Duluth Q2 2026 Earnings Report

Duluth EPS Results

• Actual EPS: $0.03
• Consensus EPS: -$0.05
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: N/A

Duluth Revenue Results

• Actual Revenue: $131.72 million
• Expected Revenue: $124.03 million
• Beat/Miss: Beat by +$7.69 million
• YoY Revenue Growth: N/A

Duluth Announcement Details

• Quarter: Q2 2026
• Date: 9/4/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, September 4, 2025
• Conference Call Time: 9:30AM ET

Duluth (NASDAQ:DLTH) operates as a specialty retailer of workwear, outdoor apparel and accessories for men and women under the Duluth Trading Co. name. The company’s product line includes work pants, durable outerwear, performance-based shirts, base layers and specialized gear such as tool belts and backpacks. Duluth Trading Co. focuses on combining practical functionality with style, targeting tradespeople, outdoor enthusiasts and anyone in need of rugged, long-lasting clothing.

Since its founding in 1989, Duluth Trading Co. has grown from a regional catalog business into a national retail chain. The company expanded into e-commerce in the early 2000s and now operates an integrated multichannel platform that includes direct mail catalogs, a robust online storefront and brick-and-mortar locations. Duluth Trading Co.’s stores are strategically located across the United States, providing customers with in-person fitting rooms, workshops and demonstration areas.

Duluth Trading Co. differentiates itself through proprietary fabric technologies and design features such as articulated knees, no-ruffle gussets and secure storage pockets. The company emphasizes customer engagement through community events, “Bucket List” adventures and an active social media presence to gather feedback and drive product innovation. Duluth Trading Co. continues to explore growth opportunities by refining its assortments, enhancing digital capabilities and opening new retail doors in underserved markets.

Duluth Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Despite a 7% year-over-year decline in net sales to $131.7 M, the company delivered a $1.5 M increase in adjusted EBITDA to $12 M (9.1% of sales) thanks to promotional resets and cost controls.
• Positive Sentiment: Ending inventory fell 12% year-over-year to $148.1 M, while store in-stock rates rose by 200 basis points, reflecting successful enterprise planning and SKU reductions.
• Positive Sentiment: SG&A expenses decreased by $5.2 M or 7.1% from last year to $68.8 M (52.2% of sales), and management remains on track to achieve $10 M in cost savings for fiscal 2025.
• Negative Sentiment: New tariffs are expected to impact fiscal H2 by approximately $15 M at an average rate of 12%, with the bulk of costs due to be felt in the second half despite mitigation efforts.
• Negative Sentiment: Direct channel net sales excluding wholesale plunged 18% year-over-year, largely driven by reduced web traffic following the pullback in promotional activity.

Presentation

[Operator]

Good day, and welcome to the Duluth Holdings, Inc. Second Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

[Operator]

I would now like to turn the conference over to Mr. Chris Steffes with Duluth Investor Relations. Please go ahead, sir.

[Chris Steffes, Senior Director - FP&A at Duluth]

Thank you, and welcome to today's call to discuss Duluth Trading's second quarter financial results. Our earnings release, which was issued this morning, is available on our Investor Relations website at ir.duluthtrading.com under News Releases. I'm here today with Stephanie Pugliese, President and Chief Executive Officer and Hina Agroval, Senior Vice President and Chief Financial Officer. On today's call, management will provide prepared remarks and then open the call for questions. Before we begin, I would like to remind you that the comments on today's call will include forward looking statements, which can be identified by the use of words such as estimate, anticipate, expect and similar phrases.

[Chris Steffes, Senior Director - FP&A at Duluth]

Forward looking statements by their nature involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward looking statements. Such risks and uncertainties include, but are not limited to, those that are described in our most recent annual report on Form 10 ks and other SEC filings as applicable. These forward looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. And with that, I will turn the call over to Stephanie.

[Stephanie Pugliese, President, CEO & Director at Duluth]

Good morning, everyone and thank you for joining us today. We are encouraged by our second quarter results demonstrating positive momentum in our initial turnaround efforts. Our team has worked tirelessly and made improvements across several critical areas of the business. This includes promotional reset, cost control, tariff mitigation and a disciplined approach to inventory management. Our strategic and operational efforts have begun to yield tangible benefits, leading to an enhanced gross margin, reduced expenses and lower inventory levels, which played out in our Q2 results.

[Stephanie Pugliese, President, CEO & Director at Duluth]

As we reduced the depth of promotional activity, we anticipated that our top line revenue would contract year over year. Yet despite a sales decline of 7% versus last year, we delivered gross margin improvement and SG and A leverage, which drove a $1,500,000 increase in adjusted EBITDA, reaching $12,000,000 or 9% of sales. We concluded the quarter with a strong liquidity of $73,000,000 reduction in inventory compared to last year, meeting our expectations of sequential inventory improvement each quarter. Let me elaborate further on each of the areas of improvement. Starting with an update on the resetting of our promotional cadence, we have reduced the depth of our promotions to strategically elevate full price sales, increase our average unit retails and drive improved profitability.

[Stephanie Pugliese, President, CEO & Director at Duluth]

We are intentionally shifting our focus towards higher quality sales. At the same time, we know that we are operating in a dynamic environment. We will continue to test, read and react to pricing initiatives throughout the second half of the year to meet customers' needs and manage higher profitability. As mentioned last quarter, we also quickly began to right size the cost structure and alleviate pressure from tariffs. I am pleased to report that we are on track to realize $10,000,000 in cost savings in fiscal twenty twenty five.

[Stephanie Pugliese, President, CEO & Director at Duluth]

While structure, we have also continued to invest time and energy to improve processes that optimize productivity now and in the future. Our ongoing commitment to inventory management and enterprise planning has led to enhancements in our operational and planning processes. This end to end cross functional initiative has resulted in the 12% reduction in Q2 ending inventory that I mentioned earlier, primarily due to our emphasis on rightsizing inventory receipts. We expect that these efforts combined with SKU and style count reductions in future seasons will lead to better use of cash, stronger inventory turns and improved margins. Now let me provide an update on our approach to mitigating tariffs, focusing on short term actions that do not compromise the long term integrity of our products.

[Stephanie Pugliese, President, CEO & Director at Duluth]

In addition to working closely with our manufacturing base and finding areas of SG and A to offset margin impact, in fall twenty twenty five, we have selected targeted products for retail increases. We did this while recognizing the need for a balance of styles that are lower priced and continue to be a great value for our customers, all with our uncompromising eye on maintaining quality. And while we are reducing deeper discounted promotions, we have implemented buy more and save discounts on some of our key programs like underwear and long tail tees. We believe that this will maintain our quality standards, help to offset the increase in cost of goods and still allow our customers to realize the value that we offer. Now let's move on to our performance in the second quarter starting with some of our product highlights.

[Stephanie Pugliese, President, CEO & Director at Duluth]

Duluth men's bottoms drove higher profitability as we pulled back on promotional depth delivering more than a 10% increase in AUR. As we continue to expand the offering in men's tops, new items like the barbecue shirt in standard fit, Breeze Shooter untucked and Drummond Slub Cotton shirts resonated with our customers. Our Mother's Day print collection in women's was our most successful print launch ever with our heirloom bibs complemented by matching garden accessories. New product lines such as Artisan Hemp, a durable yet breathable hemp and organic cotton blend and Featherlite Chick Knit shirts were well received and speak to the commitment we have to comfort, durability and functionality in all that we do. And lastly, AKHG grew by more than 10% in both men's and women's driven by better in stock position in key items like stonerun pants.

[Stephanie Pugliese, President, CEO & Director at Duluth]

We also saw positive responses to new Wonderwear performance shorts, Tundra and the After Sweat collection. Now turning to our marketing efforts for the quarter, we saw success with a full funnel approach highlighted by our Q2 Father's Day campaign. We focused on both awareness and consideration with this campaign and our Good Morning America Gifts for Dads feature drove better awareness than our similar spot during last year's peak season. Finally, this quarter, we launched the Big Damn Van, a mobile retail experience enabling Duluth to be more visible at events throughout the country, including store openings. Moving on to our retail portfolio, our store sales grew 5% year on year.

[Stephanie Pugliese, President, CEO & Director at Duluth]

This success was driven by improved traffic trends combined with increased conversion rates and higher average order values. Store marketing efforts were successful in generating awareness and driving traffic through tactics like geo targeted ads and connected TV. We closed one underperforming store this quarter and have renewed leases on two stores that are meeting our higher profit hurdle rates. Further, we are excited to open our first new store since 2021 in Kansas City, Kansas and Maple Grove, Minnesota. These are priority markets for us and we are thrilled to see these stores come to life and join our improving retail portfolio in the coming weeks.

[Stephanie Pugliese, President, CEO & Director at Duluth]

And speaking of fall, we have begun the process of tightening our assortment and have reduced our SKU count compared to the prior year with a more focused collection. Our business is built on a foundation of core products, strengthened by innovative new solutions designed to solve customers' problems. We are revitalizing our product and marketing strategies to reflect the true essence of our brand. For example, this month, we are relaunching core men's and women's denim that is built for greater durability and comfort along with adding new products like the Seawool collection, which is naturally thermo regulating, wicks away moisture and controls odor. These products provide the kind of functional apparel our customers depend on as the seasons change.

[Stephanie Pugliese, President, CEO & Director at Duluth]

We know that the second half of the year is our most important for customer engagement, revenues and profitability. As we lead up to our peak season, our focus remains on continuing the turnaround efforts and leading with a sense of urgency. Through rigorous preparation and alignment of all functions in the business, including marketing and promotional productivity, inventory positioning and customer communication, our goal is to not only meet, but exceed our customers' expectations during this critical period. In closing, we are pleased with our Q2 performance and the progress we have made so far on the first phase of our turnaround efforts and I am committed to building on this momentum. In the near term, our focus remains on simplifying the business, managing costs, mitigating the ongoing impacts of tariffs and most importantly delivering on our promise to customers with excellence.

[Stephanie Pugliese, President, CEO & Director at Duluth]

Looking ahead, we acknowledge the significant work that is to come in the second half of this year and in our turnaround plan. We will continue to leverage our foundational work in product sourcing, optimizing our fulfillment center network and rationalizing our store portfolio. In addition, we are refocusing our marketing efforts and product assortment to celebrate the self reliant spirit of our customers. Moving on to 2026, we are reducing our SKUs and refining our assortment. This focused approach will enable us to emphasize the core products that distinguish the Duluth brand.

[Stephanie Pugliese, President, CEO & Director at Duluth]

I am confident that in the long term focusing on Duluth Trading's core strengths, customer engagement with our brand, solution based products and product innovation and excellent customer service in our omnichannel environment will create shareholder value and ultimately restore the company to profitable growth and success. Now I'll hand it over to Hina to discuss our financial results for the second quarter and our outlook for fiscal year twenty twenty five.

[Heena Agrawal, SVP & CFO at Duluth]

Thanks, Stephanie, and good morning. Echoing Stephanie's comments, we are pleased with our Q2 results, which represent an important step forward in our turnaround efforts. As stated on our last two calls, our primary focus this year is to reset our promotional cadence to restore price integrity, improve inventory management and strengthen operational execution. In April, as new tariffs were announced, we responded proactively with mitigation actions. In addition, we initiated cost reduction efforts and implemented steps to manage cash flow and liquidity during this period of macroeconomic uncertainty.

[Heena Agrawal, SVP & CFO at Duluth]

I am proud of the team's unwavering commitment to the goals we established at the start of this year and their agility in developing solutions to mitigate macro headwinds. Now to provide an update on our second quarter results and progress in these areas. Today, we reported second quarter twenty twenty five net sales of $131,700,000 down 7% with gross margin expansion of two forty basis points versus last year to 54.7% and SG and A leverage driven by cost reductions. Our reported EPS is 0.4 and adjusted EPS is $03 favorable to last year by $05 Adjustments to EPS include restructuring charges of $700,000 net of tax and tax valuation allowance of negative $900,000 Adjusted EBITDA for the quarter increased by 1,500,000 versus last year to $12,000,000 or 9.1% of sales. Starting with the top line, as we reset our promotional depth to drive greater profitability, our Q2 net sales declined 7% versus last year and declined 9.8%, excluding the wholesale shipment shift from Q1 to Q2 this year.

[Heena Agrawal, SVP & CFO at Duluth]

Direct channel sales, excluding wholesale, saw an 18% decrease, primarily due to a decline in web traffic resulting from the promotional reset, partially offset by a higher average order value. Mobile sales penetration continued to improve, increasing by 100 basis points. Retail store sales increased 5.3%, driven by improved traffic trends from targeted marketing efforts, increased conversion rates and an optimized inventory allocation strategy leading to improved in stock levels. In addition, store profitability improved as we reduced promotional depth, driving higher average unit retail and average order values. Duluth men's sales declined by 8% and women's declined by 11.3% as we reset promotions, while AKHG grew by 11.4% with double digit growth across both men's and women's driven by improved inventory availability.

[Heena Agrawal, SVP & CFO at Duluth]

Effective inventory management led to improved in stock rates and profitability improved across channels and businesses with shallower promotions. Gross profit margin rate for the quarter was 54.7%, expanding by two forty basis points compared to last year, driven by an 8% increase in average unit retail and a greater proportion of full price sales as we reset promotions. Gross margin continues to improve due to two factors: a rebalancing of promotions to restore price integrity by reducing the depth of discounts and the flow through of lower product costs resulting from our direct to factory sourcing initiative. The impact of tariffs on Q2 margin was negligible and will be felt more strongly in the second half of the year. To offset the impact of tariff costs, we began implementing our targeted price increases at the July in addition to vendor negotiations and inventory receipt management.

[Heena Agrawal, SVP & CFO at Duluth]

SG and A spend was $68,800,000 which is $5,200,000 or 7.1% lower than last year. SG and A as a percentage of sales improved by 10 basis points to 52.2% compared to last year. Advertising came in at 8.9% of sales, deleveraging by 60 basis points. The improved SG and A leverage was driven by reduced outbound shipping costs and lower fixed overhead expenses, including personnel and depreciation. As Stephanie mentioned, we are on track to deliver $10,000,000 in cost reductions this year as we rightsize our expense structure.

[Heena Agrawal, SVP & CFO at Duluth]

Inventory at the end of the quarter was $148,100,000 a decrease of $20,700,000 or 12% compared to the prior year. In addition, store in stock levels increased by 200 basis points year over year. These improvements were driven by enhanced processes like enterprise planning, which optimized inventory receipts and inventory positioning to drive greater availability. We have made progress in managing receipts with year round inventory levels currently 6% lower than last year, a healthy level to support appropriate depth in our core products. As Stephanie mentioned, we have also reduced SKUs and inventory levels for the upcoming fallwinter season.

[Heena Agrawal, SVP & CFO at Duluth]

At the end of the quarter, our inventory mix included 78% in current products and 22% in clearance goods compared to 11% in clearance last year, primarily due to slower than expected sell throughs of our springsummer merchandise. To address this, we activated the Big Dan clearance event, reducing our clearance inventory to 16% of the total as of the September. For springsummer twenty twenty six, we've adopted a more sustainable approach, reducing our SKU count by over 20%, creating a more focused and relevant assortment to ultimately drive higher sell throughs. Our capital expenditures for the first half were $9,700,000 compared to $8,000,000 in the prior year, with the increase in spend primarily driven by our two new stores set to open this month. We ended the quarter with net liquidity of $73,300,000 and net debt of 26,700,000.0 Our cash and cash equivalents were $5,700,000 with borrowing on our credit facility at $32,500,000 As we actively managed our inventory levels, we cut our borrowing in half versus prior quarter.

[Heena Agrawal, SVP & CFO at Duluth]

As communicated last quarter, we anticipate that our peak borrowings for the year are behind us. Now turning to our outlook for fiscal year twenty twenty five. We are maintaining our fiscal year twenty twenty five financial guidance. The adjusted EBITDA range of 20,000,000 to $25,000,000 considers several factors. First, mitigating the impact of tariffs with price action, vendor negotiations and management of the timing of inventory receipts next, reducing expenses to protect against top line headwinds from dialing back discount levels and to align our overall expense structure with the current scale of our business.

[Heena Agrawal, SVP & CFO at Duluth]

Lastly, further integrating our planning processes and financial discipline to drive a higher return on our investments in inventory and assets like the fulfillment center network and store portfolio. Further elaborating on tariffs, we now anticipate an impact to the current year of approximately $15,000,000 based on the last announced rates by country. The average tariff rate based on country of origin and timing of receipts is approximately 12% this fiscal. The impact of tariff costs in the first half of the year was negligible and will primarily hit the second half. We have offset the majority of these additional costs by strategically increasing prices in select categories.

[Heena Agrawal, SVP & CFO at Duluth]

These price increases implemented in late July and early August are currently meeting sales expectations in terms of elasticity. In addition, we have partnered with our vendors to share in the cost impact and continue to actively manage the timing of inventory receipts. Speaking of SG and A, we've implemented over $10,000,000 in cost reductions this year, while maintaining our investment in marketing as a percent of sales. We are strategically optimizing our organizational expenses in line with the current size of our business, effectively managing the revenue impact of our pricing and promotional adjustments, mitigating tariff impacts and balancing the short and long term needs of the business. Regarding our balance sheet and capital expenditures.

[Heena Agrawal, SVP & CFO at Duluth]

First, we continue to project inventory levels to normalize in the second half of the year due to a rebalancing of sales and inventory receipts. We expect year end inventory to decrease by double digits compared to the prior year. This reduction and rightsizing of receipts ensures that we are past our peak borrowing levels. Second, we are maintaining our capital expenditure plan at approximately $17,000,000 for the year. This includes funding for the two new stores opening this month along with Manhattan Omni fulfillment software and regular maintenance.

[Heena Agrawal, SVP & CFO at Duluth]

Finally, our asset based lending facility continues to enable higher flexibility in maintaining liquidity and access to cash. To summarize, we are encouraged by the strides we are making in restoring price integrity, improving inventory management and strengthening operational execution. These initiatives will allow us to fully leverage the benefits of our strategic and structural initiatives over time. We are taking holistic actions to counteract the impact of tariffs, making decisive moves to optimize our expense structure and under Stephanie's leadership, focusing on our product assortment and brand marketing investments. With that, we will now open the call for questions.

[Operator]

Thank And the first question will come from Jonathan Komp with Baird. Please go ahead.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Yeah. Hi. Good morning. Thank you. Stephanie, I want to follow-up.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

If you could maybe share more on some of the specific metrics that you're looking at, and the team is looking at as you decide the appropriate level of pullback in your promotional activity. And then as you look forward into the key selling periods in fall and surrounding holiday, Just any thoughts on your confidence level of being able to maintain more discipline on the promotional side given some of the results you saw here in the quarter?

[Stephanie Pugliese, President, CEO & Director at Duluth]

Sure. So let me start with the question around the key metrics that we're looking at. Gross margin dollars are the primary measure that we are looking at because we know John that obviously that drives all of the dollars then below that line on the P and L. Through the discipline that we've been able to very quickly enact in the business around SG and A leverage, it's given us the ability continue what we started in first quarter around the promotional pullback knowing that there will be a contraction of sales. But ultimately the profitability is our first and foremost objective for this year to get us to that the EBITDA that we just reinforced on the bottom line for the year.

[Stephanie Pugliese, President, CEO & Director at Duluth]

In terms of as we look forward and the confidence that we have in fourth quarter, as we said in first quarter actually and reiterated today, we are seeing success in the pullback of the depth of promotion. We are still in terms of the frequency of promotion, we're still pretty consistent to where we've been in the past. So the ultimate gross margin dollars that we're generating are due to the pullback in-depth. And that's the plan that we have as we go forward for the balance of this quarter and then into fourth quarter. And the fact that we've seen the success so far this year in the first two quarters is what gives us a lot of confidence there.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Yes. That's encouraging to hear. Maybe a question then on gross margin. Just given some of the dynamics with the tariff impacts ramping up, but obviously some benefits from the activity you just mentioned and then the pricing that you're putting into place. Just any further color on the ability to continue the gross margin rate expansion and especially the fourth quarter?

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

I know looks like quite an easy comparison, but just any more color on the back half gross margin rate expectation?

[Heena Agrawal, SVP & CFO at Duluth]

Yes, Jonathan, this is Hina. I'll take that question. So we implemented price increases in two ways starting July 25 and August 8. And what we are seeing so far is, it is meeting our sales expectations from a price and unit elasticity standpoint. So we are going to continue to mitigate the impact of tariffs on the from our pricing activities.

[Heena Agrawal, SVP & CFO at Duluth]

We've also had vendor negotiations to fulfill some of the cost increases, and then we are managing the timing of our receipts. In addition to that, the SG and A cost reductions are definitely helping from an overall P and L standpoint. So we feel very good about the second half and our ability to meet our gross margin requirements. There will be some differentiation between Q3 and Q4. We'll see a bigger ramp up in Q4 versus in Q3 where these tariff impacts are just beginning to take hold.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Okay, great. Two other questions for me. Just on the SG and A, the cost savings that you're targeting, the $10,000,000 to be achieved in fiscal twenty twenty five, any further color just how much you achieved in the second quarter and how the savings will ramp here looking forward?

[Heena Agrawal, SVP & CFO at Duluth]

Yes. I mean, what we can say is the $10,000,000 is primarily coming from two areas. One is headcount that we had announced on June 4, and then the other is controllable expenses like consulting, travel and also some depreciation and amortization. So we started seeing the benefits of that in Q2. I would say we are about a third of the way there already.

[Heena Agrawal, SVP & CFO at Duluth]

So we feel very good about the $10,000,000 for the rest of the year for the entire year.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Okay. And then last question for me. Just stepping back bigger picture, as you think about reestablishing appropriate margin targets for the business, just I'm curious what you'd need to see in order to be able to share more detail on an appropriate levels of margin for the business or longer term expectations around the profitable sales base you need to get back to more reasonable annual profitability levels?

[Stephanie Pugliese, President, CEO & Director at Duluth]

So, I'll take that one John. I think the primary thing for the balance of this year is the two things really are the manageable expenses as Hina just talked about a moment ago and the resetting of price integrity. And part of that resetting of price integrity is certainly the promotional cadence that we just talked about. But the other part is the inventory management. And within inventory management, SKU and style productivity.

[Stephanie Pugliese, President, CEO & Director at Duluth]

So the balance of this year as we know, we are still in the process of rightsizing that inventory. As we move forward into 2026, as we talked about in the last quarter's call, we are planning and actually executing to a 20% decrease in SKU and style count. So as we get to that point where our assortment is rationalized, our expense plan if you will is rationalized that's where we will have the ability to really create a strong margin profile for the business. So, at this point our focus is executing really well the balance of the year both in all of the things we just talked about around the margin profile and also obviously operationally, and for our customers. And then as we move forward to 2026 that's where we start to really start implementing those key KPIs around SKU productivity, around promotional cadence and around inventory management that will lead to a stronger margin profile long term.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Okay, great. That's very clear. Thanks again for taking all the questions.

[Stephanie Pugliese, President, CEO & Director at Duluth]

Sure. Absolutely. Thanks.

[Operator]

This will conclude our question and answer session as well as our conference call for today. Thank you for your participation. You may now disconnect.

Participants

Executives

• Chris Steffes, Senior Director - FP&A
• Stephanie Pugliese, President, CEO & Director
• Heena Agrawal, SVP & CFO

Analysts

• Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co