Duluth Holdings Inc. (DLTH) Q1 2026: Improved Losses and Margin Expansion — Cautiously Optimistic

Duluth Holdings Inc. reported a net loss of $10.0 million for the first quarter ended May 3, 2026, an improvement of $5.2 million or 34% compared to a net loss of $15.3 million in the prior year. This marks a significant step towards profitability, as the company continues to navigate a challenging retail environment.

Key Financial Metrics:

• Net Loss: $10.0 million, improved from $15.3 million YoY
• Reported EPS: ($0.29), adjusted EPS: ($0.20)
• Adjusted EBITDA: Increased by $6.4 million to $2.6 million
• Gross Margin: Expanded to 57.4%, up 540 basis points from 52.0% YoY
• Net Sales: Decreased by $4.1 million or 4.0% to $98.6 million
• Direct-to-Consumer Sales: Decreased by 8.7% to $57.1 million
• Retail Store Sales: Increased by 3.3% to $41.5 million
• Inventory: Down $43.7 million or 24.8% YoY
• Net Liquidity: Approximately $100 million

Analyst View:

This quarter can be viewed as a cautiously optimistic outcome for shareholders. While Duluth Trading experienced a decline in net sales, the significant improvement in net loss and the expansion of gross margin indicate effective cost management and operational improvements. The adjusted EBITDA of $2.6 million, a turnaround from a negative figure last year, suggests that the company is on a path to recovery.

The reduction in inventory by 24.8% is particularly noteworthy, as it reflects the company's commitment to inventory discipline, which is crucial in the current retail landscape. The strong balance sheet, with approximately $100 million in net liquidity, provides a buffer against potential market volatility.

Operational Highlights:

• Gross Margin: The increase to 57.4% was driven by higher average unit retail prices and improved product costs, despite some offset from tariff costs.
• Selling, General and Administrative Expenses: Decreased by $3.4 million or 5.2% to $61.8 million, indicating improved operational efficiency.
• Direct-to-Consumer Challenges: The 8.7% decline in direct-to-consumer sales highlights ongoing challenges in web traffic and conversion rates, which the company needs to address moving forward.

Guidance and Future Outlook:

Duluth Trading has affirmed its fiscal 2026 net sales guidance range of $540 million to $560 million and raised its adjusted EBITDA guidance to a range of $28 million to $32 million, up from the previous range of $26 million to $30 million. This upward revision in guidance reflects management's confidence in the company's strategic initiatives and operational improvements.

Forward Catalyst:

Investors should closely monitor the company's performance in the upcoming quarters, particularly in terms of direct-to-consumer sales recovery and the effectiveness of its marketing campaigns. The response to new product lines and promotional strategies will be critical in determining whether Duluth Trading can sustain its momentum and continue to improve profitability.

In conclusion, while the decline in net sales is a concern, the overall improvements in profitability metrics and operational efficiency suggest that Duluth Holdings Inc. is making strides towards a more sustainable business model. Shareholders should remain cautiously optimistic as the company navigates the complexities of the retail environment.

Note: The following tables are in thousands.

Three Months Ended	May 3, 2026	May 4, 2025
Net sales	$98,594	$102,704
Cost of goods sold (excluding depreciation and amortization)	41,960	49,349
Gross profit	56,634	53,355
Selling, general and administrative expenses	61,802	65,158
Impairment of long-lived assets	2,709	549
Restructuring expense	1,354	—
Operating loss	(9,231)	(12,352)
Interest expense	790	1,481
Other (loss) income, net	93	(161)
Loss before income taxes	(9,928)	(13,994)
Income tax expense	120	1,270
Net loss	(10,048)	(15,264)
Less: Net income attributable to noncontrolling interest	53	29
Net loss attributable to controlling interest	(10,101)	(15,293)
Basic and diluted earnings per share (Class A and Class B): Weighted average shares of common stock outstanding	34,712	33,714
Net loss per share attributable to controlling interest	(0.29)	(0.45)

May 3, 2026	February 1, 2026	May 4, 2025
ASSETS Current assets: Cash and cash equivalents	6,134	16,345	8,579
Receivables	1,754	2,710	4,248
Inventory, net	132,444	131,342	176,108
Prepaid expenses & other current assets	22,732	21,654	22,189
Total current assets	163,064	172,051	211,124
Property and equipment, net	91,909	96,913	106,274
Operating lease right-of-use assets	83,382	89,283	100,076
Finance lease right-of-use assets, net	28,733	29,577	32,112
Available-for-sale security	4,676	4,763	4,860
Other assets, net	8,886	10,022	9,259
Total assets	380,650	402,609	463,705
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable	40,072	48,226	45,940
Accrued expenses and other current liabilities	34,370	39,871	27,608
Current portion of operating lease liabilities	16,562	16,449	15,875
Current portion of finance lease liabilities	2,711	2,681	2,578
Line of credit	6,009	—	64,000
Current maturities of TRI long-term debt (1)	1,043	1,020	953
Total current liabilities	100,767	108,247	156,954
Operating lease liabilities, less current maturities	72,015	76,008	86,471
Finance lease liabilities, less current maturities	27,251	27,940	29,962
TRI long-term debt, less current maturities (1)	23,085	23,337	24,054
Deferred tax liabilities	962	962	1,371
Total liabilities	224,080	236,494	298,812
Shareholders' equity: Treasury stock	(3,156)	(2,922)	(2,596)
Capital stock	111,560	110,794	108,329
Retained earnings	51,231	61,332	62,428
Accumulated other comprehensive loss, net	(260)	(231)	(300)
Total shareholders' equity of Duluth Holdings Inc.	159,375	168,973	167,861
Noncontrolling interest	(2,805)	(2,858)	(2,968)
Total shareholders' equity	156,570	166,115	164,893
Total liabilities and shareholders' equity	380,650	402,609	463,705

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