Duluth Holdings Inc.

and welcome to the Duluth Holdings Inc. second quarter 2025 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 then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Chris Steffes with Duluth Investor Relations. Please go ahead, sir.

Thank you, and welcome to today's call to discuss Duluth Trading's second quarter financial results. Our earnings release, which was issued this morning, is available on our Investor Relations website at ir.duluthtrading.com under News Releases. I'm here today with Stephanie Pugliese, President and Chief Executive Officer, and Hina Agraval, 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 statement. 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 will turn the call over to Stephanie.

Good morning, everyone, and thank you for joining us today. We are encouraged by our second quarter results, demonstrating positive momentum in our initial turnaround efforts. Our team has worked tirelessly and made improvements across several critical areas of the business, This includes promotional reset, cost control, tariff mitigation, and a disciplined approach to inventory management. Our strategic and operational efforts have begun to yield tangible benefits, leading to an enhanced gross margin, reduced expenses, and lower inventory levels, which played out in our Q2 results. As we reduced the depth of promotional activity, We anticipated that our top line revenue would contract year over year. Yet despite a sales decline of 7% versus last year, we delivered gross margin improvement and SG&A leverage, which drove a $1.5 million increase in adjusted EBITDA, reaching $12 million, or 9% of sales. We concluded the quarter with a strong liquidity of $73 million and a 12% reduction in inventory compared to last year. meeting our expectations of sequential inventory improvement each quarter. Let me elaborate further on each of the areas of improvement. Starting with an update on the resetting of our promotional cadence, we have reduced the depth of our promotions to strategically elevate full price sales, increase our average unit retails, and drive improved profitability. We are intentionally shifting our focus towards higher quality sales, At the same time, we know that we are operating in a dynamic environment. We will continue to test, read, and react to pricing initiatives throughout the second half of the year to meet customers' needs and manage higher profitability. As mentioned last quarter, we also quickly began to right-size the cost structure and alleviate pressure from tariffs. I am pleased to report that we are on track to realize $10 million in cost savings and in fiscal 2025. While we are simplifying the cost structure, we have also continued to invest time and energy to improve processes that optimize productivity now and in the future. Our ongoing commitment to inventory management and enterprise planning has led to enhancements in our operational and planning processes. This end-to-end cross-functional initiative has resulted in the 12% reduction in Q2 ending inventory that I mentioned earlier, primarily due to our emphasis on right-sizing inventory receipts. We expect that these efforts, combined with SKU and style count reductions in future seasons, will lead to better use of cash, stronger inventory turns, and improved margins. Now let me provide an update on our approach to mitigating tariffs. focusing on short-term actions that do not compromise the long-term integrity of our products. In addition to working closely with our manufacturing base and finding areas of SG&A to offset margin impact, in fall 2025, we have selected targeted products for retail increases. We did this while recognizing the need for a balance of styles that are lower priced and continue to be a great value for our customers. all with our uncompromising eye on maintaining quality. And while we are reducing deeper discounted promotions, we have implemented buy more and save discounts on some of our key programs, like underwear and long-tail teeth. We believe that this will maintain our quality standards, help to offset the increase in cost of goods, and still allow our customers to realize the value that we offer. Now let's move on to our performance in the second quarter, starting with some of our product highlights. Duluth men's bottoms drove higher profitability as we pulled back on promotional depth, delivering more than a 10% increase in AUR. As we continue to expand the offering in men's tops, new items like the barbecue shirt in standard fit, Breeze shooter untucked, and Drumlin slub cotton shirts resonated with our customers. Our Mother's Day print collection in women's was our most successful print launch ever, with our heirloom bibs complemented by matching garden accessories. New product lines, such as Artisan Hemp, a durable yet breathable hemp and organic cotton blend, and Featherlight Chicknick shirts were well-received and speak to the commitment we have to comfort, durability, and functionality in all that we do. And lastly, AKHG grew by more than 10% in both men's and women's, driven by better in-stock position in key items like stone-run pants. We also saw positive responses to new Wonderwear performance shorts, ton-dry, and the after-sweat collection. Now turning to our marketing efforts for the quarter, we saw success with a full funnel approach highlighted by our Q2 Father's Day campaigns. We focused on both awareness and consideration with this campaign, and our Good Morning America Gifts for Dads feature drove better awareness than our similar spot during last year's peak season. Finally this quarter, we launched the Big Damn Van, a mobile retail experience enabling Duluth to be more visible at events throughout the country, including store openings. Moving on to our retail portfolio, our store sales grew 5% year on year, This success was driven by improved traffic trends combined with increased conversion rates and higher average order values. Store marketing efforts were successful in generating awareness and driving traffic through tactics like geo-targeted ads and connected TV. We closed one underperforming store this quarter and have renewed leases on two stores that are meeting our higher profit hurdle rates. Further, we are excited to open our first new store since 2021 in Kansas City, Kansas, and Maple Grove, Minnesota. These are priority markets for us, and we are thrilled to see these stores come to life and join our improving retail portfolio in the coming weeks. And speaking of fall, we have begun the process of tightening our assortment and have reduced our SKU count compared to the prior year with a more focused collection. Our business is built on a foundation of core products, strengthened by innovative new solutions designed to solve our customers' problems. We are revitalizing our product and marketing strategies to reflect the true essence of our brand. For example, this month, we are relaunching core men's and women's denim that is built for greater durability and comfort, along with adding new products like the Sea Wool Collection, which is naturally thermoregulating, wicks away moisture, and controls odor. These products provide the kind of functional apparel our customers depend on as the seasons change. We know that the second half of the year is our most important for customer engagement, revenues, and profitability. As we lead up to our peak season, our focus remains on continuing the turnaround efforts and leading with a sense of urgency. Through rigorous preparation and alignment of all functions in the business, including marketing and promotional productivity, inventory positioning, and customer communication, our goal is to not only meet but exceed our customers' expectations during this critical period. In closing, we are pleased with our Q2 performance and the progress we have made so far on the first phase of our turnaround effort, and I am committed to building on this momentum. In the near term, our focus remains on simplifying the business, managing costs, mitigating the ongoing impacts of tariffs, and most importantly, delivering on our promise to customers with excellence. Looking ahead, we acknowledge the significant work that is to come in the second half of this year and in our turnaround plan. We will continue to leverage our foundational work in product sourcing, optimizing our fulfillment center network, and rationalizing our store portfolio. In addition, we are refocusing our marketing efforts and product assortment to celebrate the self-reliant spirit of our customers. Moving on to 2026, we are reducing our SKUs and refining our assortment. This focused approach will enable us to emphasize the core products that distinguish the Duluth brand. I am confident that in the long term, focusing on Duluth trading's core strengths customer engagement with our brand, dilution-based products and product innovation, and excellent customer service in our omnichannel environment will create shareholder value and ultimately restore the company to profitable growth and success. Now I'll hand it over to Hina to discuss our financial results for the second quarter and our outlook for fiscal year 2025.