Duluth Holdings (DLTH +4.14%) released its fiscal second-quarter results after the markets closed on Tuesday, Sept. 5. The workwear and accessories seller put together a great quarter and reported revenue growth of 31%. That marks its 30th consecutive quarter of increased year-over-year sales and represents an acceleration over the 22% revenue growth that was reported last quarter.
Let's put Duluth's second-quarter results under the microscope to learn more about what it accomplished during the period.
Image source: Getty Images.
Duluth Holdings Q2 results: The raw numbers
| Metric | Q2 2017 | Q2 2016 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $86.2 million | $65.8 million | 31% |
| Net income | $4.3 million | $3.6 million | 18% |
| Earnings per share | $0.13 | $0.11 | 18% |
Data source: Duluth Holdings Inc.
What happened with Duluth Holdings this quarter?
- Direct (catalog and online) sales grew 7% to $57.7 million while retail (brick-and-mortar) sales grew by 138% to $28.6 million. The huge retail sales jump was largely owed to having 12 more stores operating this quarter when compared to the year-ago period. Total revenue of $86.2 million came in far ahead of Wall Street's estimate of $82.5 million.
- Gross margins fell by 240 basis points to 56.7%. Management stated that the decline was owed to lower shipping revenues because the company offered more free shipping promotions to customers during the period. Importantly, product gross margin increased slightly thanks to a favorable mix and better management of promotions.
- Duluth's women's business accounted for 25% of total product sales and grew at a faster pace than its men's business. This result hints that its women's TV advertising campaign is bearing fruit.
- Adjusted EBITDA increased 27% year over year to $9.5 million.
- Earnings per share of $0.13 easily beat the $0.10 in EPS that analysts had predicted.
- Three new stores were opened during the quarter, the company's 21st, 22nd, and 23rd stores. Since the end of the quarter, two more stores have opened.
- Duluth's cash balance at the end of the quarter was $1.4 million.
What management had to say
Stephanie Pugliese, Duluth's CEO, said she was quite happy with the company's quarterly performance and continued success with bringing in new customers:
I am pleased to report that net sales increased over 30% during the second quarter, which marked our 30th consecutive quarter of increased net sales year-over-year. We drove a 35% increase in new customer acquisition year-over-year, as we continue to invest in our omnichannel model and in growing our brand awareness with our direct marketing efforts and with geographical expansion of our retail stores.
Pugliese also confirmed that the company is on track to open a total of six more stores by year's end. That would bring its total to 15 new stores for the fiscal year, which is two more stores than management was projecting last quarter.
Looking forward
Management restated that they expect to meet their previously communicated guidance for the full year 2017, which looks like this:
| Metric | 2016 Actual | 2017 Guidance | Year-Over-Year Change at Midpoint |
|---|---|---|---|
| Revenue | $376 million | $455 million to $465 million | 22% |
| Adjusted EBITDA | $41.2 million | $47 million to $49.5 million | 17% |
| GAAP EPS | $0.66 | $0.66 to $0.71 | 4% |
Data source: Duluth Holdings.
Duluth's new CFO, Dave Loretta, stated on the call that full-year guidance was kept intact because the two additional store openings will not occur until the end of the year. That means they will not be open long enough to have a material impact on results.
Finally, Pugliese gave investors a sneak peek about what they can expect in fiscal year 2018. She stated that the number of new stores openings in fiscal year 2018 will be "comparable" to the 15 stores that will be opening this year, which hints that investors can expect another year of rapid top-line growth.
