Duluth Holdings Inc.

Good day, and welcome to the Duluth Holdings, Inc. first quarter 2025 conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists 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, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference call over to Ms. Nita McKee. Ms. McKee, the floor is yours, ma'am.

Thank you and welcome to today's call to discuss Duluth Trading 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 Stephanie Pugliese, President and Chief Executive Officer, and Hina Agarwal, Senior Vice President and Chief Financial Officer. On today's call, management will provide prepared remarks and then open the call for questions. Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements, which can be identified by the use of words such as estimate, anticipate, expect, and similar phrases. 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 risk 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 will turn the call over to Stephanie Pugliese, President and Chief Executive Officer. Stephanie?

Good morning, everyone, and thank you for joining us today. First, I want to thank Steve Schlecht not only for his leadership, but for his unwavering commitment to the Duluth brand over many years. His vision and passion have been a driving force behind this extraordinary company and I am truly honored to once again have his support as I return to lead Duluth Trading. I'm back at Duluth because of my belief in this brand and its potential. Our customers have a deep affection for Duluth, and they genuinely want us to succeed. What sets us apart in the marketplace is our unique blend of high-quality, solution-based products infused with our brand attributes, authentic, humorous, hardworking, and humble. Our products and our brand evoke an emotional connection that is truly distinctive in today's crowded retail landscape. Returning to Duluth has been really energizing. I've been reconnecting with familiar faces who have a longstanding commitment to this brand and continue to drive excellence while also discovering new talent throughout the organization. This team gives me confidence as we build on our strengths and implement initiatives necessary to deliver sustainable, profitable growth. I am leading with a sense of urgency, clarifying direction and taking action. Our operating model and processes need to be simplified quickly to restore financial health in the business. We will then position Duluth for longer-term profitable growth. There are ultimately three key areas we will focus on to drive our business forward. First, brand awareness. Reinvigorating our distinctive voice and storytelling capabilities that have historically differentiated Duluth in the marketplace to drive customer acquisition and retention. Second, solution-based products and product innovation. Our year-round core product is foundational to our business. enhanced by new innovative solutions. This quarter, we saw success in products like Men's Flex Firehose HD, Wrinkle Fighter shirts, the introduction of Women's Noga Air, and new innovations in AKHG. We know that when we clearly communicate the solutions we offer, we win. That is why going forward, we will drive to a more focused product assortment that resonates clearly with our customers. We will narrow our assortment breadth with at least a 20% reduction of SKUs by spring 2026 while innovating in growth areas including core men's and women's workwear and adjacencies such as first layer and outdoor. This will create productivity gains in the assortment and enhance our ability to be more efficient in inventory purchases and marketing activities. And third, customer service, specifically leveraging our omnichannel model, balancing e-commerce and physical retail to create long-term value and meet customers where they prefer to shop, executing with excellence on our promise to deliver a great customer experience. These focus areas form the foundation upon which everything else will be built. But to be clear, before we can fully execute these initiatives, we must get back on track. We are taking decisive actions to get this great company and unique and powerful brand back on the path to profitability and growth. We have actioned an expense savings initiative to begin to right-size the business and to protect against potential top-line headwinds, which will result in annualized savings of approximately $15 million, of which at least 10 million of cost benefits will be realized in the current fiscal year. These expense actions are designed to reduce complexity in the business and increase our focus on innovation and our brand enablers. We are also embracing a holistic approach to our overall expense structure, which we know is higher than it needs to be. We are taking a hard look at processes, systems, and team structures across the organization with a goal of further reducing our expense base while becoming more efficient and effective in everything that we do. These efforts are directly aligned with my philosophy to simplify our operations as we shift our focus and the majority of our time and energy to brand awareness, solution-based product and product innovations, and exceptional customer service. This approach isn't about starting over. It's about building on the progress made over the past few years in systems, sourcing, distribution, and real estate strategy. Let me spend a moment on the work that was in flight when I arrived, and that will continue. Our direct-to-factory sourcing initiative is yielding great results, which not only reduce our cost of goods but enable us to better innovate and bring that innovation faster to market. We will continue to leverage this strategic initiative as we adjust our product assortment and more clearly define our go-to-market strategy. We expect that over time, the flow-through of margin improvement will be further enhanced by the resetting of promotional activity, which we started in Q1 and has shown some early signs of success. The optimization of our fulfillment network has yielded automation and cost per unit savings, as well as faster click-to-delivery times. We have rationalized our fulfillment network, but there is more work to do here. Importantly, we have made progress on the backlog issues we experienced over this past holiday season as we continue on our path to enhance operational protocols and planning processes. And finally, we will continue to reinvigorate and optimize our real estate footprint. With nearly 25% of store leases up for renewal through the end of 2026, each renewal is undergoing rigorous evaluation for remodel, relocation, or closure. We are also looking at underperforming stores beyond near-term lease expirations. We have closed one location this fiscal year and are on track to open two new stores in the fall in priority markets. We know that we need to leverage our investments as efficiently and effectively as possible. Go forward, we will be focused on building our brand awareness, expanding our solution-based product and product innovation pipeline, and elevating our omnichannel service, all with the goal of attracting new loyal Duluth brand customers and reactivating lapsed customers. While we have substantial work ahead, I am confident in our path forward. Our commitment to elevating and celebrating what sets Duluth apart in the marketplace, coupled with decisive actions to right-size our expense structure and sharpen our focus on brand and product enablers, is our path to future success. With that, I will turn it over to Hina for a review of our financial results for the first quarter and thoughts on our outlook for fiscal 2025.