Duluth Holdings Inc.

Good morning, everyone, and welcome to the Duluth Holdings Incorporated first quarter 2024 conference call. All participants will be in a 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. To ask a question, you may press star and one or your touch-tone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Lisa McKee. Ma'am, please go ahead.

Thank you and welcome to today's call to discuss Duluth Trading's first quarter financial results. Our earnings release, which was issued this morning, is available on our Investor Relations website at ir.duluthtrading.com under Press Releases. I'm here today with Sam Sato, President and Chief Executive Officer, and Hena Agrawal, Senior Vice President and 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 risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on Form 10-K and other SEC filings as applicable. These forward-looking statements speak only as 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 Sam Sato, President and Chief Executive Officer. Sam?

Thank you for joining today's call. Let me begin by stating that despite some key quarter wins, we are not satisfied with our first quarter results, which fell short of our internal expectations. Our top-line performance at a decline of 5.7% was hampered by challenging traffic and a subpar in stock position following stronger than expected unit selling late in the fourth quarter. In fact, we entered the first quarter with inventory levels 19% below the prior year. We took swift action to improve our in stock position in core items, which improved throughout the quarter and into Q2. Let me highlight a few actions we're focused on to improve our results. We are doubling down on our efforts to further leverage technology to deliver more targeted advertising to drive incremental traffic both online and in stores. We continue to leverage additional streaming platforms and vendor technologies to hone our marketing efforts and to better target specific audiences and markets. Across our 65 store fleet, we're elevating events to emotionally engage with existing and new customers within our local markets. For example, during the first quarter, we successfully tested an underwear trade-up event. On the day of the event, store traffic jumped more than 50%, contributing a 120 basis point benefit for the entire quarter. And more than one-third of the underwear trade-ups were from female shoppers, which remains a key strategic growth opportunity for Duluth. During the quarter, we completed a comprehensive benchmarking study to identify opportunities to improve our operating margin, working capital, and asset efficiency. More to come on this initiative over the coming quarters. And finally, we've engaged a third-party expert to partner with our internal team to conduct an in-depth review of our retail strategy to identify efficiencies and solidify our go-forward plan. As you can see, we're not standing still. We've taken immediate action to improve our near-term performance. We're in the process of identifying opportunities to build on our successes and drive further efficiencies across our operations, and we are controlling what we can control. Although there is much work ahead of us, we have made significant progress on our foundational initiatives aligned with our long-term strategic roadmap. Let me highlight a few key wins during the quarter. Our Daresville unit fulfillment costs were 56% lower compared to the prior year average of the remaining three fulfillment centers, and we processed 60% of total volume in the first quarter through this facility. We are now moving into phase two of evaluating our fulfillment center network footprint. In mid-April, we diversified our carrier base, lowering our outbound shipping costs. As we discussed on our last call, we meaningfully advanced our sourcing and product innovation functions. This is a critical strategic unlock for the business, which will allow us to bring the market high-quality, innovative products more frequently increase our speed to market, and significantly reduce our product costs. I'm pleased to report that this initiative is delivering product cost improvements above our expectations, and we have clear line of sight to continue benefits this year. We continue to see the positive outcomes from our previous re-platforming investments in our DuluthTraining.com website to the next generation of e-commerce tailored for mobile usability. In the quarter, our mobile penetration continued to grow, accounting for over half of our digital sales and more than two-thirds of site visits. We remained focused on enhancing digital accessibility while providing a frictionless shopping experience. Now some product innovation highlights that resonated with consumers. The first-layer business grew 4%, driven by both men's and women's. We tested photo-ready prints on Buck Smooth during the holidays, selling out quickly, and have expanded it with new prints and more inventory received in April for Father's Day. We shipped the Father's Day 3-pack to Costco as a test to increase our reach with our target consumer who shops at Costco. We're excited to see what opportunities this test enables moving forward. As I mentioned earlier, we tested a successful underwear trade-off event in April that was extremely well received and drove 120 basis points of traffic to stores for the quarter. Women's first layer grew 8%, serving as an accelerator for the overall franchise. Success in women's first layer was driven by Armachello, Buck Naked, and Lost Lake. Drivers with strategic significance include building out the bra business, delivering a 200% increase within Armachillo and representing 45% of that collection for her. And our continued focus on size inclusivity with the launch of Lost Lake Plus, driving 25% of the swim collection for her in the first season. Our Duluth Flex fire hose collection grew 1% as our innovation in fire hose HD and fire hose sweat management pants delivered significant volume for the quarter. Excitingly, we held a fire hose HD try-on event in stores, which resulted in 25% of the transactions, including a pair of fire hose HD pants. The strength in our women's heirloom garden collection continues, posting a 4% increase for the quarter, driven by overalls and prints. We continue to build awareness with our female consumer and saw a year-over-year increase in our women's-only buyers for the eighth straight quarter. The heirloom bib overall consistently ranked as the number one style this quarter, and our Show Us Your Bibs campaign was supported through social, retail, and print. It's been tagged over 550,000 times across Meta and TikTok, with big content seeing the highest engagement rate across our own social channels since the start of the campaign. In the latter half of Q4 last year, we expanded our quick-drying, dry-on-the-fly technology into tees and underwear across both men's and women's. Customers are responding favorably to the new fabrications, and these programs are off to a strong start, exceeding our expectations thus far. AKHG Fitness, with a successful launch in the latter half of Q4, is on track to add approximately 100 basis points of growth to the overall company sales this year. In Q1, this new collection represented 26% of AKHG sales and will continue to be a growth driver as we expand the offering in outdoor recreational fitness. Successful prints and collabs drove buzz and full-price sales in Q1. Within women's heirloom bibs, our top three regular-price prints were fur, gnomes, and daisies. We continued our beer collaboration with our men's barbecue shirt featuring Bush Light, which was the number one choice with twice the sell-through of the overall style. In summary, although our first quarter did not meet our internal expectations, we delivered several key wins. We took swift and appropriate near-term actions to improve the trajectory of the business. We are in the process of identifying and actioning opportunities to drive efficiencies across our operations, and our foundational investments are paying off setting the stage for long-term, sustainable, profitable growth. I remain proud of our team's unwavering dedication to operating with excellence, flexibility, and agility, always with our customers at the center of all that we do, celebrating their can-do spirit, enabling anyone who takes on life with their own two hands as our greater purpose. Now I'll turn it over to Hina to discuss Q1 financials and our full year outlook. Hina?