Duluth Holdings Inc.

Good morning and welcome to the Duluth Holdings third quarter 2020 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Donnie Case of Investor Relations. Please go ahead.

Thank you, and welcome to today's call to discuss Duluth Trading's third quarter financial results. Our earnings release, which we issued this morning, is available on our investor relations website at irduluthtrading.com under press releases. I am here today with Steve Schlecht, Chief Executive Officer, and Dave Loretta, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we will open the call to your questions. Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements which can be identified by the use of words such as estimate, anticipate, expect, and similar phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts, and assumptions and are subject to risk and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in our most recent annual report on Form 10-K and other SEC filings as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. And with that, I'll turn the call over to Steve Schlecht, Chief Executive Officer of Duluth Trading. Steve?

Good morning, everyone. And thank you for joining today's call. I am pleased to report that net sales for the third quarter grew 13% to $136 million, largely driven by a 40% growth in direct sales year over year. Our e-commerce business continued to grow at the same pace as the second quarter, with 15 million site visits up 30% to last year. All 65 of our retail stores were open during the quarter. Sales in the stores declined just 16% year over year, which was the best store performance we've seen since the pandemic began. Throughout this year, COVID-19 has unfortunately remained an unpredictable challenge in the retail landscape. It has tested the agility and resolve of our entire organization. I'm very proud of our team's efforts in delivering the best customer experience regardless of the challenges. Right now, the recent surge in the virus caseload is creating new concerns around holiday shopping beyond the usual apprehension of all retailers' experience. That said, we've done everything within our control to be prepared for peak season. We are fully staffed across all our operations to handle the early shopping that is being driven by pre-season promotional activity. Our inventory levels are in good shape, and we're fortunate to have customer-centric technologies in place like buy online, pick up at store. In fact, the pandemic has really accelerated the adoption of BOPIS, which handled over 33,000 orders in the third quarter, and we expect that order level might triple in the fourth quarter. This quarter, we also added text messaging for curbside pickup to further ensure an easy and safe retail shopping experience for our customers. So far, our early Black Friday sale event was effective at pulling some business forward with direct sales in November increasing 30%. Regarding retail, all of our stores were closed on Thanksgiving and store traffic on Black Friday was below what we initially anticipated. There's still a lot of distractions out there. The resurgence of COVID is a concern regarding in-store shopping, and it also clouds the outlook for consumer spending. We know that delivery providers are working around the clock to handle increased volume and shipping deadlines. Even so, research indicates that 47% of consumers are more interested in shopping online than last year, which puts added pressure on the delivery network. While these big question marks are outside our control, we've been busy looking beyond this very different holiday season. During the quarter, we launched two new brands. In early October, we introduced our new entry-level workwear for men, 40Grip, and in late October, we launched Best Made. which is a premium offering with design-focused hard goods and apparel. With Alaska Hard Gear, 40 Grit, and now Best Made, we are building a portfolio of distinct brands within the Duluth trading ecosystem. We are both enthusiastic and confident that we can apply our winning formula of innovative solution-based products, memorable storytelling, and strong customer relationships to build out the next phase of our direct-to-consumer platform. In doing so, it is important to know that our process is very deliberate and totally connected to the Duluth brand reputation for quality products that support hands-on work, active hobbies, and the modern self-reliant lifestyle. Our goal is to expand brand recognition with a wider and younger audience as well as offering an extended range of options across the good, better, best price categories. Fortunately, we also started to pivot toward digital marketing even before the pandemic, and now are rapidly scaling the learning curve. Our investments in digital tactics continue to drive sales and strong new customer growth, which was more than 20% in the third quarter. We will continue to expand our testing and learnings in this space and expect that our new customer data tools will realize additional efficiencies in our overall marketing program. Finally, I want to wish you and your families a wonderful and safe holiday season. I am grateful to our team that has worked so hard for our customers and the greater community. Due to the successful efforts of our Pink Buck Naked campaign, we are able to donate $120,000 to the American Cancer Society. We are also the proud sponsors of the IDEAL National Championships that honor the hard work and talent of tradespeople across our nation who face the challenges of 2020 to make our daily lives a little easier. With that, I'll turn the call over to Dave to discuss our financials and operations. Thanks, Steve.