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Alexandra.Morgan


Duluth Holdings: Expanding Customer Base and Diversifying Product Offerings

2023-07-30

The company's earnings call meeting focused on discussing plans to expand its customer base and target adjacent consumers for growth. One of the most important topics discussed was the opportunity for the company to extend its reach beyond workwear and outdoor recreation. The President and CEO, Sam Sato, expressed during the meeting that addressing adjacent consumers presented a significant opportunity for the brand. This indicated the company's intention to tap into new markets and potentially diversify its product offerings.

A deep-dive analysis into the company's plan to expand its customer base beyond workwear and outdoor recreation would be particularly interesting. This analysis could explore the potential benefits and challenges of this expansion strategy, including market research, target audience analysis, competitive landscape assessment, and potential revenue growth projections. It would also be intriguing to investigate the company's plans for marketing and distribution in these new consumer segments and how they align with the overall business strategy.

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The key drivers of the company's business, as discussed in the meeting, include price competition, sales performance, product innovation, and expansion through acquisitions and exploring new distribution channels. The company aims to target a younger consumer demographic, specifically those between 40 and 50 years old, while also focusing on the needs of female customers. They have already experienced success in acquiring new customers under the age of 50 and have made investments to expand their women's offerings. Additionally, the company plans to invest in infrastructure, such as a fulfillment center, to facilitate distribution, meet retail store inventory needs, and service wholesale accounts. They see significant opportunities for their brand in the wholesale market and intend to capitalize on them in the future.

Looking ahead to the fiscal year 2023, the company provided projections for full-year net sales, expecting them to range between $645 million to $660 million. They anticipate the gross profit margin to remain flat or increase by up to 20 basis points, with improvements expected in the second half of the year. SG&A expenses as a percentage of net sales are projected to remain flat or decrease by up to 20 basis points, with leverage primarily coming in the fourth quarter. The company also expects interest expense to increase due to higher interest rates and anticipates depreciation and amortization expenses to be approximately $36 million. They project full-year adjusted EBITDA of $47 to $49 million and EPS of $0.02 to $0.08. Despite the challenging environment, the company expressed confidence in achieving its annual goals.

The participants of the call included Nitza McKee, Investor Relations; Sam Sato, President and Chief Executive Officer; Dave Loretta, Chief Financial Officer; Ethan Saghi, BTIG Analyst; Jon Komp, Robert W. Baird and Company Analyst; Peter McGoldrick, Stifel Financial Corp. Analyst; and Dylan Carden, William Blair and Company Analyst.

Overall, the meeting highlighted the company's strategic focus on diversifying its customer base and exploring new avenues for growth. With the participation of various analysts and investors, it is evident that there is significant interest in the company's potential for expansion. The company's marketing strategy centers around innovative products, customer feedback, and data analytics. They have already achieved success with a marketing campaign during the college basketball season, resulting in increased web visits, new buyers, and sales. The company utilizes a multilevel marketing approach and personalized recommendations to drive consumer action. They are also working on improving the online shopping experience by replatforming their website. Additionally, efforts are being made to enhance customer metrics through increased selling and service initiatives, as well as product knowledge training.

In conclusion, the earnings call meeting provided valuable insights into the company's plans to broaden its customer base and explore new growth opportunities. With a focus on diversification, innovation, and strategic marketing, the company is positioning itself for continued success in the future.