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What changed in DULUTH HOLDINGS INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DULUTH HOLDINGS INC.'s 2023 and 2024 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 2024 report.

+184 added−182 removedSource: 10-K (2024-03-22) vs 10-K (2023-03-17)

Top changes in DULUTH HOLDINGS INC.'s 2024 10-K

184 paragraphs added · 182 removed · 155 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

86 edited+19 added−11 removed176 unchanged
Biggest changeThe 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.
Biggest changeRegulation 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. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
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 .
These advertisements feature both our 5 Table of Contents 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. Social Media .
The market price of our Class B common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: actual or anticipated fluctuations in our results of operations, particularly in our growth rates and margins; the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments; changes in operating performance and stock market valuations of other technology or retail companies generally, or those in our industry in particular; price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; changes in our board of directors or management; sales of large blocks of our Class B common stock, including sales by our executive officers, directors and significant shareholders; lawsuits threatened or filed against us; changes in laws or regulations applicable to our business; changes in our capital structure, such as future issuances of debt or equity securities; short sales, hedging and other derivative transactions involving our capital stock; general economic conditions in the United States and abroad; and other events or factors, including those resulting from pandemics, war, incidents of terrorism or responses to these events.
The market price of our Class B common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: actual or anticipated fluctuations in our results of operations, particularly in our growth rates and margins; the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments; changes in operating performance and stock market valuations of other retail companies generally, or those in our industry in particular; price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; changes in our board of directors or management; sales of large blocks of our Class B common stock, including sales by our executive officers, directors and significant shareholders; lawsuits threatened or filed against us; changes in laws or regulations applicable to our business; changes in our capital structure, such as future issuances of debt or equity securities; short sales, hedging and other derivative transactions involving our capital stock; general economic conditions in the United States and abroad; and other events or factors, including those resulting from pandemics, war, incidents of terrorism or responses to these events.
The Company formulated the “Big Dam Blueprint”, which management believes will unlock the Company’s full potential for long-term, sustainable grow growth. Begin with a digital-first mindset that integrates technology into all areas of the business, fundamentally changing how we operate and deliver value to customers. Intensify efforts to optimize Duluth Trading’s owned retail channels by increasing focus and investments in our direct channel as our primary growth vehicle.
The Company formulated the “Big Dam Blueprint”, which management believes will unlock the Company’s full potential for long-term, sustainable growth. Begin with a digital-first mindset that integrates technology into all areas of the business, fundamentally changing how we operate and deliver value to customers. Intensify efforts to optimize Duluth Trading’s owned retail channels by increasing focus and investments in our direct channel as our primary growth vehicle.
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.
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 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.
There are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, interest rates, consumer credit availability, unemployment, stock market performance, extreme weather conditions, energy prices and tax rates in the national, regional and local markets where we sell our products.
There are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, interest rates, inflation, consumer credit availability, unemployment, stock market performance, extreme weather conditions, energy prices and tax rates in the national, regional and local markets where we sell our products.
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.
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, Georgia and Utah.
Our sourcing strategy focuses on identifying and employing vendors that provide quality materials and fine craftsmanship that our customers expect of our brand. To ensure that our high standards of quality and timely delivery of merchandise are met, we work closely with our third-party agent partners.
Our sourcing strategy focuses on identifying and employing vendors that provide quality materials and fine craftsmanship that our customers expect of our brand. To ensure that our high standards of quality and timely delivery of merchandise are met, we work closely with our third-party partners.
We employ a variety of digital and online advertising strategies. These efforts include display advertising, digital video advertising, search engine marketing and optimization and targeted email, which we send to customers to introduce new products and offer promotions on select merchandise. Television .
We employ a variety of digital and online advertising strategies. These efforts include display advertising, digital video advertising, search engine marketing and optimization and targeted email, which we send to customers to introduce new products and offer promotions on select merchandise. Television and Radio .
Due to the rapid pace of change in the apparel, footwear and accessories industry, the length of time it takes to obtain patents and the expense and uncertainty of obtaining patent protection, we have not taken steps to obtain patent protection for our innovative product designs.
Due to the rapid pace of change in the apparel, footwear and accessories industry, the length of time it takes to obtain patents and the expense and uncertainty of obtaining patent protection, we have not taken steps to obtain patent protection for many of our innovative product designs.
Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales, increase our costs, diminish our growth prospects, and damage our brand, which could negatively impact our business, financial condition and results of operations.
Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales, increase our costs, diminish our growth prospects, and damage our brand and reputation, which could negatively impact our business, financial condition and results of operations.
Mr. Schlecht controls more than 50% of the total voting power of our common stock, and we are considered a controlled company under the NASDAQ corporate governance listing standards.
Schlecht controls more than 50% of the total voting power of our common stock, and we are considered a controlled company under the NASDAQ corporate governance listing standards.
Many of our strategic initiatives require that we hire and/or develop associates with appropriate experience. Attracting and retaining a sufficient number of qualified employees to meet our staffing needs may be difficult, since the competition for these types of personnel is intense.
Many of our strategic initiatives require that we hire and/or develop associates with appropriate experience. Attracting and retaining a sufficient number of qualified employees to meet our staffing needs may be difficult, because the competition for these types of personnel is intense.
As a controlled company, certain exemptions under the NASDAQ listing standards exempt us from the obligation to comply with certain NASDAQ corporate governance requirements, including the requirements: that a majority of our board of directors consist of independent directors, as defined under the rules of NASDAQ; that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
As a controlled company, certain exemptions under the NASDAQ listing standards exempt us from the obligation to comply with certain NASDAQ corporate governance requirements, including the requirements: that a majority of our board of directors consist of independent directors, as defined under the rules of NASDAQ; 19 Table of Contents that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
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.
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.
Any security incident or data breach could severely damage our reputation and our relationships with customers, business partners and employees, cause us to incur significant costs and expenses to investigate, remediate and notify affected individuals, and expose us to an increased risk of litigation, regulatory enforcement, fines and penalties, and other losses and 14 Table of Contents liabilities.
Any security incident or data breach could severely damage our reputation and our relationships with customers, business partners and employees, cause us to incur significant costs and expenses to investigate, remediate and notify affected individuals, and expose us to an increased risk of litigation, regulatory enforcement, fines and penalties, and other losses and liabilities.
Severe weather events may impact our ability to supply our 17 Table of Contents retail stores, deliver orders to customers on schedule and staff our retail stores, fulfillment centers and call center, which could have an adverse effect on our business and results of operations. Our product designs are not protected by substantial intellectual property rights.
Severe weather events may impact our ability to supply our retail stores, deliver orders to customers on schedule and staff our retail stores, fulfillment centers and call center, which could have an adverse effect on our business and results of operations. Our product designs are not protected by substantial intellectual property rights.
Legal, Tax, Compliance, Reputable and Other Risks We may be subject to increased labor costs due to external factors, including changes in laws and regulations, and we may be subject to unionization, work stoppages or slowdowns.
Legal, Tax, Compliance, Reputation and Other Risks We may be subject to increased labor costs due to external factors, including changes in laws and regulations, and we may be subject to unionization, work stoppages or slowdowns.
The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us and decrease our future sales, which could have an impact on our business, financial condition and results of operations.
The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional 18 Table of Contents administrative burdens for us and decrease our future sales, which could have an impact on our business, financial condition and results of operations.
We continually evaluate and upgrade our information systems, security measures, and practices to combat the ever-evolving cyber risks and to comply with our legal and regulatory obligations, and we provide cybersecurity awareness training around phishing, social engineering, and other cyber risks to our employees, in an effort to elevate our cybersecurity posture and give our workforce the skills to both avoid and report cyber threats.
We continually evaluate and upgrade our information systems, security measures, and practices to combat the ever-evolving cyber risks and to comply with our legal and regulatory obligations, and we provide cybersecurity awareness training around phishing, social engineering, and other cyber 14 Table of Contents risks to our employees, in an effort to elevate our cybersecurity posture and give our workforce the skills to both avoid and report cyber threats.
Our paid advertising includes search engine marketing, display advertising and paid social media. Our non-paid advertising efforts include search engine optimization, non-paid social media and email. We obtain a significant amount of traffic via search engines and, therefore, rely on search engines such as Google, Yahoo! and Bing.
We also use other paid and non-paid advertising. Our paid advertising includes search engine marketing, display advertising and paid social media. Our non-paid advertising efforts include search engine optimization, non-paid social media and email. We obtain a significant amount of traffic via search engines and, therefore, rely on search engines such as Google, Yahoo! and Bing.
Our Products We offer a comprehensive line of innovative, durable and functional casual wear, workwear and accessories for both men and women. Our product assortment includes shirts, pants, underwear, outerwear, footwear, accessories and hard goods.
Our Products We offer a comprehensive line of innovative, durable and functional workwear, casual wear, outdoor apparel and accessories for both men and women. Our product assortment includes shirts, pants, shorts, underwear, outerwear, footwear, accessories and hard goods.
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.
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.
Schlecht, who is our only Class A shareholder, beneficially owns shares representing more than 50% of the voting power of our outstanding capital stock. As a result of our dual class ownership structure, Mr.
Schlecht, who through his voting trust is our only Class A shareholder, beneficially owns shares representing more than 50% of the voting power of our outstanding capital stock. As a result of our dual class ownership structure, Mr.
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.
We seek to ensure the consistent product quality by training 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, Salt Lake City, Utah and Adairsville, Georgia.
Furthermore, these factors could cause our customers to no longer 9 Table of Contents feel a personal connection with the Duluth Trading brand, which could result in the loss of customers and materially adversely affect our business, results of operations and growth prospects. We may face risks and new challenges associated with our geographic expansion.
Furthermore, these factors could cause our customers to no longer 9 Table of Contents feel a personal connection with the Duluth Trading brand, which could result in the loss of customers and materially adversely affect our business, results of operations and growth prospects. We may face risks and challenges if we pursue further geographic expansion.
If our business does not generate sufficient cash flow from operations to fund these activities and sufficient funds are not otherwise available from our existing revolving credit facility or future credit facilities, we may need additional equity or debt financing.
If our business does not generate sufficient cash flow from operations to fund these activities and 16 Table of Contents sufficient funds are not otherwise available from our existing revolving credit facility or future credit facilities, we may need additional equity or debt financing.
In addition, if we experience a shortage of a popular item, we may be required to arrange for additional quantities of the item, if available, to be delivered through airfreight, which is significantly more expensive than standard shipping by sea.
In addition, as has happened in the past, if we experience a shortage of a popular item, we may be required to arrange for additional quantities of the item, if available, to be delivered through airfreight, which is significantly more expensive than standard shipping by sea.
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.
We have built strong, long-term relationships with our vendors. In fiscal 2023, 59% of our purchases came from our largest supplier, an agent partner in Hong Kong who manages multiple factories across Asia and Latin America, including Bangladesh, Cambodia, China, Egypt, Honduras, Indonesia, Mexico, Pakistan, and Vietnam.
Our expansion into new geographic markets could result in increased competitive, merchandising, distribution and other challenges.
Our expansion into new geographic markets could result in increased competition and merchandising, distribution and other challenges.
Competitors have attempted to copy our product designs in the past, and we expect that if we are able to raise our national profile, our products may be subject to greater imitation by existing and new competitors.
Competitors have attempted to copy our product designs in the past, and we expect that if we are able to raise our national profile, our products may be subject to greater imitation by existing and new 17 Table of Contents competitors.
Patent and Trademark Office, trademark offices in other jurisdictions, or exist under common law in the United States and other jurisdictions. The “Duluth Trading Co” trade name and trademark is used both in the United States and internationally and is material to our business.
Patent and Trademark Office, trademark offices in other jurisdictions, 6 Table of Contents or exist under common law in the United States and other jurisdictions. The “Duluth Trading Co” trade name and trademark is used both in the United States and internationally and is material to our business.
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.
Create unique brand positions, across men’s and women’s, for Duluth and AKHG, as well as for our important Buck Naked franchise to address customer needs for various occasions including work, outdoor recreation, casual lifestyle, and first layer.
If we fail to comply with these rules or requirements, or if our systems containing payment information are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from our customers and process electronic funds transfers or facilitate other types of payments, and our business and operating results could be adversely affected. 16 Table of Contents We depend on cash generated from our operations to support our growth, which could strain our growth.
If we fail to comply with these rules or requirements, or if our systems containing payment information are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from our customers and process electronic funds transfers or facilitate other types of payments, and our business and operating results could be adversely affected.
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 rights to some of these trademarks may be limited to select markets. We also own domain names, including “duluthtrading.com.” Employees As of January 28, 2024, we employed 950 full-time and 1,373 part-time and flexible part-time employees, 1,054 of which were employed at our retail stores. The number of employees, particularly part-time employees, fluctuates depending upon seasonal needs.
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.
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.
Invest in the evolution of the Duluth Trading platform to enable the integration of new brands, expand our offerings and broaden our customer base. Carefully test and learn to unlock long-term growth potential.
Invest in the evolution of the Duluth Trading platform to enable the integration of new brands and channels, expand our product offering and broaden our customer base. Prioritize test and learn to unlock long-term growth potential.
We are conducting strategic research that will inform decisions on future stores regarding new locations and market share potential, size and layout. Evolve the Company’s multi-brand platform as a new pathway to grow the business.
We are conducting strategic research that will inform decisions on future stores regarding new locations and market share potential, size, format, and assortment. Evolve the Company’s platform to grow into a multi-brand and multi-channel business.
Explore new opportunities to engage current and potential customers through products, services and touchpoints that they expect and value. Increase and, in some areas, accelerate investments to future proof the business.
Explore new opportunities to engage current and potential customers through products, services and touchpoints that they expect and value. Future proof the business through investments in capabilities and infrastructure.
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 ® .
Trademarks that are important in identifying and distinguishing our products and services are AKHG ® , Alaskan Hardgear ® Armachillo ® , Ballroom ® , Buck Naked ® , Bullpen ® , Cab Commander ® , Crouch Gusset ® , Dang Soft ® , Dry on the Fly ® , Duluth Trading Co ® , DuluthFlex ® , Fire Hose ® , Flexpedition ® , Longtail T ® , NoGA ® ,No Polo Shirt ® , No Yank ® , Spit & Polish ® , and Wild Boar ® .
Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could harm our operations and financial results.
Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could harm our operations and financial results. If we fail to achieve our growth strategy, our business, financial condition and operating results could be harmed.
Failure to procure suppliers of products from our third-party suppliers and deliver merchandise to customers and our retail stores in a timely, effective and economically viable manner could damage our reputation and adversely affect our business.
Failure to procure suppliers of products from our third-party suppliers and deliver merchandise to customers and our retail stores in a timely, effective and economically viable manner could damage our reputation and adversely affect our business. In addition, any increase in distribution costs and expenses could adversely affect our future financial performance.
If we are unable to acquire new customers, our growth prospects may be materially adversely affected. If we cannot compete effectively in the apparel, footwear and accessories industry, our business and results of operations may be adversely affected. The apparel, footwear and accessories industry is highly competitive.
If we cannot compete effectively in the apparel, footwear and accessories industry, our business and results of operations may be adversely affected. The apparel, footwear and accessories industry is highly competitive.
To support continued growth, we must effectively integrate, develop and motivate a large number of employees. Failure to improve and expand our infrastructure of employees may have a material adverse effect on our business, financial condition and operating results. Additionally, the growth of our business places significant demands on our management and other employees.
Failure to improve and expand our infrastructure of employees may have a material adverse effect on our business, financial condition and operating results. Additionally, the growth strategy of our business places significant demands on our management and other employees.
It is possible that some taxing jurisdictions may attempt to assess additional taxes and penalties on us or assert either an error in our calculation, a change in the application of law or an interpretation of the law that differs from our own, which may, if successful, adversely affect our business and results of operations. 18 Table of Contents An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies.
It is possible that some taxing jurisdictions may attempt to assess additional taxes and penalties on us or assert either an error in our calculation, a change in the application of law or an interpretation of the law that differs from our own, which may, if successful, adversely affect our business and results of operations.
An economic recession or a decline in consumer spending could have a material adverse effect on our business and results of operations. The apparel, footwear and accessories industry has historically been subject to cyclical variations and is particularly affected by adverse trends in the general economy. The success of our business depends on consumer spending.
The apparel, footwear and accessories industry has historically been subject to cyclical variations and is particularly affected by adverse trends in the general economy. The success of our business depends on consumer spending.
For example, our national television advertising campaigns are expensive and may not result in the cost-effective acquisition of customers. Furthermore, as our brand becomes more widely known in the market, future marketing campaigns may not result in the acquisition of new customers at the same rate as past campaigns. We also use other paid and non-paid advertising.
For example, our national television advertising campaigns are expensive and may not result in the cost-effective acquisition of customers. Furthermore, as our brand has become more widely known in the market, our marketing campaigns have not resulted in acquisition of new customers at the same rate as past campaigns, and this trend may continue in the future.
We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive merchandise from suppliers or deliver products to customers in a timely and cost-effective manner.
We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive merchandise from suppliers or deliver products to customers in a timely and cost-effective manner. 12 Table of Contents Competitive pricing pressures with respect to shipping our products to our customers may harm our business and results of operations.
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.
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.
We advertise on cable and broadcast television networks to build brand awareness for both men’s and women’s products and to reach a large, national audience.
We advertise in online video channels, streaming television, on cable and broadcast television networks, as well as through streaming and on-demand audio channels to build brand awareness for both men’s and women’s products and to reach a large, national audience.
We use a variety of factors in our forecasting and planning processes, including historical results, recent history and assessments of economic and market conditions, among other things.
We may be unable to accurately forecast our operating results and growth rate. We may not be able to accurately forecast our operating results and growth rate. We use a variety of factors in our forecasting and planning processes, including historical results, recent history and assessments of economic and market conditions, among other things.
We have an engaged social media community, which allows us to personally connect with our customers online, and we believe further raises brand awareness. We maintain a social media presence on Facebook, Instagram, Pinterest, YouTube and Twitter. Catalogs . Our catalogs are an important part of our heritage and represent a tangible vehicle for our authentic and humorous storytelling.
We have an engaged social media community, which allows us to personally connect with our customers online, and we believe further raises brand awareness. We maintain a social media presence on Facebook, Instagram, Pinterest, YouTube and X (formerly known as Twitter). Catalogs .
As a result, it may be difficult to respond to changes in customer demand. If we do not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, inventory levels will not be appropriate and our results of operations could be adversely affected.
If we do not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, inventory levels will not be appropriate and our results of operations could be adversely affected. We expect a disproportionate amount of our net sales to occur during our fourth quarter.
Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, actions by our competitors with respect to compensation levels and changing demographics. Currently none of our employees are represented by a union, but our employees have the right to under the National Labor Relations Act.
Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, actions by our competitors with respect to compensation levels and changing demographics.
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.
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 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.
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.
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.
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. As usage of these channels by our customer base has not grown 10 Table of Contents as expected, we have suffered a decline in customer growth and net sales.
In addition, we experience seasonal trends in our business, and this variability may make it difficult to predict net sales and could result in significant fluctuations in our operating results from period to period.
A softening of demand, whether caused by changes in customer preferences or a weakening of the economy or other factors, may result in decreased net sales. In addition, we experience seasonal trends in our business, and this variability may make it difficult to predict net sales and could result in significant fluctuations in our operating results from period to period.
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.
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.
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.
ITEM 1. BUSINESS Unless the context indicates otherwise, the terms the “Company,” “Duluth,” “Duluth Trading,” “Duluth Holdings,” “Duluth Trading Company,” “Duluth Trading Co.,” “we,” “our” or “us” are used to refer to Duluth Holdings Inc.
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.
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 and website.
The holder of our Class A common stock will also be entitled to a separate vote in the event we seek to amend our articles of incorporation in a manner that alters or changes the powers, preferences or special rights of the Class A common stock in a manner that affects its holder adversely. 19 Table of Contents We are a controlled company within the meaning of the NASDAQ rules, and as a result, we rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
The holder of our Class A common stock will also be entitled to a separate vote in the event we seek to amend our articles of incorporation in a manner that alters or changes the powers, preferences or special rights of the Class A common stock in a manner that affects its holder adversely.
If such claims are successful, our business and results of operations could be materially adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and materially adversely affect our business, financial condition and operating results.
If such claims are successful, our business and results of operations could be materially adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and materially adversely affect our business, financial condition and operating results. 21 Table of Contents Anti-takeover provisions in our charter documents and under Wisconsin law could make an acquisition of our company more difficult, limit attempts by our shareholders to replace or remove our current management and limit the market price of our Class B common stock.
We cannot assure you that the net profit from new customers we acquire will ultimately exceed the cost of acquiring those customers. If we fail to deliver an outstanding customer experience, or if consumers do not perceive the products we offer to be manufactured with high quality craftsmanship, we may not be able to acquire new customers.
If we fail to deliver an outstanding customer experience, or if consumers do not perceive the products we offer to be manufactured with high quality craftsmanship, we may not be able to acquire new customers. If we are unable to acquire new customers, our growth prospects may be materially adversely affected.
We primarily rely on cash flow generated from our direct-to-consumer and retail store sales and borrowings under our credit facility to fund our current operations and our growth initiatives. As we expand our business, we will need significant amounts of cash to pay our existing and future lease obligations, purchase inventory, pay personnel and invest in our infrastructure and facilities.
As we expand our business, we will need significant amounts of cash to pay our existing and future lease obligations, purchase inventory, pay personnel and invest in our infrastructure and facilities.
In response to Wayfair, or otherwise, states or local governments have adopted, or begun to enforce, laws requiring us to calculate, collect and remit taxes on sales in their jurisdictions.
Wayfair, Inc. et al , or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments have adopted, or begun to enforce, laws requiring us to calculate, collect and remit taxes on sales in their jurisdictions.
Higher direct-to-consumer net sales has resulted and may continue to result in additional peak surcharges assessed by our delivery partners. To remain competitive, we have been required to offer discounted, free or other more competitive shipping options to our customers, which has resulted in declines in our shipping and handling revenue and increased shipping and handling expense.
To remain competitive, we have been required to offer discounted, free or other more competitive shipping options to our customers, which has resulted in declines in our shipping and handling revenue and increased shipping and handling expense. We expect further declines in shipping and handling revenues as compared to prior years.
If we overstock products, we may be required to take significant inventory markdowns or write-offs and incur 15 Table of Contents commitment costs, which could reduce profitability. We may experience an increase in our net shipping cost due to complimentary upgrades, split-shipments and additional long-zone shipments necessary to ensure timely delivery for the holiday season.
We may experience an increase in our net shipping cost due to complimentary upgrades, split-shipments and additional long-zone shipments necessary to ensure timely delivery for the holiday season.
Our business is subject to seasonal influences, with increased net sales and net income realized during the fourth quarter of our fiscal year, which includes the holiday season.
Our business is subject to seasonal influences, with increased net sales and net income realized during the fourth quarter of our fiscal year, which includes the holiday season. We must maintain sufficient inventory levels to operate our business successfully, but we must also avoid accumulating excess inventory, which increases working capital needs and potentially lowers gross margins.
If we fail to manage our growth effectively, our business, financial condition and operating results could be harmed. To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people, information systems and facilities and expand, train and manage our employee base.
To achieve our growth strategy, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people, information systems and facilities and expand, train and manage our employee base. To support continued growth, we must effectively integrate, develop and motivate a large number of employees.
The growth of our sales and profitability depends on the continued growth of demand for the products we offer, and our business is affected by general economic and business conditions. A softening of demand, whether caused by changes in customer preferences or a weakening of the economy or other factors, may result in decreased net sales or growth.
The growth rates in net sales and profitability that we forecast may not be achieved. The growth of our sales and profitability depends on the growth of demand for the products we offer, and our business is affected by general economic and business conditions.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect our business, financial condition and operating results. 20 Table of Contents If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect our business, financial condition and operating results.
Some of these suppliers often require lengthy advance notice of order requirements in order to be able to manufacture and supply products in the quantities requested. This usually requires us to order our products, and enter into commitments for the purchase of our products, well in advance of the time these products will be offered for sale.
This usually requires us to order our products, and enter into commitments for the purchase of our products, well in advance of the time these products will be offered for sale. As a result, it may be difficult to respond to changes in customer demand.
Changes that adversely impact our ability to meet our labor needs in a cost-effective manner could adversely affect our operating results.
Currently none of our employees are represented by a union, but our employees have the right to be under the National Labor Relations Act. Changes that adversely impact our ability to meet our labor needs in a cost-effective manner could adversely affect our operating results.
Competitive pricing pressures with respect to shipping our products to our customers may harm our business and results of operations. Given the size of our direct-to-consumer net sales relative to our total net sales, shipping and handling revenue has had a significant impact on our gross profit and gross profit margin.
Given the size of our direct-to-consumer net sales relative to our total net sales, shipping and handling revenue has had a significant impact on our gross profit and gross profit margin. Historically, this revenue has partially offset our shipping and handling expense included in selling, general and administrative expenses.
If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected. Financial Risks Our net sales and profits depend on the level of consumer spending for apparel, footwear and accessories, which is sensitive to general economic conditions and other factors.
Financial Risks Our net sales and profits depend on the level of consumer spending for apparel, footwear and accessories, which is sensitive to general economic conditions and other factors. An economic recession or a decline in consumer spending could have a material adverse effect on our business and results of operations.
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.
The following discussion contains references to fiscal years 2023 and 2022, which refer to our fiscal years ended January 28, 2024 and January 29, 2023, respectively. Fiscal years 2023 and 2022 were 52-week periods. Duluth Trading is a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories primarily sold through our own omnichannel platform.
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.
If we are unable to achieve the growth strategy of our organization, our business, financial condition and operating results may be materially adversely affected. Operational Risks Economic uncertainties may continue to adversely affect our business operations, store and website traffic, employee availability, financial condition, liquidity, and cash flow for an extended period of time.
Further 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.
Further 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.
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.
Including logistics, operations, and planning systems, processes, and talent needed to scale the business and enable a multi-brand and multi-channel strategy. 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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
Biggest changeITEM 1A. RISK FACTORS 9 ITEM 1B. UNRESOLVED STAFF COMMENTS 22 ITEM 1C. CYBERSECURITY 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 2. Properties

Properties — owned and leased real estate

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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.
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 Kowloon, Hong Kong Office 1,855 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.
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. 24 Table of Contents
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.
ITEM 2. PROPERTIES The following table sets forth the location, primary use and size of our leased and owned facilities as of January 28, 2024.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeShe 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.
Biggest changeSutera has served as our Senior Vice President, Chief Technology Officer and Logistics 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. Sutera oversaw the company’s information and technology functions and digital operational solutions. Before that, 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.
Homolka 57 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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable . ‎ 24 Table of Contents Information about our Executive Officers The following is a list of names and ages of executive officers of Duluth Trading indicating all positions and offices held by each such person and each such person’s principal occupation(s) or employment during the past five years.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable . ‎ 25 Table of Contents Information about our Executive Officers The following is a list of names and ages of executive officers of Duluth Trading indicating all positions and offices held by each such person and each such person’s principal occupation(s) or employment during the past five years.
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.
Mr. 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 K. Shepherd 47 Ms.
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.
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. 26 Table of Contents Richard W. Schlecht 43 Mr.
Schlecht 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.
Schlecht has served as our Senior Vice President of Product Development and Sourcing since October 2023, and has previously served as our Senior Vice President of Product, Merchandise and Inventory from March 2022 to October 2023, 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.
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.
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 any officers or director, except as disclosed below, arrangements or understandings between any officer and any other person pursuant to which the officer was selected.
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.
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. Heena K. Agrawal 48 Ms. Agrawal has served as our Senior Vice President and Chief Financial Officer since February 2024. Ms.
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.
Shepherd has served as our Senior Vice President of Brand and Marketing since October 2023, serving as caretaker of the brand and voice of customer experience across all facets of the Company.
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
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. 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. David S.
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.
The information presented below is as of March 22, 2024. Name Age Office Samuel M. Sato 60 Mr. Sato was appointed to our Board of Directors in May 2021, and since that time has served as President and Chief Executive Officer.
Removed
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.
Added
Agrawal previously served as the Chief Financial Officer, Global Wrangler and Global Kontoor Supply Chain of Kontoor Brands, Inc. from January 2023 to January 2024, and Chief Financial Officer of Global Wrangler from September 2021 to January 2024. Prior to that, Ms.
Removed
Schlecht previously served as our Chairman of the Board of Directors and Chief Executive Officer from February 2003 to February 2015 and then as Executive Chairman of the Board from February 2015 to May 2021. Mr.
Added
Agrawal served as the Global Segment Chief Financial Officer, Industrial Segment for Underwriters Laboratories from February 2021 to September 2021, and Connected Technology Appliances & Lighting Global Division Chief Financial Officer for Underwriters Laboratories from October 2019 to February 2021, as well as various leadership positions at Walgreens Boots Alliance from January 2012 to September 2019, most recently serving as Synergy Leader M&A Integration: Rite Aid from 2018 to September 2019 and at Procter & Gamble from 2001 to 2011.
Removed
Schlecht served as Chief Executive Officer of the Company from February 2003 to February 2015 and from August 2019 to May 2021 and as President from February 2003 to February 2012. He also served as President and Chief Executive Officer of GEMPLER'S, Inc., which he founded in 1986 until February 2003. Mr.
Added
Ms. Agrawal holds a Bachelor of Commerce, Accounting, and Taxation degree from Narsee Monjee College of Commerce and Economics and an M.B.A. from Indiana University Kelley School of Business. Ms. Agrawal has been involved in the retail industry for over 20 years. Albert J. Sutera 57 Mr.
Removed
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.
Added
She previously served as our Senior Vice President of Customer Experience from March 2022 to October 2023, Vice President of Merchandising and Marketing from May 2020 to March 2022 and Vice President of Marketing from February 2019 to May 2020.
Removed
Previously at Nordstrom, Inc., he served as corporate Vice President and Treasurer overseeing treasury, investor relations and corporate development. Before his 13 years with Nordstrom, Mr. Loretta was Director of Planning and Analysis for Restoration Hardware, Inc., where he developed a companywide budgeting, forecasting and reporting process for the retail stores, catalog direct mail and e-commerce.
Added
She earned a B.S. degree in Communications / Marketing from Oklahoma Christian University in 1999. PART II
Removed
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.
Removed
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur 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.
Biggest changeOur Class A common stock is neither listed nor traded on an exchange. Shareholders of Record As of March 5, 2024, there were approximately 107 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.
We believe the number of beneficial holders of the Company’s Class B common stock is in excess of this amount. Dividends Our Class B common stock began trading on November 20, 2015, since that time, we have not declared any cash dividends, and we do not anticipate declaring any cash dividends in the foreseeable future.
We believe the number of beneficial holders of the Company’s Class B common stock is in excess of this amount. Dividends Our Class B common stock began trading on November 19, 2015. Since that time, we have not declared any cash dividends, and we do not anticipate declaring any cash dividends in the foreseeable future.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Listing and Trading Our Class B common stock is traded on the NASDAQ Global Select Market under the symbol “DLTH,” since our initial public offering on November 19, 2015.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Listing and Trading Our Class B common stock has been traded on the NASDAQ Global Select Market under the symbol “DLTH,” since our initial public offering on November 19, 2015.
Removed
Securities 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
Added
Securities Authorized for Issuance Under Equity Compensation Plans Information required by this Item concerning our Equity Compensation Plan Information is set forth in our definitive proxy statement for our 2024 annual meeting of shareholders to be held on May 23, 2024 (the “Proxy Statement”) under the caption “Proposal Four: Approval of the 2024 Equity Incentive Plan of Duluth Holdings, Inc.”, and is incorporated herein by reference .
Added
I TEM 6. [RESERVED] ‎ 27 Table of Contents

Item 7. Management's Discussion & Analysis

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

51 edited+3 added−8 removed35 unchanged
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.
Biggest changeFiscal Year Ended January 28, 2024 January 29, 2023 (in thousands) Net sales 646,681 653,307 Cost of goods sold (excluding depreciation and amortization) 321,710 309,872 Gross profit 324,971 343,435 Selling, general and administrative expenses 333,804 337,204 Operating (loss) income (8,833) 6,231 Interest expense 4,156 3,653 Other income, net 923 376 (Loss) income before income taxes (12,066) 2,954 Income tax (benefit) expense (2,693) 708 Net (loss) income (9,373) 2,246 Less: Net income (loss) attributable to noncontrolling interest (17) (58) Net (loss) income attributable to controlling interest $ (9,356) $ 2,304 Percentage of Net sales: Net sales 100.0 % 100.0 % Cost of goods sold (excluding depreciation and amortization) 49.7 % 47.4 % Gross profit 50.3 % 52.6 % Selling, general and administrative expenses 51.6 % 51.6 % Operating (loss) income (1.4) % 1.0 % Interest expense 0.6 % 0.6 % Other income, net 0.1 % — % (Loss) income before income taxes (1.9) % 0.5 % Income tax (benefit) expense (0.4) % 0.1 % Net (loss) income (1.4) % 0.3 % Less: Net income (loss) attributable to noncontrolling interest — % — % Net (loss) income attributable to controlling interest (1.4) % 0.3 % Fiscal 2023 Compared to Fiscal 2022 Net Sales Net sales decreased $6.6 million, or 1.0%, to $646.7 million in fiscal 2023 compared to $653.3 million in fiscal 2022.
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.
The First Amendment amends the 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) reduce the commitment fee in some instances.
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.
The 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 offer a comprehensive line of innovative, durable and functional products, such as our Longtail T ® shirts, Buck Naked TM underwear, Fire Hose ® work pants and No-Yank™ Tank, which reflect our position as the Modern, Self-Reliant American Lifestyle brand.
We offer a comprehensive line of innovative, durable and functional products, such as our Longtail T ® shirts, Buck Naked ® underwear, Fire Hose ® work pants and No-Yank ® Tank, which reflect our position as the Modern, Self-Reliant American Lifestyle brand.
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 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 Credit Agreement.
See “Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our net income to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures.
See “Reconciliation of Net (Loss) Income to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our net loss to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures.
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.
On July 8, 2022, the Company entered into the First Amendment to the Credit Agreement (the “First Amendment”), which was treated as a modification for accounting purposes.
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.
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 2023 results compared to fiscal 2022. Fiscal year 2023 and 2022 were 52-week periods.
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. 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.
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.
Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand. ‎ 29 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.
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.
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. ‎ 28 Table of Contents Our management’s discussion and analysis includes market sales metrics for our stores, website and catalog sales.
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.
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 the Company’s rent adjusted leverage ratio.
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.
Revenue Recognition 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.
Merchandise exchanges of the same product and price are not considered merchandise returns and are therefore excluded when calculating the sales returns reserve. Inventories Our inventories are composed of finished goods and are stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out method.
Merchandise exchanges of 35 Table of Contents the same product and price are not considered merchandise returns and are therefore excluded when calculating the sales returns reserve. Inventories Our inventories are composed of finished goods and are stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out method.
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.
Economic Conditions The United States economy has experienced high inflation during 2022 and 2023 and there are expectations in the market that inflation may remain at elevated levels. The ultimate impact of higher inflationary periods and efforts to control inflation on our operational and financial performance still depends on future developments outside of our control.
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.
The cash used in operating assets and liabilities of $37.2 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 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.
Net Cash Used in 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 2023 and fiscal 2022, net cash used in financing activities was $3.3 million and $3.2 million, respectively, primarily consisting of payments on finance lease obligations.
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.
For a discussion of fiscal 2022 results compared to fiscal 2021, refer to the Company’s Annual Report on Form 10-K for the year ended January 29, 2023. Overview We are a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories sold primarily 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. Since then, we have expanded our retail presence, and as of January 29, 2023, 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 28, 2024, we operated 62 retail stores and three outlet stores.
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 2022, net cash used in operating activities was $1.4 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 $37.2 million.
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.
The increase was primarily driven by lower inventory levels, partially offset by 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.
On May 14, 2021, the Company terminated the Credit Agreement, and entered into a new credit agreement (the “New Credit Agreement”), which was treated as a modification for accounting purposes.
Credit Agreement On May 14, 2021, the Company terminated its prior credit agreement, and entered into a credit agreement (the “Credit Agreement”), which was treated as a modification for accounting purposes.
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.
As a percentage of net sales, Adjusted EBITDA decreased to 5.2% of net sales in fiscal 2023 compared to 6.7% of net sales in fiscal 2022. 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.
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.
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. As of January 28, 2024 our working capital was $78.5 million, which includes cash and cash equivalents of $32.2 million.
We have not made any material changes to our assumptions included in the calculations of the obsolescence and shrinkage reserves during the periods presented, nor have we recorded significant adjustments related to the physical inventory process. The reserve for inventory shrinkage is adjusted to reflect the trend of historical physical inventory count results.
We have not made any material changes to our assumptions included in the calculations of the obsolescence and shrinkage reserves during the periods presented, nor have we recorded significant adjustments related to the physical inventory process.
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.
The reserve for inventory shrinkage is adjusted to reflect the trend of historical physical inventory count results. 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.
During the first three quarters of our fiscal year, we typically are net users of cash in our operating activities as we acquire inventory in anticipation of our peak selling season, which occurs in the fourth quarter of our fiscal year. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.
During the first three quarters of our fiscal year, we typically are net users of cash in our operating activities as we acquire inventory in anticipation of our peak selling season, which typically occurs in the fourth quarter of our fiscal year.
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.
Net Cash Used in Investing Activities Investing activities consist primarily of capital expenditures related to a new fulfillment center and information technology. For fiscal 2023, net cash used in investing activities was $48.7 million, driven by purchases of property and equipment of $49.1 million, primarily related to the Adairsville, Georgia fulfillment center.
We define Adjusted EBITDA as consolidated net income before depreciation and amortization, interest expense and provision for income taxes adjusted for the impact of certain items, including non-cash and other items we do not consider representative of our ongoing operating performance. We believe Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other items.
We define Adjusted EBITDA as consolidated net (loss) income before depreciation and amortization, interest expense and provision for income taxes adjusted for the impact of certain items, including non-cash and other items we do not consider representative of our ongoing operating performance.
The primary drivers of the costs of individual goods are raw material costs. Depreciation and amortization are excluded from gross profit. We expect gross profit to increase to the extent that we successfully grow our net sales. Shipping and handling revenue is also reflected in our gross profit and gross profit margin.
The primary drivers of the costs of individual goods are raw material costs. Depreciation and amortization are excluded from gross profit. Shipping and handling revenue is also reflected in our gross profit and gross profit margin.
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.
No valuation allowance was recognized for the years ended January 28, 2024 or January 29, 2023. 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.
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.
Fiscal Year Ended January 28, 2024 January 29, 2023 (in thousands) Net (loss) income $ (9,373) $ 2,246 Depreciation and amortization 32,159 30,810 Amortization of internal-use software hosting ‎ subscription implementation costs 4,961 3,392 Interest expense 4,156 3,653 Income tax (benefit) expense (2,693) 708 EBITDA (non-GAAP) 29,210 40,809 Stock based compensation 4,195 2,711 Adjusted EBITDA (non-GAAP) $ 33,405 $ 43,520 As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $10.1 million, or 23.2%, to $33.4 million in fiscal 2023 compared to $43.5 million in fiscal 2022.
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.
We spent $53.2 million in fiscal 2023 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. We expect to spend approximately $25.2 million in fiscal 2024 on capital expenditures.
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.
Gross Profit Gross profit decreased $18.5 million, or 5.4%, to $325.0 million in fiscal 2023 compared to $343.4 million in fiscal 2022. As a percentage of net sales, gross margin decreased to 50.3% of net sales in fiscal 2023 compared to 52.6% of net sales in fiscal 2022.
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.
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.
We believe that our cash flow from operating activities and the availability of cash under our credit facility will be sufficient to cover working capital requirements and anticipated capital expenditures for the foreseeable future. Cash Flow Analysis A summary of operating, investing and financing activities is shown in the following table.
We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year. We believe that our cash flow from operating activities and the availability of cash under our credit facility will be sufficient to cover working capital requirements and anticipated capital expenditures for the foreseeable future.
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.
As of and for the fiscal year ended January 28, 2024, 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.
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 cash provided by operating assets and liabilities of $13.7 million primarily consisted of a $29.2 million decrease in inventory partially offset by a $5.4 million and $5.1 million decrease in trade accounts payable and accrued expenses, respectively.
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
See Note 9 “Income Taxes,” of Notes to Consolidated Financial Statements included in this Annual Report on Form 10 - K. ‎ 36 Table of Contents
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.
The decrease in gross margin rate was primarily due to a lower mix of full price sales as customers purchasing activity increased during periods of promotions. ‎ 31 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $3.4 million, or 1.0%, to $333.8 million in fiscal 2023 compared to $337.2 million in fiscal 2022.
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.
A summary of our financial results is as follows: Net sales in fiscal 2023 decreased by 1.0% over the prior year to $646.7 million; Net loss in fiscal 2023 was ($9.4) million compared to prior year net income of $2.2 million; and Adjusted EBITDA in fiscal 2023 decreased 23.2% over the prior year to $33.4 million.
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.
Fiscal Year Ended January 28, 2024 January 29, 2023 (in thousands) Net cash provided by (used in) operating activities $ 38,673 $ (1,396) Net cash used in investing activities (48,718) (26,873) Net cash used in financing activities (3,346) (3,234) Decrease in cash and cash equivalents $ (13,391) $ (31,503) ‎ 33 Table of Contents Net Cash Provided by (Used in) Operating Activities Operating activities consist primarily of net (loss) income adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in assets and liabilities.
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.
Store market net sales decreased $11.4 million, or 2.5%, to $445.1 million in fiscal 2023 compared to $456.5 million in fiscal 2022. Net sales in non-store markets increased $4.4 million, or 2.3%, to $196.0 million in fiscal 2023 compared to $191.6 million in fiscal 2022.
For fiscal 2021, net cash provided by operating activities was $92.0 million, which primarily consisted of net income of $29.6 million, non-cash depreciation and amortization of $29.2 million, amortization of stock-based compensation of $2.2 million and cash provided by operating assets and liabilities of $36.1 million.
For fiscal 2023, net cash provided by operating activities was $38.7 million, which primarily consisted of non-cash depreciation and amortization of $32.2 million, amortization of stock-based compensation of $4.2 million and cash provided by operating assets and liabilities of $13.7 million, which was partially offset by net loss of ($9.4) million.
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.
Fiscal Year Ended January 28, 2024 January 29, 2023 (in thousands) Net cash provided by (used in) operating activities $ 38,673 $ (1,396) Purchases of property and equipment (49,086) (27,065) Free Cash Flow (non-GAAP) $ (10,413) $ (28,461) 32 Table of Contents Free cash flow increased $18.0 million to ($10.4) million in fiscal 2023 compared to ($28.5) million in fiscal 2022.
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.
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. Reconciliation of Net (Loss) Income to EBITDA and EBITDA to Adjusted EBITDA The following table represents reconciliations of net (loss) income to EBITDA and EBITDA to Adjusted EBITDA for the periods indicated below.
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.
Selling, general and administrative expenses as a percentage of net sales was 51.6% in fiscal 2023 and fiscal 2022. Interest Expense Interest expense increased $0.5 million to $4.2 million in fiscal 2023 compared to $3.7 million in fiscal 2022.
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.
The increase in interest expense was primarily attributable to increased interest rates on outstanding debt in fiscal 2023 compared to fiscal 2022. Income Taxes Income tax benefit was $2.7 million in fiscal 2023 compared to income tax expense of $0.7 million in fiscal 2022.
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.
For fiscal 2022, net cash used in investing activities was $26.9 million, driven by purchases of property and equipment of $27.1 million, primarily related to the Adairsville, Georgia fulfillment center.
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.
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.
Off-Balance Sheet Arrangements We are not a party to any significant off-balance sheet arrangements.
See Note 3 “Leases” of Notes to Consolidated Financial Statements for additional discussion of these obligations. 34 Table of Contents Off-Balance Sheet Arrangements We are not a party to any significant off-balance sheet arrangements.
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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.
Added
We believe Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other items. This non-GAAP measure may not be comparable to similarly titled measures used by other companies.
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Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA The following table represents reconciliations of net income to EBITDA and EBITDA to Adjusted EBITDA for the periods indicated below.
Added
Our effective tax rate related to controlling interest was 22.4% in fiscal 2023 compared to 23.5% in fiscal 2022. Net (Loss) Income Attributable to Controlling Interest Net loss attributable to controlling interest was ($9.4) million in fiscal 2023 compared to net income attributable to controlling interest of $2.3 million in fiscal 2022, due to the factors discussed above.
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For fiscal 2021, net cash used in financing activities was $51.4 million, primarily consisting of the full paydown of Duluth’s bank debt.
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Cash Flow Analysis A summary of operating, investing and financing activities is shown in the following table.
Removed
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
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.
Removed
The loan covenants were also amended to allow for greater flexibility during the Company’s peak borrowing periods in fiscal 2020.
Removed
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.
Removed
The interest rate applicable to the Incremental DDTL was also a fixed rate over the aforementioned interest periods equal to LIBOR (with a 1% floor) for such interest period plus a margin of 275 to 350 basis points.

Other DLTH 10-K year-over-year comparisons