US' Duluth's sales drop 8.1% YoY, gross margin up to 52.3% in Q3 FY24

The net loss for the company was $28.5 million with adjusted net loss of $13.8 million, compared to net loss of $10.5 million with adjusted net loss of $13.8 million in Q3 FY23. The earnings per share (EPS) per diluted share stood at $0.85, and adjusted EPS at $0.41. Adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) decreased by $5.2 million from the same quarter of last fiscal to $6.8 million in Q3 FY24, Duluth said in a press release.

Direct to-consumer (DTC) net sales decreased by 8.3 per cent to $79.8 million primarily driven by lower site conversion compared to the prior fiscal. Retail store net sales decreased by 7.8 per cent to $47.2 million due to slower store traffic, partially offset by strong conversion rates.

Selling, general and administrative (SG&A) expenses increased by 1.2 per cent to $82.9 million, compared to $81.8 million in the same period of the last fiscal. As a percentage of net sales, SG&A expenses deleveraged to 65.2 per cent, compared to 59.2 per cent in the same period of the last fiscal, mainly driven by higher fixed costs and depreciation from foundational strategic investments, partially offset by efficiencies across logistics and the fulfilment centre network, said the release.

“Impacted by a combination of uncertain macro environment and unseasonably warm weather, our third quarter performance did not meet our expectations. Despite the macro and weather-related impacts, we were pleased to see growth in our average order value and a double-digit increase in digital traffic. That said, these were not enough to offset the year-over-year contraction in transactions. As a result, we began taking the necessary actions to increase our unit selling velocity beginning in late October and I am pleased to report that our top line trends have meaningfully improved leading into the all-important black Friday week and continued through cyber-Monday,” said Sam Sato, president and chief executive officer (CEO) of Duluth. “As we enter the final peak selling weeks of the holiday season, we are committed to prudently managing our inventory and ending the fiscal year in a clean, high-quality position.”

Nine-months (9M) of FY24

The company reported net sales of $385.4 million in 9M period of FY24, down from $401.1 million in the same period of FY23. Gross profit declined to $202.0 million from $206.5 million, while SG&A expenses rose to $229.7 million compared to $225.0 million in the prior fiscal. The loss before income taxes widened to $38.5 million from loss of $21.1 million, and income tax expense reached $1.6 million, compared to a tax benefit of $4.8 million in the same period of FY23. This resulted in a net loss of $40.1 million, up from $16.3 million in the same period last fiscal. Net loss attributable to controlling interest was $40.2 million, compared to $16.3 million in FY23.

Outlook

For the full fiscal 2024, Duluth expects net sales of approximately $640 million, and full year gross margin reduction of approximately 125 basis points. It also expects SG&A expenses, excluding the sales tax contingency, to get reduced by 80 bps, and capital expenditures, inclusive of software hosting implementation costs, of $23 million.

ALCHEMPro News Desk (SG)