FinanceLooker

Excrept from filing document 2025-02-02

This Annual Report on Form 10 K contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties All statements other than statements of historical or current facts included in this Annual Report on Form 10 K are forward looking statements Forward looking statements refer to our current expectations and projections relating to our financial condition results of operations plans objectives strategies future performance and business You can identify forward looking statements by the fact that they do not relate strictly to historical or current facts These statements may include words such as anticipate could design estimate expect project plan potential intend believe may might will objective should would can have likely and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events For example all statements we make relating to our estimated and projected earnings revenue costs expenditures cash flows growth rates and financial results our plans and objectives for future operations growth or initiatives strategies or the expected outcome or impact of pending or threatened litigation are forward looking statements All forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected including
We make many of our forward looking statements based on our operating budgets and forecasts which are based upon detailed assumptions While we believe that our assumptions are reasonable we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results
See the Risk Factors section of this Annual Report on Form 10 K for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties All forward looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this annual report and hereafter in our other SEC filings and public communications You should evaluate all forward looking statements made by us in the context of these risks and uncertainties
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you Furthermore the forward looking statements included in this Annual Report on Form 10 K are made only as of the date hereof We undertake no obligation to publicly update or revise any forward looking statement as a result of new information future events or otherwise except as otherwise required by law
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 We offer products nationwide through our website 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 February 2 2025 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 The two brothers were never satisfied with the status quo and believed there s gotta be a better way So they invented the Bucket Boss a ruggedly durable canvas tool organizer that fits around a drywall bucket and transformed the way construction workers organized their tools Capitalizing on their initial success these brothers launched a catalog that later became known as Duluth Trading Company Under the initial philosophy of Job Tough Job Smart this catalog was dedicated to improving and expanding on existing methods of tool storage organization and transport In December 2000 GEMPLER S Inc a Wisconsin corporation and an agricultural and horticultural supply catalog business founded and owned by Stephen L Schlecht acquired Duluth Trading and brought the two mail order companies together Both catalogs had customers who worked outside and embraced the spirit of hands on self reliant Americans In February 2003 the GEMPLER s catalog business was sold to W W Grainger NYSE GWW and proceeds from that sale were used to fund the growth of Duluth Trading With that transaction GEMPLER S changed its corporate name to Duluth Holdings Inc
From what began as an idea aimed at those working in the building trades Duluth Trading has become a widely recognized brand and proprietary line of innovative and functional apparel and gear We have created strong brand awareness and built a loyal customer base We believe the foundation of our success is our culture of poking average in the eye by seeing things for what they could be and should be and finding a way to make them exactly that and we like to do it all with a big toothy grin
In 2021 the Company completed a comprehensive review of current operations logistics networks marketing and technology capabilities and unique brands and products The Company formulated the Big Dam Blueprint which management believes will unlock the Company s full potential for long term sustainable growth
Intensify efforts to optimize Duluth Trading s owned retail channels by increasing focus and investments in our direct channel as our primary growth vehicle 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 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 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
Our omnichannel business strategy allows our sales channels to work in synergy to seamlessly deliver a consistent brand experience to the customer including consistent marketing pricing and product presentation All sales channels are fully integrated including stores website catalogs and customer contact centers Our omnichannel services include order in store buy online pickup in store and ship from store as well as retail store and mobile shopping experiences
Our retail stores are designed to bring our brand to life by creating a unique and entertaining experience including engaging sales associates a compelling and complete product assortment and custom made fixtures to fit our brand We also showcase unique attractions at each retail store that celebrate the heritage of the local area such as the tool museum in our Mt Horeb Wisconsin store and the Exploded Tractor exhibit in our Ankeny Iowa store We believe these local community elements help promote customer loyalty and drive repeat purchases
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 Our products feature proprietary designs and distinct names such as our Longtail T shirts Buck Naked underwear Fire Hose work pants and No Yank Tank
Our product assortment appeals to our customers for their everyday and on the job use The majority of our products represent enduring styles that go beyond short lived fashion trends We believe many of our customers purchases are driven by our thoughtful design and high quality craftsmanship and our best selling styles tend to be items that carry over year to year with only minor updates
We believe the authenticity of our products is driven by a number of factors including our solution based design process use of technical materials sophisticated manufacturing methods and innovative product features Our products are sold at competitive prices and are designed to offer superior performance with added features such as underarm panels for more freedom of movement triple stitched seams for durability and mid leg utility pockets for functionality We also collaborate with our suppliers to develop advanced fabrics that we sell under our trademarks For example we incorporate our DuluthFlex Fire Hose cotton canvas into products to provide strength and abrasion resistance with stretch for freedom of movement
We are focused on developing apparel and gear that builds upon the Duluth Trading brand s product heritage of there s gotta be a better way resulting in distinctive products with enhanced features Members of our product development team also regularly read online customer product reviews attend tradeshows and collaborate with our vendors which facilitates new product innovation Our product development team incorporates all of this input to develop new product solutions and features ensure consistent fit style and color and design functional and durable fabrics
Our marketing strategy is designed to build brand awareness acquire new customers enhance customer loyalty and drive sales transactions We are nationally known for our creative irreverent and quirky advertising that features our Giant Angry Beaver Buck Naked Guy and Grab Happy Grizzly characters to showcase our brand philosophy humor and innovation We also feature testimonials in our marketing campaigns which put our products in context tying them to the individuals who represent our core customer who leads a hands on lifestyle values a job well done and is often outdoors for work and hobbies We believe our customers identify with the inspiring stories of real men and women recognize our products versatility and appreciate the extreme and demanding conditions our products can withstand
Digital and Email Marketing 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 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 These advertisements feature both our
We are committed to providing outstanding customer service and believe in treating our customers like next door neighbors Our retail stores are stocked with a comprehensive assortment of our products and staffed with knowledgeable and well trained sales associates We stand behind all purchases with our No Bull Guarantee
We do not own or operate any manufacturing facilities Instead we arrange with third party vendors for the manufacturing of our merchandise We have built strong long term relationships with our vendors In fiscal 2024 43 of our purchases came from our largest supplier an agent partner in Hong Kong Goods manufactured on our behalf non market buy are sourced from multiple factories across the globe including concentrations in Vietnam Indonesia Pakistan Bangladesh and Cambodia
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 All of our products are produced according to our specifications and we require all of our manufacturers to adhere to strict regulatory compliance and standards of conduct 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
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 Our distributed order management systems provide us with omnichannel capabilities that have a global view of available to promise inventory management
We operate primarily in the apparel footwear and accessories industry which is highly competitive We compete with a diverse group of direct to consumer companies and retailers including men s and women s specialty apparel chains department stores outdoor specialty stores apparel catalog businesses and online apparel businesses We compete principally on the basis of brand recognition innovation product quality customer service and price 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
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 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 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 Our rights to some of these trademarks may be limited to select markets We also own domain names including duluthtrading com
As of February 2 2025 we employed 807 full time and 1 441 part time and flexible part time employees 1 085 of which were employed at our retail stores The number of employees particularly part time employees fluctuates depending upon seasonal needs Our employees are not represented by a labor union and are not party to a collective bargaining agreement We consider our relations with our employees to be good
Our business experiences seasonal fluctuations Our net sales and net income are generally highest in the fourth fiscal quarter which includes the holiday sales period As a result our quarterly operating results and working capital requirements fluctuate significantly from quarter to quarter Further the impact of certain unusual or non recurring items economic conditions weather or other factors affecting our operations may vary from one year to the next
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
Our Annual Reports on Form 10 K Quarterly Reports on Form 10 Q Current Reports on Form 8 K and amendments to reports filed pursuant to Sections 13 a and 15 d of the Securities Exchange Act of 1934 as amended the Exchange Act are made available free of charge on or through our website at www duluthtrading com under the Investors tab as soon as reasonably practicable after such reports are filed with or furnished to the SEC
Certain factors may have a material adverse effect on our business financial condition and results of operations You should consider carefully the risks and uncertainties described below in addition to other information contained in this Annual Report on Form 10 K including our financial statements and related notes The risks and uncertainties described below are not the only ones we face Additional risks and uncertainties that we are unaware of or that we currently believe are not material may also become important factors that adversely affect our business If any of the following risks actually occurs our business financial condition results of operations and future prospects could be materially and adversely affected In that event the trading price of our Class B common stock could decline and you could lose part or all of your investment
Our products must satisfy the desires of customers whose preferences change over time In order to be successful we must design obtain and offer to customers innovative and high quality products on a continuous and timely basis Failure to effectively respond to customer needs and preferences or convey a compelling brand image or price to value equation to customers may result in lower net sales and gross profit margins
Our success depends in part on management s ability to effectively anticipate or identify customer needs and preferences and respond quickly with marketable product offerings in advance of the actual time of sale to the customer Even if we are successful in anticipating or identifying our customers needs and preferences we must continue to develop and introduce innovative high quality products and product features in response to changing consumer demand
Our business depends on our ability to maintain strong brands and sub brands We may not be able to maintain and enhance the Duluth Trading brands if we receive unfavorable complaints negative publicity or otherwise fail to live up to consumers expectations which could materially adversely affect our business results of operations and growth prospects
We currently offer a differentiated brand to our customers defined by solution based products manufactured with high quality craftsmanship humorous and distinctive marketing and an outstanding customer experience Maintaining and enhancing the Duluth Trading brand is critical to expanding our base of customers If we fail to maintain our brand or if we incur excessive expenses in this effort our business operating results and financial condition may be materially adversely affected We anticipate that as we raise our profile nationally and attract an increasing amount of competition maintaining and enhancing our brand may become increasingly difficult and expensive and may require us to make substantial additional investments in areas such as marketing store operations merchandising technology and personnel
Customer complaints or negative reactions to or unfavorable publicity about our product quality or product features our storytelling or irreverent advertising the shopping experience on our website or in our retail stores product delivery times customer data privacy and security practices or customer support especially on blogs social media other third party websites and our website could rapidly and severely diminish consumer use of our website and catalogs visits to our retail stores and consumer confidence in us and result in harm to our brand Furthermore these factors could cause our customers to no longer
Our expansion into new geographic markets could result in increased competition and merchandising distribution and other challenges We may encounter difficulties in attracting customers in our new retail store locations due to a lack of customer familiarity with our brand our lack of familiarity with local customer preferences competition with new competitors or with existing competitors with a large established market presence and seasonal differences in the market Our ability to expand successfully into other geographic markets will depend on acceptance of our retail store experience by customers in those markets including our ability to design our stores in a manner that resonates locally and to offer the correct product assortment to appeal to consumers in such markets There can be no assurance that any newly opened stores will be received as well as or achieve net sales or profitability levels consistent with our projected targets or be comparable to those of our existing stores in the time periods estimated by us or at all If our stores fail to achieve or are unable to sustain acceptable net sales and profitability levels our business results of operations and growth prospects may be materially adversely affected
Furthermore our retail stores may be located in regions that will be far from our Mount Horeb Wisconsin headquarters and will require additional management time and attention Failure to properly supervise the operation and maintain the consistency of the customer experience in those retail stores could result in loss of customers and potentially harm future net sales prospects
The success of our direct to consumer channel depends on customers use of our digital platform including our website and response to digital marketing if our overall marketing strategies are not successful including our maintenance of a robust customer list and ability to effectively customize our marketing efforts based on understanding customers preferences our business and results of operations could be materially adversely affected
The level of customer traffic and volume of customer purchases through our direct to consumer channel is substantially dependent on our ability to provide a content rich and user friendly website a fun easy and hassle free customer experience and reliable delivery of our products If we are unable to maintain and increase customers use of our e commerce platform including our website and the volume of purchases decline our business and results of operations could be adversely affected
Customer response to our digital marketing is substantially dependent on merchandise assortment merchandise availability and creative presentation as well as the selection of customers to whom our digital marketing is directed and our catalogs are sent Our maintenance of a robust customer list which we believe includes desirable demographic characteristics for the products we offer has also been a key component of our overall strategy If the performance of our website and email declines or if our overall marketing strategy is not successful our business results of operations and stock price could be adversely affected
Our success depends on our ability to acquire customers in a cost effective manner In order to expand our customer base we must appeal to and acquire customers who identify with the Duluth Trading brand We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers 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 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 Search engines frequently update and change the logic that determines the placement and display of results of a user s search such that the purchased or algorithmic placement of links to our sites can be negatively affected Moreover a search engine could for competitive or other purposes alter its search algorithms or results causing our sites to place lower in search query results A major search engine could change its algorithms in a manner that negatively affects our paid or non paid search ranking and competitive dynamics could impact the effectiveness of search engine marketing or search engine optimization We also obtain a significant amount of traffic via social networking websites or other channels used by our current and prospective customers As e commerce and social networking continue to rapidly evolve we must continue to establish relationships with these channels and may be unable to develop or maintain these relationships on acceptable terms 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
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 are unable to acquire new customers our growth prospects may be materially adversely affected
The apparel footwear and accessories industry is highly competitive We compete with a diverse group of direct to consumer companies and retailers including men s and women s specialty apparel chains outdoor specialty stores apparel catalog businesses and online apparel businesses that sell competing lines of merchandise Our competitors may be able to adopt more aggressive pricing policies adapt to changes in customers needs and preferences more quickly devote greater resources to the design sourcing distribution marketing and sale of their products or generate greater national brand recognition than us In addition as our business continues to expand our competitors may seek to increase efforts to imitate our product designs which could adversely affect our business and results of operations An inability to overcome these potential competitive disadvantages or effectively market our products relative to our competitors could have an adverse effect on our business and results of operations
We may consider strategic transactions and business arrangements including but not limited to acquisitions asset purchases partnerships joint ventures restructurings and investments 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
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 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 strategy of our business places significant demands on our management and other employees The growth of our business may require significant additional resources to meet these daily demands which may not scale in a cost effective manner or may negatively affect the quality of our website retail stores fulfillment centers call center and other aspects of the customer experience We are also required to manage relationships with a growing number of suppliers customers and other third parties Our information technology systems and our internal controls and procedures may not be adequate to support future growth of these relationships If we are unable to achieve the growth strategy of our organization our business financial condition and operating results may be materially adversely affected
Business activities continue to face economic uncertainties including but not limited to increased inflation and interest rates tariffs and global supply 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 and website Reductions in customer visits to and spending at our stores and website caused by economic uncertainties have resulted in a loss of retail store sales and profits and other material adverse effects The extent of the impact on our business financial results liquidity and cash flows will depend largely on future developments all of which are highly uncertain and cannot be predicted
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
New initiatives have been and may be proposed in the United States that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions that if enacted would increase the cost of products purchased from suppliers in such countries with which we do business Any inability on our part to rely on our foreign sources of production due to any of the factors listed above could have an adverse effect on our business results of operations and financial condition
We do not own or operate any manufacturing facilities and therefore depend upon independent third party suppliers for the manufacture of our merchandise 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 Georgia and Utah While our reliance on a limited number of fulfillment centers provides certain efficiencies it also makes us more vulnerable to natural disasters weather related disruptions accidents system failures public health pandemics or other unforeseen causes that could delay or impair our ability to fulfill customer orders and or ship merchandise to our stores which could adversely affect sales Our ability to mitigate the adverse impacts of these events depends in part upon the effectiveness of our disaster preparedness and response planning as well as our business continuity planning Our use of imports also makes us vulnerable to risks associated with products manufactured abroad including among other things risks of damage destruction or confiscation of products while in transit to a fulfillment center or at points of export or import organized labor strikes and work stoppages transportation and other delays in shipments including as a result of heightened security screening and inspection processes or other port of entry limitations or restrictions in the United States unexpected or significant port congestion lack of freight availability and freight cost increases 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 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
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 Online and omnichannel retailers are increasing their focus on delivery services with customers increasingly seeking faster guaranteed delivery times and low price or free shipping 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 We expect further declines in shipping and handling revenues as compared to prior years 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
Relying on third party service providers puts us at risk from disruptions in their operations such as employee strikes inclement weather and their inability to meet our shipping demands Moreover we may be unable to obtain terms as favorable as those received from the transportation providers we currently use which would further increase our costs In addition if our products are not delivered to our customers on time our customers may cancel their orders or we may lose business from these customers in the future We may be subject to shipping surcharges and thresholds during the peak holiday shopping season which may have a negative impact on our earnings Our efforts to mitigate the impact of future thresholds may not be successful or may result in similar surcharges These factors may negatively impact our financial condition and results of operations
The price and availability of raw materials may fluctuate substantially depending on a variety of factors including demand acreage devoted to cotton crops and crop yields weather patterns supply conditions transportation costs energy prices work stoppages government regulation and government policy economic climates market speculation and other unpredictable factors Fluctuations in the price and availability of fuel labor and raw materials such as cotton could affect our cost of goods and an inability to mitigate these cost increases unless sufficiently offset with our pricing actions might cause a decrease in our profitability while any related pricing actions might cause a decline in our sales volume Additionally any decrease in the availability of raw materials could impair our ability to meet our production or purchasing requirements in a timely manner Both the increased cost and lower availability of merchandise raw materials fuel and labor may have an adverse impact on our cash flow and working capital needs as well as those of our suppliers
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 In addition if the cost of fuel rises the cost to deliver merchandise from fulfillment centers to customers and our retail stores may rise and although some of these costs are paid by our customers such costs could have an adverse impact on our profitability 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
Our products are sourced through third party purchasing agents and a variety of domestic and international suppliers If these suppliers are unable or unwilling to provide the products or services that we require or materially increase their costs our ability to offer and deliver our products on a timely and profitable basis could be impaired which could have a material adverse effect on our business financial condition and results of operations We cannot assure that any or all of our relationships will not be terminated or that such relationships will continue as presently in effect Furthermore if any of our significant suppliers were to become subject to bankruptcy receivership or similar proceedings customs actions or other legal actions we may be unable to arrange for alternate or replacement relationships on terms as favorable as our current terms which could adversely affect our sales and operating results
Our growth strategy is influenced by the willingness and ability of our suppliers to efficiently manufacture our products in a manner that is consistent with our standards for quality and value If we cannot obtain a sufficient amount and variety of quality products at acceptable prices it could have a negative impact on our competitive position This could result in lower revenue and decreased customer interest in our product offerings which in turn could adversely affect our business and results of operations Our arrangements with our suppliers are generally not exclusive As a result our suppliers might be able to sell similar or identical products to certain of our competitors some of which purchase products in significantly greater volume Our competitors may enter into arrangements with suppliers that could impair our ability to obtain our products from those suppliers including by requiring suppliers to enter into exclusive arrangements which could limit our access to such arrangements or products
We have entered into agreements with third parties for logistics services information technology systems including hosting our website operating our call center during certain hours software development and support catalog production select marketing services processing gift card activity distribution and packaging and employee benefits Services provided by any of our third party suppliers could be interrupted as a result of many factors such as acts of nature or contract disputes Any failure by a third party to provide us with services for which we have contracted on a timely basis or within service level expectations and performance standards could result in a disruption of our business and have an adverse effect on our business and results of operations
We are subject to the risk of inventory loss and theft Although our inventory shrinkage rates have not been material or fluctuated significantly in recent years we cannot assure you that actual rates of inventory loss and theft in the future will be within our estimates or that the measures we are taking will effectively reduce the problem of inventory shrinkage Although some level of inventory shrinkage is an unavoidable cost of doing business if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft it could have a material adverse effect on our business financial condition and results of operations
In the normal course of business we often collect retain and transmit customer personal and credit card information employee personal information and other sensitive and confidential information The protection of customer and employee information and the Company s intellectual property from potential threats is vitally important to the Company Consumers and employees continue to have significant concerns about the security of personal information especially when transmitted over the Internet and the use retention disclosure and privacy of such information 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 Despite our risk management efforts vendor due diligence and security measures our facilities and systems and those of our third party service providers are subject to increasingly complex cyber risks including cyber extortion data breaches unauthorized access denial of service vendor or employee misconduct ransomware and other malicious software and data exfiltration We and our employees and customers could suffer significant harm if any personal financial or credit card information was accessed or disclosed by an unauthorized third party or our information technology systems or those of our third party providers were compromised or subject to data loss exfiltration corruption or disruption 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 In addition the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become more complex and uncertain due to recent high profile privacy and security incidents and legislative efforts across the globe As a result we may incur significant costs to comply with laws regarding the use retention disclosure security and privacy of personal information
Our ability to effectively manage and operate our business depends significantly on information technology systems We rely heavily on information technology to track sales and inventory and manage our supply chain We are also dependent on information technology including the Internet for our direct to consumer sales including our e commerce and catalog operations and retail business credit card transaction authorization Despite our preventative efforts our systems and those of our third party service providers may be vulnerable to damage or interruption The failure of these systems to operate effectively problems with transitioning to upgraded or replacement systems difficulty in integrating new systems or systems of acquired businesses or a breach of security of these systems has and could adversely impact the operations of our business including disruption of our ability to accept and fulfill customer orders effective management of inventory inefficient ordering and replenishment of products e commerce operations retail business credit card transaction authorization and processing corporate email communications and our interaction with the public on social media
We depend on the talents and continued efforts of our executive management team The loss of members of our executive management may disrupt our business and adversely affect our results of operations Furthermore our ability to manage further expansion will require us to continue to attract motivate and retain additional qualified personnel We believe that having an executive management team with qualified personnel who are passionate about our brand have extensive industry experience and have a strong customer service ethic has been an important factor in our historical success and we believe that it will continue to be important to growing our business Competition for these types of personnel is intense and we may not be successful in attracting integrating and retaining the personnel required to grow and operate our business profitably
Our performance is dependent on attracting and retaining a large number of qualified employees 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 Many of our staffing needs in our stores fulfillment centers and call center are entry level or part time positions with historically high rates of turnover If we cannot attract and retain employees with the qualifications we deem necessary to meet our staffing needs in our corporate office stores fulfillment centers and call center our ability to effectively operate may be adversely affected In addition our staffing needs are especially high during the peak holiday season We cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in future periods
We must maintain sufficient inventory levels and properly allocate inventory throughout our distribution network to operate our business successfully but we must also avoid accumulating excess inventory which increases working capital needs and potentially lowers gross margins We obtain substantially all of our inventory from suppliers located outside the
United States 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 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
We expect a disproportionate amount of our net sales to occur during our fourth quarter If we do not stock or restock popular products in amounts sufficient to meet customer demand it could significantly affect our revenue and our future growth If we overstock products we may be required to take significant inventory markdowns or write offs and incur commitment costs as well as incur costs related to a pack and hold approach for inventory 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 Furthermore if too many customers access our website within a short period of time due to increased holiday demand we may experience system interruptions that could make our website unavailable or prevent us from efficiently fulfilling orders which may reduce the volume of products we sell as well as the attractiveness of our product offerings In addition we or our third party service providers may be unable to adequately staff our fulfillment and customer service centers during these peak periods and our delivery service providers and other fulfillment companies may be unable to meet the peak seasonal demand For example during the holiday season in 2024 there were challenges in inventory planning resulting in delays in processing at a legacy fulfillment center
As a result of holiday sales inventories accounts payable and borrowings under our revolving line of credit typically reach their highest levels in October or November of each year other than as a result of cash flow provided by or used in investing and financing activities Inventories accounts payable and borrowings under our revolving line of credit then typically decline steadily during the holiday season resulting in our cash typically reaching its highest level and borrowings under our revolving line of credit reaching their lowest level typically near December 31 of each year
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 or consumer sensitivity to pricing 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 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 A decline in actual or perceived economic conditions or other factors could negatively impact the level of consumer spending and have a material adverse impact on our business and results of operations
We accept payments using a variety of methods including credit cards debit cards Paypal gift cards and physical bank checks For existing and future payment methods we offer to our customers we may become subject to additional regulations and compliance requirements including obligations to implement enhanced authentication processes that could result in increased costs and reduce the ease of use of certain payment methods as well as fraud For certain payment methods including credit and debit cards we pay interchange and other fees which may increase over time raising our operating costs and lowering profitability We rely on third party service providers for payment processing services including the processing of credit and debit cards In each case it could disrupt our business if these third party service providers suffer a data breach or become unwilling or unable to provide these services to us We are also subject to payment card association operating rules including data privacy and security rules certification requirements and rules governing electronic funds transfers which could change or be reinterpreted to make it difficult or impossible for us to comply 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
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 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 such financing is not available to us on satisfactory terms our ability to operate and expand our business or to respond to competitive pressures would be limited and we could be required to delay curtail or eliminate planned investments and other activities Moreover if we raise additional capital by issuing equity securities or securities convertible into equity securities your ownership may be diluted Any debt financing we may incur may impose on us covenants that restrict our operations and will require interest payments that would create additional cash demands and financial risk for us
We may not be able to accurately forecast our operating results 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 The changes in net sales and profitability that we forecast may not be achieved Our sales and profitability depends on the growth of demand for the products we offer at the prices 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 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 Furthermore most of our expenses and investments are fixed and we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our net sales results Failure to accurately forecast our operating results could cause investors perceptions of our business to be adversely affected and the market price of our Class B common stock could decline
Our failure to comply with the restrictive covenants under our revolving credit facility and other debt instruments could result in an event of default which if not cured or waived could result in us being required to repay these borrowings before their due date with penalties If we are forced to refinance these borrowings on less favorable terms our results of operations and financial condition could be adversely affected by increased costs and rates
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 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 In addition the employer mandate provisions of the Patient Protection and Affordable Health Care Act the PPACA changes in regulations under the PPACA changes in federal and state minimum wage laws and other laws and regulations relating to employee benefits could cause us to incur additional wage and benefit costs which could negatively impact our business financial condition and results of operations
Our business is adversely affected by unseasonal weather conditions Sales of certain seasonal apparel items especially outerwear are dependent in part on the weather and may decline in years in which weather conditions do not favor the use of these products Sales of our spring and summer products which traditionally consist of lighter weight clothing are adversely affected by cool or wet weather Similarly sales of our fall and winter products which are traditionally weighted toward outerwear are adversely affected by mild dry or warm weather 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
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 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 If we are not able to continue rapid innovation of new products and product features our brand may be harmed and our results of operations may be materially adversely affected
We regard our trademarks copyrights trade secrets and similar proprietary rights as critical to our success As such we rely on trademark and copyright law trade secret protection and confidentiality agreements with our associates consultants suppliers and others to protect our proprietary rights Nevertheless the steps we take to protect our proprietary rights may be inadequate and we may experience difficulty in effectively limiting the unauthorized use of our trademarks and other intellectual property worldwide Unauthorized use of our trademarks copyrights trade secrets or other intellectual property rights may cause significant damage to our brand and our ability to effectively represent ourselves to agents suppliers vendors licensees and or customers While we intend to enforce our intellectual property rights there can be no assurance that we are adequately protected in all countries or that we will prevail when defending our trademark and proprietary rights If we are unable to protect or preserve the value of our trademarks copyrights or other intellectual property rights for any reason or if we fail to maintain our brand image due to merchandise and service quality issues actual or perceived adverse publicity governmental investigations or litigation or other reasons our brand and reputation could be damaged and our business may be adversely affected
Third parties may sue us for alleged infringement of their proprietary rights or use intellectual property rights to interfere with or attempt to interfere with the manufacture of products for us or the supply of products to us The party claiming infringement might have greater resources than we do to pursue its claims and we could be forced to incur substantial costs and devote significant management resources to defend against such litigation If the party claiming infringement were to prevail we could be forced to discontinue the use of the related trademark or design and or pay significant damages or enter into expensive royalty or licensing arrangements with the prevailing party assuming these royalty or licensing arrangements are available at all on an economically feasible basis which they may not be We could also be required to pay substantial damages Such infringement claims could harm the Duluth Trading brand In addition any payments we are required to make and any injunction we are required to comply with as a result of such infringement could adversely affect our financial results
Our reputation and customers willingness to purchase our products depend in part on our suppliers compliance with ethical employment practices such as with respect to child labor wages and benefits forced labor discrimination freedom of association unlawful inducements safe and healthy working conditions and with all legal and regulatory requirements relating to the conduct of their business While we operate compliance and monitoring programs to promote ethical and lawful business practices we do not exercise ultimate control over our independent suppliers or their business practices and cannot guarantee their compliance with ethical and lawful business practices Violation of labor or other laws by our suppliers or the divergence of a supplier s labor practices from those generally accepted as ethical in the United States could materially hurt our reputation which could have an adverse effect on our business and results of operations
In accordance with current law we pay collect and or remit taxes in those states where we or our subsidiary as applicable maintain a physical presence Tax laws are complex and their application differs from state to state 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 increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out of state companies Additionally the Supreme Court of the United States ruled in South Dakota v 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 A successful assertion by one or more states requiring us to collect taxes where we presently do not do so or to collect more taxes in a jurisdiction in which we currently do collect some taxes could result in substantial tax liabilities including taxes on past sales as well as penalties and interest 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
Our business requires compliance with many laws and regulations including labor and employment customs truth in advertising data privacy and security consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and or govern the importation promotion and sale of merchandise and the operation of stores and warehouse facilities Failure to achieve compliance could subject us to lawsuits and other proceedings and could also lead to damage awards fines and penalties We may become involved in a number of legal proceedings and audits including government and agency investigations and consumer employment tort and other litigation We cannot predict with certainty the outcomes of these legal proceedings and other contingencies The outcome of some of these legal proceedings audits and other contingencies could require us to take or refrain from taking actions which could negatively affect our operations or require us to pay substantial amounts of money adversely affecting our financial condition and results of operations Additionally defending against these lawsuits and proceedings may be necessary which could result in substantial costs and diversion of management s attention and resources causing a material adverse effect on our business financial condition and results of operations There can be no assurance that any pending or future legal proceedings and audits will not have a material adverse effect on our business financial condition and results of operations
Our consolidated financial statements are prepared in accordance with U S GAAP New accounting rules or regulations and changes to existing accounting rules or regulations have occurred and may occur in the future Future changes to accounting rules or regulations could negatively affect our results of operations and financial condition through increased compliance costs
The dual class structure of our common stock and the existing ownership of common stock by our executive officers directors and their affiliates have the effect of concentrating voting control with our executive officers directors and their affiliates for the foreseeable future which will limit your ability to influence corporate matters
Our Class A common stock has ten votes per share and our Class B common stock has one vote per share Given the greater number of votes per share attributed to our Class A common stock our Chairman Stephen L 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 Schlecht will be able to exert a significant degree of influence or actual control over our management and affairs and over matters requiring shareholder approval including the election of directors a merger consolidation or sale of all or substantially all of our assets and any other significant transaction Mr Schlecht together with our other executive officers directors and their affiliates owns shares representing the majority of the voting power of our outstanding capital stock This concentrated control will limit your ability to influence corporate matters for the foreseeable future For example these shareholders will be able to control elections of directors amendments of our articles of incorporation or bylaws increases to the number of shares available for issuance under our equity incentive plans or adoption of new equity incentive plans and approval of any merger or sale of assets for the foreseeable future This control may materially adversely affect the market price of our Class B common stock
Additionally the holder of our Class A common stock may cause us to make strategic decisions or pursue acquisitions that could involve risks to you or may not be aligned with your interests 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
Although we have a majority of independent directors on our board we are a controlled company As such there is no guarantee that we will not take advantage of this exemption in the future Accordingly as long as we are a controlled company holders of our Class B common stock may not have the same protections afforded to shareholders of companies that are subject to all of the NASDAQ corporate governance requirements
In addition stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many retail and e commerce companies Stock prices of many retail companies and e commerce companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies 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
The trading market for our Class B common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business our market and our competitors We do not have any control over these analysts If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares our share
As a public company we are subject to the reporting requirements of the Exchange Act the Sarbanes Oxley Act the Dodd Frank Wall Street Reform and Consumer Protection Act the listing requirements of the NASDAQ Global Select Market and other applicable securities rules and regulations Compliance with these rules and regulations increase our legal and financial compliance costs make some activities more difficult time consuming or costly and increase demand on our systems and resources The Exchange Act requires among other things that we file annual quarterly and current reports with respect to our business and results of operations The Sarbanes Oxley Act requires among other things that we maintain effective disclosure controls and procedures and internal control over financial reporting In order to maintain and if required improve our disclosure controls and procedures and internal control over financial reporting significant resources and management oversight may be required As a result management s attention may be diverted from other business concerns which could materially adversely affect our business and results of operations
In addition changing laws regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies increasing legal and financial compliance costs and making some activities more time consuming These laws regulations and standards are subject to varying interpretations in many cases due to their lack of specificity and as a result their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices We intend to invest resources to comply with evolving laws regulations and standards and this investment may result in increased general and administrative expenses and a diversion of management s time and attention from revenue generating activities to compliance activities If our efforts to comply with new laws regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice regulatory authorities may initiate legal proceedings against us and our business may be materially adversely affected
As a result of disclosure of information in this annual report and in filings required of a public company our business and financial condition will become more visible which we believe may result in threatened or actual litigation including by competitors and other third parties 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
Provisions in our amended and restated articles of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management In addition to the dual class structure of our common stock our amended and restated articles of incorporation and amended and restated bylaws include provisions that
These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors which is responsible for appointing the members of our management In addition because we are incorporated in Wisconsin the Wisconsin control share acquisition statute and Wisconsin s business combination provisions would apply and limit the ability of an acquiring person to engage in certain transactions or to exercise full voting power of acquired shares under certain circumstances As a result offers to acquire us which may represent a premium over the available market price of our Class B common stock may be withdrawn or otherwise fail to be realized
We believe cybersecurity is critical to advancing our Big Dam Blueprint vision and recognize the importance of assessing identifying and managing material risks associated with cybersecurity threats defined in Item 106 a of Regulation S K These risks include among others described in our risk factor disclosures in Item 1A of this Annual Report on Form 10 K operational risks fraud harm to employees or customers and violation of data privacy or security laws These cybersecurity risks make it necessary that we incur significant expenditures on cybersecurity
Our audit committee of our board of directors is formally charged with oversight of cybersecurity risk This includes reviewing the Company s cybersecurity and other information technology risks controls and procedures including a high level review of the threat landscape facing the Company and the Company s strategy to mitigate cybersecurity risks and potential breaches and the Company s plan to respond to data breaches
Identifying and assessing our cybersecurity risk is integrated into our overall risk management systems and processes As part of our program our internal audit team facilitates an annual risk assessment that includes assessing cybersecurity and other technology risks The results are shared with the board of directors during a regular board meeting In addition a quarterly cyber risk assessment process run by our information technology team including our chief technology officer is shared with the audit committee The chair of the audit committee reports on significant cybersecurity updates to the full board of directors during executive sessions of our quarterly meetings Our audit committee members also engage in conversations throughout the year with management on cybersecurity events and discuss any updates to our cybersecurity processes systems and programs
Our cybersecurity risk management processes are overseen by leaders from our information technology compliance and legal teams Our chief technology officer has over 30 years of experience leading information technology organizations Other individual leaders within these teams have on average over 20 years of experience in roles involving information technology including security and compliance
We have implemented several measures to identify and assess our cybersecurity threats We self assess maturity levels along with areas of risk for the cyber kill chain using the ISO IEC 33004 2015 Process Maturity Model Within this model our risk dashboard is continually assessed based on eight key initiatives reconnaissance intrusion exploitation privilege escalation lateral movement obfuscation anti forensics denial of service and exfiltration Along with this model we engage and utilize various third parties to measure risk profiles of ourselves and vendors security threats specific to our Company both internal and external through multiple avenues such as our website and social media and perform periodic penetration tests on Company systems to identify cybersecurity risks and threats to the Company These evaluations include testing both the design and operational effectiveness of security controls We recognize a cybersecurity incident experienced by a supplier or vendor could materially impact us We assess third party cybersecurity controls as part of our third party information technology risk when integrating new tools or third parties We contractually require third parties to report cybersecurity incidents if applicable to us so we can assess the impact of the incident and any necessary regulatory reporting obligations that may be required Additionally as part of the contract management process new information technology vendors are subject to a cybersecurity review by the information technology team and include cybersecurity and data privacy language if applicable in contracts
Training of employees utilization of incident response plans payment card industry audits and SOX testing are all processes by which we seek to prevent detect mitigate and remediate cybersecurity incidents In the event of a security or data incident the impact is evaluated ranked by severity and prioritized for remediation Incidents deemed to have a moderate or higher business impact even if immaterial to the Company are reported to the audit committee
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 The leases on our retail stores expire at various times and are subject to renewal options and rent escalation provisions As we approach lease renewals for about 25 of our stores through 2026 we are thoroughly evaluating each location for remodel relocation or exit based on enhance performance standards
From time to time we are subject to certain legal proceedings and claims in the ordinary course of business We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business financial condition operating results or cash flows We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable
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 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 or 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 21 2025
Mr Schlecht is the founder of our Company and has served as Chairman of the Board of Directors and Senior Advisor since May 2021 Mr Schlecht has served on our Board of Directors since our founding in 1986 Mr Schlecht previously served as Executive Chairman from February 2015 to May 2021 and as Chief Executive Officer from August 2019 to May 2021 Prior to that Mr Schlecht served as Chairman of the Board of Directors and Chief Executive Officer from February 2003 to February 2015 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 Schlecht holds a B S B A degree and an M B A from Northwestern University
As previously announced the Board of Directors of the Company appointed Mr Schlecht as Interim Chief Executive Officer of the Company in addition to his role as Senior Advisor to the Company effective April 25 2025 unless the Board appoints a permanent Chief Executive Officer prior to such date During the transition period between the announcement of Mr Sato s retirement and April 25 2025 Mr Schlecht will assume day to day leadership of the Company
Mr Sato was appointed to our Board of Directors in May 2021 and since that time has served as President and Chief Executive Officer He previously served as the Chief Executive Officer of The Finish Line Inc from February 2016 to February 2019 and also served on the Board of Directors of The Finish Line Inc from October 2014 to February 2019 Mr Sato previously served as President of The Finish Line Inc from October 2014 to February 2016 President Finish Line Brand from October 2012 to October 2014 and President and Chief Merchandising Officer from October 2010 to September 2012 as well as The Finish Line Inc s Executive Vice President Chief Merchandising Officer from to March 2007 to October 2010 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
Ms Agrawal has served as our Senior Vice President and Chief Financial Officer since February 2024 Ms 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 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 Ms Agrawal holds a Bachelor of Commerce Accounting and Taxation degree from Narsee Monjee College of Commerce and Economics an M B A from the Kelley School of Business at Indiana University CPA inactive and is a CFA charter holder
Mr Getson has served as our Senior Vice President and Chief Merchandising Officer since August 2024 From December 2016 through April 2024 Mr Getson served as Senior Vice President and General Merchandise Manager at Academy Sports and Outdoors a retailer of trending outdoor and sports categories From June 2010 through November 2016 Mr Getson served as Executive Vice President and General Merchandise Manager at Golfsmith International Prior to that Mr Getson served in various roles at Cabela s Bon Ton Corporation Perry Ellis International and Polo Ralph Lauren
Mr Homolka has served as our Senior Vice President of Talent Retail Store Operations Contact Center Operations Asset Protection Safety 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 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
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 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
Mr Sutera has served as our Senior Vice President Chief Technology Officer and Logistics since August 2022 He previously served as US Chief Technology Operations Officer of Signa Sports United from January 2022 to August 2022 as Executive Vice President Chief Technology Information Officer of JD Sports Fashion from March 2016 to August 2021 as Senior Vice President CTO for Hudson Bay Corporation from November 2013 to February 2016 and as Senior Vice President of Digital Technology Operations of Saks Fifth Avenue from March 2007 to November 2013 Mr Sutera holds a B S in Finance and Accounting from Montclair State University and a Master s Certificate in Computer Science and Project Management from Stevens Institute of Technology
Mr Weber has served as our Senior Vice President of Brand and Marketing since August 2024 serving as caretaker of brand and marketing across all facets of the company From July 2023 to August 2024 Mr Weber served as our Vice President of Brand and Marketing taking on successively greater responsibility of the company s brand marketing and customer analytics functions Prior to joining Duluth Trading he served as Vice President of Brand and Creative at Wilson Sporting Goods from 2021 to 2023 a leading manufacturer and retailer in high performance sports equipment apparel footwear and accessories Previously he spent nearly 5 years at adidas as Senior Director of Global Brand Design Mr Weber earned a Bachelor of Arts degree in Philosophy from Wheaton College and a Master of Fine Arts degree in Fiction from the State University of New York Brockport
Based upon data provided by our transfer agent as of March 21 2025 there were approximately 107 holders of record 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
The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and the accompanying notes and information contained in other sections included elsewhere in this annual report particularly Risk Factors and Business This discussion and analysis is based on the beliefs of our management as well as assumptions made by and information currently available to our management The statements in this discussion and analysis concerning expectations regarding our future performance liquidity and capital resources as well as other non historical statements in this discussion and analysis are forward looking statements 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
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 February 2 2025 we operated 62 retail stores and three outlet stores
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 Our brand has a heritage in workwear that transcends tradesmen and appeals to a broad demographic for everyday and on the job use
From our heritage as a catalog for those working in the building trades Duluth Trading has become a widely recognized brand and proprietary line of innovative and functional apparel and gear Over the last decade we have created strong brand awareness built a loyal customer base and generated sales growth We have done so by sticking to our roots of there s gotta be a better way and through our relentless focus on providing our customers with quality functional products
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 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
Our management s discussion and analysis includes market sales metrics for our stores website and catalog sales Market areas are determined by a third party that divides the United States and Puerto Rico into 280 unique geographical areas Our store market sales metrics include sales from our stores website and catalog Our non store market sales metrics include sales from our website catalog and orders placed through the call center
Gross profit is equal to our net sales less cost of goods sold Gross profit as a percentage of our net sales is referred to as gross margin Cost of goods sold includes the direct cost of purchased merchandise inventory shrinkage inventory adjustments due to obsolescence including excess and slow moving inventory and lower of cost and net realizable reserves inbound freight and freight from our fulfillment centers to our retail stores 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 Our gross profit may not be comparable to other retailers as we do not include distribution network and store occupancy expenses in calculating gross profit but instead we include them in selling general and administrative expenses
Selling general and administrative expenses include all operating costs not included in cost of goods sold These expenses include all payroll and payroll related expenses and occupancy expenses related to our stores and to our operations at our headquarters including utilities depreciation and amortization They also include marketing expense which primarily includes television digital and social media advertising catalog production mailing and print advertising costs as well as all logistics costs associated with shipping product to our customers consulting and software expenses and professional services fees Selling general and administrative expenses as a percentage of net sales is usually higher in lower volume quarters and lower in higher volume quarters because a portion of the costs are relatively fixed
While we expect these expenses to increase as we continue to increase brand awareness and invest in infrastructure to support our business we believe these expenses will decrease as a percentage of sales over time Our shipping and handling expenses typically increase during the second half of the year due to additional surcharges during our peak selling season
We believe Adjusted EBITDA is a useful measure of operating performance as it provides a clearer picture of operating results by excluding the effects of financing and investing activities by eliminating the effects of interest and depreciation costs and eliminating expenses that are not reflective of underlying business performance We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our business
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 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
We believe Free Cash Flow is a useful measure of performance as an indication of the Company s ability to generate cash and provides additional perspective on our ability to efficiently use capital in executing our growth strategy We use Free Cash Flow to facilitate a comparison of our operating performance on a consistent basis from period to period and our ability to generate cash
Net sales decreased 20 1 million or 3 1 to 626 6 million in fiscal 2024 compared to 646 7 million in fiscal 2023 The decrease in net sales was primarily driven by lower average unit retail prices processing delays at a legacy fulfillment center lower web conversion and a decline in store traffic Following the surge in unit demand over the Black Friday weekend inventory units housed in our highly automated Adairsville center were significantly depleted resulting in a higher level of orders being routed to a legacy fulfillment facility which resulted in significant backlog We subsequently reduced promotional depth and frequency to address the order backlog and maintain sales quality which constrained top line growth
Gross profit decreased 16 5 million or 5 1 to 308 5 million in fiscal 2024 compared to 325 0 million in fiscal 2023 As a percentage of net sales gross margin decreased to 49 2 of net sales in fiscal 2024 compared to 50 3 of net sales in fiscal 2023 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 partially offset by an improvement in product costs from our direct to factory sourcing initiative
Income tax expense was 2 4 million in fiscal 2024 compared to income tax benefit of 2 9 million in fiscal 2023 Our effective tax rate related to controlling interest was 5 7 in fiscal 2024 compared to 22 4 in fiscal 2023 The provision for fiscal 2024 reflected the establishment of a valuation allowance against the net amount of deferred tax assets as well as pre tax loss in the current year
As a result of the factors discussed above in the Results of Operations section Adjusted EBITDA decreased 18 0 million to 14 6 million in fiscal 2024 compared to 32 7 million in fiscal 2023 As a percentage of net sales Adjusted EBITDA decreased to 2 3 of net sales in fiscal 2024 compared to 5 1 of net sales in fiscal 2023
Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity 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 February 2 2025 our working capital was 63 1 million which includes cash and cash equivalents of 3 3 million
We spent 17 4 million in fiscal 2024 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 20 0 million in fiscal 2025 on capital expenditures 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 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 We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year
For fiscal 2024 net cash used in operating activities was 16 9 million which primarily consisted of non cash depreciation and amortization of 32 3 million and amortization of stock based compensation of 4 0 million offset by cash used in operating assets and liabilities of 12 0 million and net loss of 43 6 million The cash used in operating assets and liabilities of 12 0 million primarily consisted of a 40 8 million increase in inventory partially offset by a 22 9 million increase in trade accounts payable
The increase in inventory and trade accounts payable was primarily related to an increase in in transit inventory as we moved from purchasing through an agent to buying directly from factories coupled with higher inventory receipts on core year round products to mitigate low in stock post Black Friday week
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 14 5 million which was partially offset by net loss of 9 9 million The cash provided by operating assets and liabilities of 14 5 million primarily consisted of a 29 2 million decrease in inventory partially offset by a 5 4 million and 4 4 million decrease in trade accounts payable and accrued expenses respectively
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 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 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 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
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 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
On January 31 2025 the Company entered into the Second Amendment to the Credit Agreement the Second Amendment which was treated as an extinguishment for accounting purposes The Second Amendment amends the Credit Agreement in order to i decrease the revolving commitment from 200 0 million to 100 0 million ii revise the definition of
Applicable Rate to provide for pricing terms in the event of a Rent Adjusted Leverage Ratio greater than or equal to 3 50 1 0 iii limit the exceptions to the prohibition on restricted payments to a making dividends or distributions by any subsidiary to the Company and b the acquisition of equity interests in satisfaction of tax withholding obligations associated with restricted stock or awards under employee incentive plans and iv provide that the Maximum Rent Adjusted Leverage Ratio and the Minimum Fixed Charge Coverage Ratio will be measured commencing on the fiscal quarter ending May 2 2021 and measured quarterly thereafter as of the last day of each fiscal quarter of the Company other than for the fiscal quarter ending February 2 2025
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in our consolidated financial statements and related notes as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period We evaluate our accounting policies estimates and judgments on an on going basis We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances Actual results may differ from these estimates under different assumptions and conditions and such differences could be material to the consolidated financial statements
The Company currently estimates product return reserve using its own historical sales information The Company regularly assesses and adjusts the estimate of accrued sales returns by updating return rates for actual company trends and projected costs While returns have historically been within our expectations future return rates may differ from those experienced in the past Changes in these estimates can have a material impact on our financial statements We believe the accounting estimate related to product returns is a critical accounting estimate because it requires us to make assumptions about future potential returns which are highly uncertain
With respect to critical accounting policies even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations However our historical results for the periods presented in the consolidated financial statements have not been materially impacted by such variances More information on all of our significant accounting policies can be found in Note 2 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements included in this Annual Report on Form 10 K
The Company recognizes ROU assets and lease liabilities related to leases on the Company s consolidated balance sheets The Company determines if an arrangement is or contains a lease at inception ROU assets represent the right to use an underlying asset for the lease term and lease liabilities reflect the obligation to make lease payments arising from the lease At any given time during the lease term the lease liability represents the present value of the remaining lease payments and the ROU asset is measured at the amount of the lease liability adjusted for pre paid rent unamortized initial direct costs and the remaining balance of lease incentives received Both the lease ROU asset and liability are reduced to zero at the end of the lease See Note 3 Leases of Notes to Consolidated Financial Statements included in this Annual Report on Form 10 K
the use of the product including among other options the ability to redirect the product to a different shipping destination Store revenue is recognized at the point of sale This represents the point at which the customer obtains control of the product and has the ability to direct the use of the product
We reserve for projected merchandise returns based on both historical and actual experience as well as various other assumptions that we believe to be reasonable Actual merchandise returns are monitored regularly and have not been materially different from the estimates recorded Product returns often represent merchandise that can be resold Amounts refunded to customers are generally made by issuing the same payment tender as used in the original purchase Merchandise exchanges of the same product and price are not considered merchandise returns and are therefore excluded when calculating the sales returns reserve
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 Net realizable value is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion disposal and transportation The inventory value is adjusted periodically if needed to reflect current market conditions and inventory composition which requires our judgments that may significantly affect the ending inventory valuation as well as gross margin The estimates used in inventory valuation are obsolescence including excess and slow moving inventory and lower of cost or market reserves and estimates of inventory shrinkage We adjust our inventory for obsolescence based on historical trends aging reports specific identification current retail prices and our estimates of future retail sales prices
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
Due to these factors our obsolescence and shrinkage reserves contain uncertainties Both estimates have calculations that require us to make assumptions and to apply judgment regarding a number of factors including market conditions the selling environment historical results and current inventory trends If actual observed obsolescence or periodic updates of our shrinkage estimates differ from our original estimates we adjust our inventory reserves accordingly throughout the period We do not believe that changes in the assumptions used in these estimates would have a significant effect on our net income or inventory balances 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
We account for income taxes and the related accounts using the asset and liability method in accordance with ASC Topic 740 Income Taxes ASC 740 Under this method we accrue income taxes payable or refundable and recognize deferred tax assets and liabilities based on differences between U S GAAP and tax bases of assets and liabilities We measure deferred tax assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse and recognize the effect of a change in enacted rates in the period of enactment
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized In making such determination we consider all available positive and negative evidence including future reversals of existing taxable temporary differences projected future taxable income tax planning strategies and recent financial operations A valuation allowance is established if it is more likely than not that some portion or all of the deferred income tax asset will not be realized A valuation allowance was recognized for the year ended February 2 2025
We have audited the accompanying consolidated balance sheets of Duluth Holdings Inc and subsidiaries the Company as of February 2 2025 and January 28 2024 the related consolidated statements of operations comprehensive income shareholders equity and cash flows for the years then ended and the related notes and financial statement schedule II Valuation and Qualifying Accounts collectively the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company as of February 2 2025 and January 28 2024 and the results of its operations and its cash flows for each of the years then ended in conformity with U S generally accepted accounting principles
These consolidated financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on these consolidated financial statements based on our audit We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audit also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements We believe that our audit provides a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the consolidated financial statements and 2 involved our especially challenging subjective or complex judgments The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As discussed in Note 5 to the consolidated financial statements as of February 2 2025 the Company recorded 4 568 thousand in reserves for product returns within accrued expenses and other current liabilities Management estimates the product return reserve using its own historical sales and product return information
The following are the primary procedures we performed to address this critical audit matter We evaluated and tested the design and implementation of certain internal controls related to the product return reserve This included controls related to determining the historical return rate used to estimate product returns We assessed the Company s ability to accurately estimate the product return rate by comparing prior period estimates to actual product return rates experienced We analyzed the product return rate assumption by evaluating the consistency of the assumption with the trend of actual historical product return rates and by comparing the product return reserve to actual product returns received after the balance sheet date
Duluth Holdings Inc Duluth Trading or the Company a Wisconsin corporation is a lifestyle brand of men s and women s casual wear workwear and accessories sold primarily through the Company s own omnichannel platform The Company s products are marketed under the Duluth Trading Company brand with the majority of products being exclusively developed and sold as Duluth Trading branded merchandise
In 2010 the Company initiated its omnichannel platform with the opening of its first store Since then Duluth Trading has expanded its retail presence and as of February 2 2025 the Company operated 62 retail stores and three outlet stores The Company identifies its operating segments according to how its business activities are managed and evaluated The Company continues to grow its omnichannel distribution network which allows the consumer to interact with the Company through a consistent customer experience whether on the Company website or at Company stores The Company has one reportable external segment consistent with the Company s omnichannel business approach The Company s revenues generated outside the United States were insignificant
The Company has two classes of authorized common stock Class A common stock and Class B common stock The rights of holders of Class A common stock and Class B common stock are identical except for voting and conversion rights Each share of Class A common stock is entitled to ten votes per share and is convertible at any time into one share of Class B common stock Each share of Class B common stock is entitled to one vote per share The Company s Class B common stock trades on the NASDAQ Global Select Market under the symbol DLTH
The Company s business is affected by the pattern of seasonality common to most retail apparel businesses Historically the Company has recognized a significant portion of its revenue and operating profit in the fourth fiscal quarter of each year as a result of increased sales during the holiday season
During fiscal 2024 management identified inaccuracies in the collection of local sales tax transactions within certain states Accordingly the Company has revised its consolidated financial statements and related notes to increase Accrued expenses by 3 2 million and Deferred tax assets by 0 8 million as of January 28 2024 and to increase Selling general and administrative expenses by 0 7 million and income tax benefit by 0 2 million for the year ended January 28 2024 The cumulative errors related to periods prior to fiscal 2023 resulted in a decrease to Retained earnings by 2 4 million as of the beginning of fiscal 2023 The Company has determined that the errors were immaterial to all impacted periods and has corrected the impacted periods as an immaterial correction of an error The Company also revised the fiscal 2024 quarterly consolidated financial statements to correct the impact of the errors on the respective periods
The preparation of financial statements in conformity with U S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates
The Company s revenue primarily consists of the sale of apparel footwear and hard goods 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 Store revenue is recognized at the point of sale The Company provides the customer the right of return on the product and revenue is adjusted based on an estimate of the expected returns based on historical rates as well as events that may cause changes to historical rates See Note 5 Accrued Expense and Other Liabilities for the Company s product returns reserve Shipping and processing revenue generated from customer orders are included as a component of net sales and shipping and processing expense including handling expense is included as a component of selling general and administrative expenses Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses A liability is recognized at the time a gift card is sold and revenue is recognized at the time the gift card is redeemed for merchandise See Note 8 Revenue for further information
The Company s advertising and catalog expense primarily consists of web marketing programs social media and radio and television advertisements which are expensed as they are incurred The Company s direct response advertising consists of producing printing and mailing catalogs which are expensed upon receipt by customers
Shipping and processing revenue generated from customer orders has been classified as a component of net sales Shipping and processing expense including handling expense has been classified as a component of selling general and administrative expenses The Company incurred shipping and processing expenses of 43 7 million and 47 2 million for fiscal 2024 and fiscal 2023 respectively
The Company accounts for income taxes and related accounts using the asset liability method in accordance with ASC Topic 740 Income Taxes ASC 740 Under ASC 740 the Company accrues income taxes payable or refundable and recognizes deferred tax assets and liabilities based on differences between U S GAAP and tax bases of assets and liabilities The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse and recognizes the effect of a change in enacted rates in the period of enactment A valuation allowance is established if it is more likely than not that some portion or all of the deferred income tax asset will not be realized
The Company establishes 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 The Company recognizes penalties and interest related to uncertain tax positions as income tax expense See Note 9 Income Taxes of these Notes to Consolidated Financial Statements for further discussion
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits At various times during the year the Company has certain cash balances deposited in financial institutions in excess of federally insured limits The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk
The Company considers short term investments with original maturities of three months or less when purchased to be cash equivalents As of February 2 2025 Cash and cash equivalents consisted of cash amounts receivable from credit card issuers and money market funds Amounts receivable from credit card issuers are typically converted to cash within 2 to 4 days of the original sales transaction and are considered to be cash equivalents
Inventory consists of finished goods stated at the lower of cost or net realizable value with cost determined using the first in first out valuation method The Company records an inventory reserve for the anticipated loss associated with selling inventories below cost Inventory reserve for excess obsolete items and shrinkage was 2 1 million and 1 4 million as of February 2 2025 and January 28 2024 respectively
Property and equipment are carried at cost and are generally depreciated using the straight line method over the estimated useful lives Leasehold improvements are depreciated over the shorter of the lease term or estimated useful life Depreciable lives by major classification generally are as follows
Software hosting implementation costs includes costs of implementation activities of certain cloud computing arrangements in accordance with Accounting Standards Update No 2018 15 Intangibles Goodwill and Other Internal Use Software Subtopic 350 40 Amortization expense was 5 3 million and 5 0 million for fiscal 2024 and fiscal 2023 respectively Accumulated amortization was 12 4 million and 10 4 million for fiscal 2024 and fiscal 2023 respectively See Note 12 Recent Accounting Pronouncements for more information
Goodwill represents the excess of purchase price over the fair value of net assets acquired ASC Topic 350 Intangibles Goodwill and Other requires that goodwill be tested for impairment annually or more often if an event or circumstance indicates that an impairment loss may have been incurred The Company s management uses its judgment in assessing whether goodwill may have become impaired between annual impairment tests Indicators such as unexpected adverse business conditions economic factors competitive activities loss of key personnel and acts by governments may signal that an asset has become impaired
Management performed its annual qualitative assessment of goodwill as of December 31 2024 and 2023 which included assessing factors such as macroeconomic conditions industry and market considerations cost factors and overall financial performance The next step after the qualitative assessment failed was estimating the fair value of the reporting unit which management used the market valuation approach Through the annual assessment management determined the carrying amount of the Goodwill exceeded its value Thus the Company recognized a full impairment for the year ended February 2 2025
Intangible assets and other assets include loan origination fees and trade names which are amortized over their estimated useful lives ranging from three years to fifteen years Other assets also primarily include security deposits required by certain of the Company s lease agreements and prepaid expenses Amortization expense was 0 2 million for fiscal 2024 and fiscal 2023 Accumulated amortization was 1 2 million and 1 0 million as of February 2 2025 and January 28 2024 respectively
The Company s long lived assets are reviewed for impairment during the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets a loss is recognized for the difference between the fair value and the carrying value of the asset or group of assets Such analyses necessarily involve judgment
In connection with the IPO the Company adopted the 2015 Equity Incentive Plan of Duluth Holdings Inc There are awards outstanding under the 2015 plan but we do not grant new awards under the plan We have adopted the 2024 Equity Incentive Plan of Duluth Holdings Inc 2024 Plan which provides compensation alternatives such as stock options shares restricted stock restricted stock units deferred stock and performance share units using or based on the Company s Class B common stock
The Company accounts for its stock based compensation plan in accordance with ASC Topic 718 Stock Compensation which requires the Company to measure all share based payments at grant date fair value and recognize the cost over the requisite service period of the award Restricted stock issued to board members generally vests over a period of one year Restricted stock issued to key employees and executives typically vests over a period of three years to four years based on the terms for each individual award The fair value of the restricted stock is determined based on the market value of the Company s Class B common stock on the grant date Restricted stock forfeitures are recognized as incurred
Other comprehensive income or loss represents the change in equity from non shareholder or non member transactions which is not included in the statements of earnings but is reported as a separate component of shareholders equity For fiscal 2024 and fiscal 2023 other comprehensive income consists of changes in unrealized gains and losses on the Company s available for sale security net of taxes
ASC Topic 820 Fair Value Measurements and Disclosures ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date i e an exit price The exit price is based on the amount that the holder of the asset or liability would receive or need to pay in an actual transaction or in a hypothetical transaction if an actual transaction does not exist at the measurement date ASC 820 describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value of which the first two are considered observable and the last unobservable as follows
Level 2 Inputs other than Level 1 that are observable either directly or indirectly such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
The Company s assets and liabilities measured at fair value are categorized as Level 1 or Level 3 instruments The fair value of the Company s money market account is obtained from real time quotes for transactions in active exchange markets involving identical assets Level 1 The fair value of the Company s available for sale security was valued based on a discounted cash flow method Level 3 which incorporates the U S Treasury yield curve credit information and an estimate of future cash flows During fiscal 2024 certain changes in the inputs did impact the fair value of the available for sale security The calculated fair value is based on estimates that are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
Based on the criteria set forth in ASC Topic 842 Leases ASC 842 the Company recognizes ROU assets and lease liabilities related to leases on the Company s Consolidated Balance Sheets The Company determines if an arrangement is or contains a lease at inception ROU assets represent the right to use an underlying asset for the lease term and lease liabilities reflect the obligation to make lease payments arising from the lease At any given time during the lease term the lease liability represents the present value of the remaining lease payments and the ROU asset is measured at the amount of the lease liability adjusted for pre paid rent unamortized initial direct costs and the remaining balance of lease incentives received Both the lease ROU asset and liability are reduced to zero at the end of the lease
The Company leases retail space under non cancelable lease agreements which expire on various dates through 2041 Substantially all of these arrangements are store leases Store leases generally have initial lease terms ranging from five years to fifteen years with renewal options and rent escalation provisions At the commencement of a lease the Company includes only the initial lease term as the option to extend is not reasonably certain The Company does not record leases with a lease term of 12 months or less on the Company s Consolidated Balance Sheets
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 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 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 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
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 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
On January 31 2025 the Company entered into the Second Amendment to the Credit Agreement the Second Amendment which was treated as an extinguishment for accounting purposes The Second Amendment amends the Credit Agreement in order to i decrease the revolving commitment from 200 0 million to 100 0 million ii revise the definition of Applicable Rate to provide for pricing terms in the event of a Rent Adjusted Leverage Ratio greater than or equal to 3 50 1 0 iii limit the exceptions to the prohibition on restricted payments to a making dividends or distributions by any subsidiary to the Company and b the acquisition of equity interests in satisfaction of tax withholding obligations associated with restricted stock or awards under employee incentive plans and iv provide that the Maximum Rent Adjusted Leverage Ratio and the Minimum Fixed Charge Coverage Ratio will be measured commencing on the fiscal quarter ending May 2 2021 and measured quarterly thereafter as of the last day of each fiscal quarter of the Company other than for the fiscal quarter ending February 2 2025
Based upon the criteria set forth in ASC 810 Consolidation the Company consolidates variable interest entities VIEs in which it has a controlling financial interest and is therefore deemed the primary beneficiary A controlling financial interest will have both of the following characteristics a the power to direct the VIE activities that most significantly impact economic performance and b the obligation to absorb the VIE losses and the right to receive benefits that are significant to the VIE The Company has determined that it was the primary beneficiary of one VIE as of February 2 2025 and January 28 2024
The Company leases the Company s headquarters in Mt Horeb Wisconsin from TRI In conjunction with the lease the Company originally invested 6 3 million in a trust that loaned funds to TRI for the construction of the Company s headquarters TRI is a Wisconsin limited liability company whose primary purpose and activity is to own this real property The Company considers itself the primary beneficiary for TRI as the Company has both the power to direct the activities that most significantly impact the entity s economic performance and is expected to receive benefits that are significant to TRI As the Company is the primary beneficiary it consolidates TRI and the lease is eliminated in consolidation The Company does not consolidate the trust as the Company is not the primary beneficiary
Earnings per share is computed under the provisions of ASC 260 Earnings Per Share Basic earnings per share is based on the weighted average number of common shares outstanding for the period Diluted earnings per share is based on the weighted average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method Dilutive potential common shares include outstanding restricted stock and are considered only for dilutive earnings per share The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation is as follows
The Company s revenue primarily consists of the sale of apparel footwear and hard goods Revenue for merchandise that is shipped to our customers from our fulfillment centers and stores is recognized upon shipment Store revenue is recognized at the point of sale net of returns and excludes taxes Shipping and processing revenue generated from customer orders are included as a component of net sales and shipping and processing expense including handling expense is included as a component of selling general and administrative expenses Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses
The Company s contract assets primarily consist of the right of return for amounts of inventory to be returned that are expected to be resold and are recorded in Prepaid expenses and other current assets on the Company s Consolidated Balance Sheets The Company s contract liabilities primarily consist of gift card liabilities and are recorded upon issuance in Accrued expenses and other current liabilities under deferred revenue see Note 5 Accrued Expenses and Other Current Liabilities on the Company s Consolidated Balance Sheets Upon issuance of a gift card a liability is established for its cash value
Revenue from gift cards is recognized when the gift card is redeemed by the customer for merchandise or as gift card breakage an estimate of gift cards which will not be redeemed The Company does not record breakage revenue when escheat liability to the relevant jurisdictions exists Gift card breakage is recorded within Net sales on the Company s Consolidated Statement of Operations The following table provides the reconciliation of the contract liability related to gift cards
The Company regularly assesses the realizability of deferred tax assets and under the asset and liability method prescribed under ASC 740 Income Taxes the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is recorded if necessary to reduce net deferred tax assets to the amount more likely than not to be realized The Company considers all available evidence both positive and negative to determine the realizability of deferred tax assets and includes historical information about results of operations for the current and preceding years as well as more subjective information about future years In conducting this assessment a significant piece of objective negative evidence evaluated by management was a cumulative loss over the most recent 36 month period ended October 27 2024 which was not outweighed by available positive evidence and which limited the Company s ability to give weight to projections of future growth for purposes of this assessment Accordingly as of February 2 2025 a valuation allowance of 11 8 million was provided against the net amount of deferred tax assets The amount of the deferred tax assets considered realizable however could be adjusted if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth
As of February 2 2025 we had state net operating losses NOL of approximately 23 2 million with deferred tax assets of 1 2 million related to these state NOLs These state net operating loss carryforwards expire at various periods beginning in 2029 The federal NOL is approximately 30 1 million with deferred tax asset of 6 3 million related to the federal NOL
If recognized 0 1 million of the Company s unrecognized tax benefits as of February 2 2025 would affect the Company s effective tax rate The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months Any interest and penalties related to uncertain tax positions are recorded in income tax expense There were no material amounts recorded as tax expense for interest or penalties for the years ended February 2 2025 or January 28 2024
The Company has a contributory 401 k profit sharing plan the Plan which covers all employees who have attained age 21 and who have met minimum service requirements The Company makes quarterly non discretionary safe harbor matching contributions to the Plan equal to 100 of the basic contribution made by each participant on the first 3 of his or her compensation plus 50 of the basic contribution made by each participant on the next 2 of his or her compensation As of January 1 2025 the Company updated the non discretionary safe harbor matching contributions to the Plan to 100 of the basic contribution made by each participant on the first 1 of his or her compensation plus 50 of the basic contribution made by each participant on the next 5 of his or her compensation
From time to time the Company becomes involved in lawsuits and other claims arising from its ordinary course of business Because of the uncertainties related to the incurrence amount and range of loss on any pending litigation or claim management is currently unable to predict the ultimate outcome of any litigation or claim determine whether a liability has been incurred or make an estimate of the reasonably possible liability that could result from an unfavorable outcome
Management believes after considering a number of factors and the nature of any outstanding litigation or claims that the outcome will not have a material effect upon the Company s results of operations financial condition or cash flows However because of the unpredictable nature of these matters the Company cannot provide any assurances regarding the outcome of any litigation or claim to which it is a party or the impact on it of an adverse ruling in such matters
As of February 2 2025 and January 28 2024 we had one reportable segment The Company s operating segment is based on how the Chief Operating Decision Maker CODM makes decisions about allocating resources and assessing performance Our CODM is our Chief Executive Officer and the CODM receives discrete financial information for the Company s gross margin and a summarized comprehensive statement of income monthly that categorizes selling general and administrative expenses into four line items with remaining expenses and expenditures for long lived assets being consolidated as an omnichannel business
On February 3 2020 the Company adopted Accounting Standards Update ASU No 2018 15 Intangibles Goodwill and Other Internal Use Software Subtopic 350 40 ASU 2018 15 which provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract ASU 2018 15 requires a customer in a cloud computing arrangement that is a service contract to follow the new internal use software guidance to determine which implementation costs to capitalize as assets or expense as incurred The new internal use software guidance requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post implementation stages be expensed as they are incurred The Company adopted ASU 2018 15 using the prospective method In fiscal 2024 and 2023 11 2 million and 10 1 million of capitalized costs associated with implementation activities net of amortization are classified within Prepaid expenses other current assets on the Company s Consolidated Balance Sheets respectively and 5 3 million and 5 0 million of related amortization costs are included in Selling general and administrative expenses on the Company s Consolidated Statement of Operations respectively
In June 2016 the FASB issued Accounting Standards Update No 2016 13 Financial Instruments Credit Losses Topic 326 Measurement of Credit Losses on Financial Instruments ASU 2016 13 which amends the impairment model by requiring entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments which include trade and other receivables loans and held to maturity debt securities to record an allowance for credit risk based on expected losses rather than incurred losses otherwise known as CECL In addition this guidance changes the recognition for credit losses on available for sale debt securities which can occur as a result of market and credit risk and requires additional disclosures On November 15 2019 the FASB issued ASU No 2019 10 Financial Instruments Credit Losses Topic 326 Derivatives and Hedging Topic 815 and Leases Topic 842 ASU 2019 10 which provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities ASU 2019 10 amends the effective dates for ASU 2016 13 for smaller reporting companies with fiscal years beginning after December 15 2022 and interim periods within those years The Company adopted ASU 2016 13 on January 30 2023 the first day of the Company s first quarter for the fiscal year ending January 28 2024 the Company s fiscal year 2023 ASU 2016 13 did not have a material impact on the Company s consolidated financial statements
In November 2023 the FASB issued ASU No 2023 07 Segment Reporting Improvements to Reportable Segment Disclosures This ASU improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses In addition the amendments enhance interim disclosure requirements clarify circumstances in which an entity can disclose multiple segment measures of profit or loss provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements The new guidance is effective for public companies with annual periods beginning after December 15 2023 and interim periods within annual period beginning after December 15 2024 with early adoption permitted The Company adopted ASU 2023 07 on January 29 2024 the first day of the Company s first quarter for the fiscal year ending February 2 2025 the Company s fiscal year 2024
In December 2023 the FASB issued ASU No 2023 09 Income Taxes Improvements to Income Tax Disclosures This ASU improves the transparency of income tax disclosures by requiring i consistent categories and greater disaggregation of information in the rate reconciliation and ii income taxes paid disaggregated by jurisdiction This new guidance will be effective for annual periods beginning after December 15 2024 and early adoption is permitted Management is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements
Section 13a 15 b under the Securities Exchange Act of 1934 as amended the Exchange Act requires management of an issuer subject to the Exchange Act to evaluate with the participation of the issuer s principal executive and principal financial officers or persons performing similar functions the effectiveness of the issuer s disclosure controls and procedures as defined in Rule 13a 15 e under the Exchange Act as of the end of each fiscal quarter The Company carried out an evaluation under the supervision of and with the participation of our management including our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures at the reasonable assurance level pursuant to Rule 13a 15 of the Exchange Act Based on this evaluation our Chief Executive Officer and Chief Financial Officer have concluded that as of such date our disclosure controls and procedures were effective at the reasonable assurance level
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a 15 f under the Exchange Act Management assessed the effectiveness of its internal control over financial reporting as of February 2 2025 In making this assessment management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission COSO in the Internal Control Integrated Framework 2013 or the COSO Report Based on this assessment management concluded that our internal control over financial reporting is effective as of February 2 2025
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
There was no change in our internal control over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the Exchange Act that occurred during the fiscal quarter ended February 2 2025 that has materially affected or is reasonable likely to materially affect our internal control over financial reporting
Information required by this Item concerning our directors audit committee and audit committee financial experts insider trading policy and compliance with Section 16 a of the Exchange Act is incorporated by reference to information under the sections Proposal One Election of Directors Executive Compensation Insider Trading Policy and Delinquent Section 16 a Reports in our definitive proxy statement for our 2025 annual meeting of shareholders to be held on May 29 2025 the Proxy Statement It is anticipated that our Proxy Statement will be filed with the Securities and Exchange Commission on or about April 11 2025
We have adopted a code of business conduct and ethics that applies to our directors officers and employees including our principal executive officer principal financial officer and principal accounting officer We have posted the code of business conduct and ethics on our website at http ir duluthtrading com under the tab Corporate Governance Documents Charters Code of Business Conduct and Ethics We intend to satisfy our disclosure requirements under Item 5 05 of Form 8 K regarding amendments to or waiver of any provisions of our code of business conduct and ethics that applies to our principal executive officer principal financial officer and principal accounting officer and our directors by posting such information to our website
Our code of business conduct and ethics is available in print for any shareholder who requests it by writing to Secretary Duluth Holdings Inc 201 East Front Street Mount Horeb Wisconsin 53572 We are not including the information available on or through our website as part of or incorporating such information by reference into this Annual Report on Form 10 K
See Index to Consolidated Financial Statements in Part II Item 8 of this Annual Report on Form 10 K Schedule II is included in Part II Item 8 All other financial statement schedules have been omitted because they are not required or are not applicable or because the information required in those schedules either is not material or is included in the consolidated financial statements or the accompanying notes
Form of S Corporation Termination Tax Allocation and Indemnification Agreement among Duluth Holdings Inc and shareholders of Duluth Holdings Inc incorporated by reference to Exhibit 10 23 of Pre Effective Amendment No 1 to the Company s Registration Statement on Form S 1 File No 333 207300 filed October 13 2015
Credit Agreement dated as of May 14 2021 among Duluth Holdings Inc the Lenders party thereto Bank of America N A as Administrative Agent Swingline Lender and L C Issuer BofA Securities Inc as a Joint Lead Arranger and Sole Bookrunner and Keybanc Capital Markets Inc as a Joint Lead Arranger incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 8 K dated May 14 2021
First Amendment dated as of July 8 2022 among Duluth Holdings Inc the Lenders party thereto Bank of America N A as Administrative Agent Swingline Lender and L C Issuer BofA Securities Inc as a Joint Lead Arranger and Sole Bookrunner and Keybanc Capital Markets Inc as a Joint Lead Arranger incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 8 K dated July 8 2022
Second Amendment dated as of January 31 2025 among Duluth Holdings Inc the Lenders party thereto Bank of America N A as Administrative Agent Swingline Lender and L C Issuer BofA Securities Inc as a Joint Lead Arranger and Sole Bookrunner and Keybanc Capital Markets Inc as a Joint Lead Arranger incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 8 K dated January 31 2025

Company Name	DULUTH HOLDINGS INC. Vist SEC web-site
Category	RETAIL-APPAREL & ACCESSORY STORES
Trading Symbol	DLTH