 29, 2023 our working capital was $107.9 million, which includes cash and cash equivalents of $45.5 million.
See also the information under the heading “Free Cash Flow” in the section “How We Assess the Performance of Our Business” for our definition of Free Cash Flow. ‎ 27 Table of Contents Our management’s discussion and analysis includes market sales metrics for our stores, website and catalog sales.
See also the information under the heading “Adjusted EBITDA” in the section “How We Assess the Performance of Our Business” for our definition of Adjusted EBITDA. ‎ 27 Table of Contents Our management’s discussion and analysis includes market sales metrics for our stores, website and catalog sales.
Net Cash (Used in) Provided by Financing Activities Financing activities consist primarily of borrowings and payments related to our revolving line of credit and other long-term debts, as well as payments on finance lease obligations. For fiscal 2021, net cash used in financing activities was $51.4 million, primarily consisting of the full paydown of Duluth’s bank debt.
Net Cash (Used in) Provided by Financing Activities Financing activities consist primarily of borrowings and payments related to our revolving line of credit and other long-term debt, as well as payments on finance lease obligations. For fiscal 2022, net cash used in financing activities was $3.2 million, primarily consisting of payments on finance lease obligations.
As a percentage of net sales, Adjusted EBITDA increased to 11.1% of net sales in fiscal 2021 compared to 8.6% of net sales in fiscal 2020. ‎ 32 Table of Contents Free Cash Flow The following table represents a reconciliation of Net cash provided by operating activities, the most comparable U.S. GAAP financial measure, to free cash flow.
As a percentage of net sales, Adjusted EBITDA decreased to 6.7% of net sales in fiscal 2022 compared to 11.1% of net sales in fiscal 2021. Free Cash Flow The following table represents a reconciliation of Net cash provided by operating activities, the most comparable U.S.
The New Credit Agreement is secured by essentially all Company assets and requires the Company 34 Table of Contents to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the New Credit Agreement As of and for the fiscal year ended January 30, 2022, we were in compliance with all financial and non-financial covenants.
The New Credit Agreement is secured by essentially all Company assets and requires the Company to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the New Credit Agreement.
The increase was primarily driven by higher net income and lower inventory levels associated with continued in-bound receipt delays. Liquidity and Capital Resources General Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity.
The decrease was primarily driven by lower net income, higher inventory levels and higher purchases of property and equipment. Liquidity and Capital Resources General Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity.
Fiscal Year Ended January 30, 2022 January 31, 2021 (in thousands) Net cash provided by operating activities $ 91,981 $ 50,751 Net cash used in investing activities (10,150) (12,132) Net cash (used in) provided by financing activities (51,364) 6,362 Increase in cash and cash equivalents $ 30,467 $ 44,981 ‎ 33 Table of Contents Net Cash Provided by Operating Activities Operating activities consist primarily of net income adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in assets and liabilities.
Fiscal Year Ended January 29, 2023 January 30, 2022 (in thousands) Net cash (used in) provided by operating activities $ (5,628) $ 91,981 Net cash used in investing activities (22,641) (10,150) Net cash used in financing activities (3,234) (51,364) (Decrease) Increase in cash and cash equivalents $ (31,503) $ 30,467 ‎ 32 Table of Contents Net Cash Provided by Operating Activities Operating activities consist primarily of net income adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in assets and liabilities.
We spent $10.4 million in fiscal 2021 on capital expenditures, as well as, $4.7 million of additional investments in software hosting implementation costs, which are included in Prepaid expenses & other current assets on the Company’s Consolidated Balance Sheets.
We spent $31.5 million in fiscal 2022 on capital expenditures, inclusive of investments in software hosting implementation costs, which are included in Prepaid expenses & other current assets on the Company’s Consolidated Balance Sheets.
For fiscal 2020, net cash provided by operating activities was $50.8 million, which primarily consisted of net income of $13.4 million, non-cash depreciation and amortization of $28.5 million and amortization of stock-based compensation of $1.6 million and cash provided by operating assets and liabilities of $7.2 million.
For fiscal 2022, net cash used in operating activities was $5.6 million, which primarily consisted of net income of $2.2 million, non-cash depreciation and amortization of $30.8 million, amortization of stock-based compensation of $2.7 million, which was offset by cash used in operating assets and liabilities of $41.4 million.
For fiscal 2021, net cash used in investing activities was $10.2 million, primarily driven by capital expenditures of $10.4 million for a new distribution center and one new retail store, as well as investments in information technology.
For fiscal 2021, net cash used in investing activities was $10.2 million, primarily driven by purchases of property and equipment of $10.4 million for the Salt Lake City fulfillment center and one new retail store, as well as investments in information technology.
Fiscal Year Ended January 30, 2022 January 31, 2021 (in thousands) Net income $ 29,550 $ 13,380 Depreciation and amortization 29,225 28,520 Amortization of internal-use software hosting ‎ subscription implementation costs 1,797 229 Interest expense 4,717 6,263 Income tax expense 9,887 4,637 EBITDA (non-GAAP) 75,176 53,029 Stock based compensation 2,198 1,629 Adjusted EBITDA (non-GAAP) $ 77,374 $ 54,658 As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $22.7 million, or 41.6%, to $77.4 million in fiscal 2021 compared to $54.7 million in fiscal 2020.
Fiscal Year Ended January 29, 2023 January 30, 2022 (in thousands) Net income $ 2,246 $ 29,550 Depreciation and amortization 30,810 29,225 Amortization of internal-use software hosting ‎ subscription implementation costs 3,392 1,797 Interest expense 3,653 4,717 Income tax expense 708 9,887 EBITDA (non-GAAP) 40,809 75,176 Stock based compensation 2,711 2,198 Adjusted EBITDA (non-GAAP) $ 43,520 $ 77,374 As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $33.9 million, or 43.8%, to $43.5 million in fiscal 2022 compared to $77.4 million in fiscal 2021.
While we expect these expenses to increase as we continue to increase brand awareness and invest in infrastructure to support our growing business, we believe these expenses will decrease as a percentage of sales over time.
While we expect these expenses to increase as we continue to increase brand awareness and invest in infrastructure to support our business, we believe these expenses will decrease as a percentage of sales over time. Our shipping and handling expenses typically increase during the second half of the year due to additional surcharges during our peak selling season.
The Company performs its retail store physical inventory counts in July and the difference between actual and estimated shrinkage, recorded in Cost of goods sold, may cause fluctuations, particularly in second fiscal quarter results. Income Taxes We account for income taxes and the related accounts using the liability method in accordance with ASC Topic 740, Income Taxes (“ASC 740”).
The Company performs its retail store physical inventory counts in July and the difference between actual and estimated shrinkage, recorded in Cost of goods sold, may cause fluctuations, particularly in second fiscal quarter results.
See Note 9 “Income Taxes,” of Notes to Consolidated Financial Statements included in this Annual Report on Form 10 - K. 36 Table of Contents ‎ 37 Table of Contents
We recognize penalties and interest related to uncertain tax positions as income tax expense. 35 Table of Contents See Note 9 “Income Taxes,” of Notes to Consolidated Financial Statements included in this Annual Report on Form 10 - K. ‎ 36 Table of Contents
We expect to spend approximately $57.0 million in fiscal 2022 on capital expenditures, primarily due to investments in logistics optimization, including the introduction of automated fulfillment centers. Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year.
We expect to spend approximately $55.0 million in fiscal 2023 on capital expenditures, of which approximately $42.1 million will be related to continued logistics optimization from introducing the new automated fulfillment center in Adairsville, Georgia. Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year.
Under this method, we accrue income taxes payable or refundable and recognize deferred tax assets and liabilities based on differences between U.S. GAAP and tax bases of assets and liabilities.
Income Taxes We account for income taxes and the related accounts using the asset and liability method in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Under this method, we accrue income taxes payable or refundable and recognize deferred tax assets and liabilities based on differences between U.S. GAAP and tax bases of assets and liabilities.
Selling, general and administrative expenses as a percentage of net sales is usually higher in lower-volume quarters and lower in higher-volume quarters because a portion of the costs are relatively fixed. Our historical sales growth has been accompanied by increased selling, general and administrative expenses. The most significant components of these increases are advertising, rent/occupancy and payroll costs.
Selling, general and administrative expenses as a percentage of net sales is usually higher in lower-volume quarters and lower in higher-volume quarters because a portion of the costs are relatively fixed.
Contractual Obligations In connection with our investing and operating activities, we have entered into certain contractual obligations. See Note 3 “Leases” of Notes to Consolidated Financial Statements for additional discussion of these obligations. Off-Balance Sheet Arrangements We are not a party to any significant off-balance sheet arrangements.
As of and for the fiscal year ended January 29, 2023, we were in compliance with all financial and non-financial covenants. Contractual Obligations In connection with our investing and operating activities, we have entered into certain contractual obligations. See Note 3 “Leases” of Notes to Consolidated Financial Statements for additional discussion of these obligations.
Fiscal Year Ended January 30, 2022 January 31, 2021 (in thousands) Net cash provided by operating activities $ 91,981 $ 50,751 Purchases of property and equipment (10,352) (11,743) Capital contributions towards build-to-suit stores — (520) Free Cash Flow (non-GAAP) $ 81,629 $ 38,488 Free cash flow increased $43.1 million to $81.6 million in fiscal 2021 compared to $38.5 million in fiscal 2020.
GAAP financial measure, to free cash flow. 31 Table of Contents Fiscal Year Ended January 29, 2023 January 30, 2022 (in thousands) Net cash (used in) provided by operating activities $ (5,628) $ 91,981 Purchases of property and equipment (22,833) (10,352) Free Cash Flow (non-GAAP) $ (28,461) $ 81,629 Free cash flow decreased $110.1 million to ($28.5) million in fiscal 2022 compared to $81.6 million in fiscal 2021.
Net Cash Used in Investing Activities Investing activities consist primarily of capital expenditures for growth related to a new distribution center and information technology.
Net Cash Used in Investing Activities Investing activities consist primarily of capital expenditures related to a new fulfillment center and information technology. For fiscal 2022, net cash used in investing activities was $22.6 million, primarily driven by purchases of property and equipment of $22.8 million, primarily related to the Adairsville fulfillment center.
A summary of our financial results is as follows: Net sales in fiscal 2021 increased by 9.4% over the prior year to $698.6 million; Net income in fiscal 2021 increased 118.8% compared to the prior year to $29.7 million; Adjusted EBITDA in fiscal 2021 increased 41.6% over the prior year to $77.4 million; and Cash flow from operations in fiscal 2021 increased to $92.0 million and Free Cash Flow increased $43.1 million over the prior year to $81.6 million.
A summary of our financial results is as follows: Net sales in fiscal 2022 decreased by 6.5% over the prior year to $653.3 million; Net income in fiscal 2022 was $2.2 million compared to prior year net income of $29.6 million; and Adjusted EBITDA in fiscal 2022 decreased 43.8% over the prior year to $43.5 million.
Income Taxes Income tax expense was $9.9 million in fiscal 2021 compared to $4.6 million in fiscal 2020. Our effective tax rate related to controlling interest was 25.0% and 25.5% in fiscal 2021 and fiscal 2020, respectively.
The decrease in interest expense was primarily attributable to the larger amount of long-term debt outstanding in fiscal 2021 compared to fiscal 2022. Income Taxes Income tax expense was $0.7 million in fiscal 2022 compared to $9.9 million in fiscal 2021. Our effective tax rate related to controlling interest was 23.5% in fiscal 2022 compared to 25.0% in fiscal 2021.
As a percentage of net sales, gross margin increased to 54.0% of net sales in fiscal 2021 compared to 51.9% of net sales in fiscal 2020.
Gross Profit Gross profit decreased $33.9 million, or 9.0%, to $343.4 million in fiscal 2022 compared to $377.3 million in fiscal 2021. As a percentage of net sales, gross margin decreased to 52.6% of net sales in fiscal 2022 compared to 54.0% of net sales in fiscal 2021.
Selling, general and administrative expenses as a percentage of net sales decreased in fiscal 2021 to 47.7% of net sales, compared to 48.1% of net sales for fiscal 2020.
Selling, general and administrative expenses as a percentage of net sales increased in fiscal 2022 to 51.6% of net sales, compared to 47.7% of net sales for fiscal 2021. The negative leverage was primarily due to lower net sales in the current period compared to the prior period.
We continue to actively evaluate all federal, state and local regulations to ensure compliance with store operations. ‎ 28 Table of Contents How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of financial and operating measures that affect our operating results.
Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand. ‎ 28 Table of Contents How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of financial and operating measures that affect our operating results.
The cash provided by operating assets and liabilities of $7.2 million primarily consisted of a $7.7 million increase in accrued expenses and deferred rent obligations due to $3.5 million of deferred payroll taxes afforded by the CARES Act, a $4.2 million increase in income tax payable, a $2.6 million decrease in prepaid expenses, offset by a $1.2 million increase in inventory, a $4.1 million increase in hosting software implementation costs and a $1.5 million decrease in trade accounts payable.
The cash used in operating assets and liabilities of $41.4 million primarily consisted of a $32.3 million increase in inventory, primarily due to the pull forward of spring receipts, and a $11.8 million decrease in accrued expenses, partially offset by a $12.7 million increase in trade accounts payable.
Net sales in non-store markets decreased $8.2 million, or 3.8%, to $206.2 million in fiscal 2021 compared to $214.4 million in fiscal 2020. The decrease was driven by extended free shipping and higher promotions in the prior year. Gross Profit Gross profit increased $45.8 million, or 13.8%, to $377.3 million in fiscal 2021 compared to $331.5 million in fiscal 2020.
Store market net sales decreased $29.8 million, or 6.1%, to $456.5 million in fiscal 2022 compared to $486.3 million in fiscal 2021. Net sales in non-store markets decreased $14.6 million, or 7.1%, to $191.6 million in fiscal 2022 compared to $206.2 million in fiscal 2021.
Interest Expense Interest expense decreased $1.6 million to $4.7 million in fiscal 2021 compared to $6.3 million in fiscal 2020.
The increase in selling, general and administrative expense was primarily caused by increased depreciation expense from continued investments in technology and throughout our fulfillment network. Interest Expense Interest expense decreased $1.0 million to $3.7 million in fiscal 2022 compared to $4.7 million in fiscal 2021.
Removed
See also the information under the heading “Adjusted EBITDA” in the section “How We Assess the Performance of Our Business” for our definition of Adjusted EBITDA. See “Free Cash Flow” section for a reconciliation of Net cash provided by operating activities to Free Cash Flow.
Added
Economic Conditions The United States economy has experienced high inflation during 2021 and 2022 and there are expectations in the market that inflation may remain at elevated levels. The ultimate impact of higher inflationary periods on our operational and financial performance still depends on future developments outside of our control.
Removed
COVID-19 Throughout fiscal 2021, the COVID-19 pandemic impacted our business results and operations. The disruption in the global supply chain due to transportation delays, container shortages and port congestion interrupted the flow of our inventory and added incremental expedited shipping costs.
Added
The decrease in gross margin rate was primarily due to a lower mix of full price sales, coupled with deeper discounts as a response to the heavily promotional industry environment, particularly during the back half of fiscal 2022. ‎ 30 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses increased $4.0 million, or 1.2%, to $337.2 million in fiscal 2022 compared to $333.2 million in fiscal 2021.
Removed
Despite these disruptions caused by the pandemic, we achieved record revenues for fiscal 2021, which increased 9.4% to $698.6 million, compared to fiscal 2020, with gross margin expansion creating net income of $29.7 million, a 118.8% increase over fiscal 2020.
Added
For fiscal 2021, net cash used in financing activities was $51.4 million, primarily consisting of the full paydown of Duluth’s bank debt.
Removed
Our direct business coupled with retail reemerging in fiscal 2021 fueled our growth through the year as we continued to navigate the pandemic.
Added
Credit Agreement On May 17, 2018, the Company entered into a credit agreement (the “Credit Agreement”) which provided for borrowing availability of up to $80.0 million in revolving credit and associated swing line (the “Revolver”) and borrowing availability of up to $50.0 million in a delayed draw term loan (“DDTL”), for a total credit facility of $130.0 million.
Removed
The ultimate impact of COVID-19 on our operational and financial performance still depends on future developments outside of our control, including the duration and spread of the pandemic and related actions taken by federal, state and local government officials, and international governments to prevent disease spread, and the availability, safety and efficacy of a vaccine.
Added
On July 8, 2022, the Company entered into the First Amendment to the New Credit Agreement (the “First Amendment”), which was treated as a modification for accounting purposes.
Removed
Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand.
Added
The First Amendment amends the New Credit Agreement in order to (i) increase the revolving commitment from $150.0 million to $200.0 million; (ii) extend the maturity date from May 14, 2026 to July 8, 2027; (iii) amend the pricing index to replace BSBY with the Term Secured Overnight Financing Rate; and (iv) to reduce the commitment fee in some instances.
Removed
Our shipping and handling expenses increased during the second half of the year because of additional surcharges due to the strained distribution network during our peak selling season.
Added
Off-Balance Sheet Arrangements We are not a party to any significant off-balance sheet arrangements.
Removed
The increase was due to an increase in store market sales partially offset by a decrease in non-store market sales. Store market net sales increased $67.1 million, or 16.0%, to $486.2 million in fiscal 2021 compared to $419.1 million in fiscal 2020.
Removed
The year-over-year sales difference was primarily driven by temporary store closures beginning on March 20, 2020 until they re-opened beginning in the first week of May through the third week of June, coupled with higher conversion as compared to the prior year.
Removed
The increase in gross margin rate was driven by a higher mix of full price sales due to lower clearance inventory and fewer promotional events, as well as improved gross margin rates on both full price and clearance items.
Removed
The year-over-year increase was partially offset by expenses associated with increased expedited freight costs in order to combat disruptions within the supply chain. ‎ 31 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses increased $25.9 million, or 8.4%, to $333.2 million in fiscal 2021 compared to $307.3 million in fiscal 2020.
Removed
The positive leverage was primarily due to shifting to a more efficient digital marketing approach, as well as lower shipping expenses driven in part by a shift in channel mix resulting from higher store traffic during the current year.
Removed
The increase in selling, general and administrative expense was primarily caused by increased wages due to Company retail locations being open for the full fiscal year, wage increases at both the stores and distribution centers, new headcount and merit increases, as well as increased depreciation expense associated with investments in technology.
Removed
The decrease in interest expense was primarily attributable the full pay-down of Duluth Trading’s bank debt in fiscal 2021 compared to increased borrowings on the revolving line of credit and delayed draw term loan during fiscal 2020 due to uncertainties resulting from the COVID-19 pandemic.
Removed
For fiscal 2020, net cash used in investing activities was $12.1 million, primarily driven by capital expenditures of $11.7 million, due mainly to the opening of 4 new stores, as well as investments in information technology.
Removed
For fiscal 2020, net cash provided by financing activities was $6.4 million, primarily consisting of proceeds of $28.3 million, net from our term loan and payments of $19.3 million, net from our revolving line of credit to fund working capital.

Other DLTH 10-K year-over-year comparisons