Duluth Holdings Takes Bold Steps Toward Profitability Under New Leadership
In a decisive move to restore profitability and growth, Stephanie Pugliese has re-established her leadership as president and CEO of Duluth Holdings, Inc. In her first quarterly call since returning to the helm on May 5, Pugliese announced that the company is strategically rationalizing its stock-keeping units (SKUs), streamlining costs, and assessing the potential closure of underperforming stores. Such initiatives are part of a broader effort to prioritize innovation and revitalize the iconic brand, which has faced challenges in recent quarters.
Financial Landscape: Losses Deepen Amid Sales Decline
Duluth Holdings reported a widened net loss for the first quarter ending May 4, with sales plummeting by 12% compared to the previous year, yet the company reaffirmed its financial guidance for the year. Pugliese, who previously served as CEO from 2015 to 2019, highlighted the urgent need to simplify operational processes and refocus on the brand’s core strengths.
Addressing Operational Complexity
Pugliese emphasized a “whole-system approach” to address inefficiencies within the company’s operational structure, stating that Duluth’s current expense levels exceed necessary thresholds. “Our operational model needs to be streamlined swiftly to regain financial health,” she noted. The newly introduced expense reduction program aims for annual savings of approximately $15 million, with at least $10 million expected in the current fiscal year.
“These initiatives are crafted to diminish complexity while enhancing our focus on product innovation and customer experience. We aim to clarify our operational direction urgently,” Pugliese remarked during the analyst call.
A Focus on Brand Awareness and Customer Connection
Returning to her roots, Pugliese expressed enthusiasm about Duluth’s potential for growth. “Our customers have a deep affection for Duluth, and our distinctive approach—combining high-quality, solution-based products with our brand ethos: Authentic, Humorous, Hardworking, and Humble—sets us apart in the overwhelmingly crowded retail landscape,” she stated confidently.
To take the brand forward, increasing brand visibility is paramount. “We will reinvigorate our storytelling capabilities to attract new consumers and enhance customer retention,” she added.
Product Strategy: Innovation Meets Efficiency
Pugliese highlighted the importance of focusing on solutions-oriented products for customers. “The foundation of our business lies in our core product offerings, which will be enriched by innovative new solutions,” she explained. Successful launches in the first quarter included men’s Flex Fire Hose HD and Wrinklefighter shirts, as well as women’s NoGa Air products, all signaling a commitment to meeting consumer needs.
As part of the effort to boost efficiency, Duluth plans to reduce apparel SKUs by over 5% by Fall 2025 and aims for a 20% reduction by Spring/Summer 2026. The company is also targeting a double-digit decline in non-apparel hardgoods SKUs starting in Fall 2025. “These reductions will not only improve productivity but will also enhance our operational efficiency concerning inventory management and marketing strategies,” Pugliese noted.
Enhancing Customer Experience Through Omnichannel Strategies
Pugliese reiterated the necessity of heightening customer service capabilities. She highlighted the use of Duluth’s omnichannel model to address customer needs, whether they shop online or in physical stores. Moreover, she stressed that building on recent advancements in systems, sourcing, and distribution strategies would be crucial to future successes.
The company’s direct-to-factory sourcing initiative has already yielded significant benefits, reducing product costs while accelerating the innovation process, a strategy Pugliese plans to continue leveraging.
Real Estate Strategy: Navigating Store Leases and Market Challenges
With about 25% of Duluth’s stores facing lease renewal before 2026, the company is currently evaluating options for closing or remodeling locations based on performance metrics. Pugliese mentioned that assessing underperforming stores extends beyond the immediate future, showcasing a commitment to optimizing the physical presence of the brand.
Quarterly Financial Summary Emphasizes Areas of Improvement
According to Heena Agrawal, Senior Vice President and Chief Financial Officer, the first quarter’s results reflected advancements in four key priorities set for 2025: resetting promotions, establishing price integrity, enhancing inventory management, and strengthening operational execution. Sales reached $102.7 million, marking a 12% decrease year-over-year. As part of ongoing resets, Duluth has reduced both the number of days products are on promotion and the discount depth, showing early signs of positive retail trends despite the sales downturn.
Retail sales dipped by 2.6%, but improved shopper conversions helped to cushion the blow. Agrawal highlighted that success is being observed with shallower promotions, driven by higher average order values and enhanced sales trends.
Impact of Tariffs and Future Projections
As the company navigates market challenges, Duluth anticipates an increase in product costs due to a 10% tariff implemented in April 2025, estimating around $14 million in additional expenses. Agrawal reassured stakeholders about the minimal impact from dependencies on China, which constitute less than 1% of current-year receipts. To mitigate profit reductions, the company plans targeted price increases in select product categories and enhanced collaboration with vendors to share costs.
Guidance and Outlook Maintained amid Challenges
Looking ahead, Duluth is maintaining its annual guidance, projecting net sales between $570 million and $595 million and an adjusted EBITDA in the $20 million to $25 million range. Agrawal emphasized that the company’s ongoing expense reduction strategies are also a safeguard against potential headwinds in its top-line performance. “We’re positioning ourselves proactively against uncertainties in the macroeconomic environment,” she concluded.
Pugliese reinforced her commitment and confidence in Duluth’s direction: “The substantial work ahead is not daunting; it’s a pathway we are charting together, focusing on the brand’s unique strengths and foundational product offerings as we prioritize financial health, brand visibility, and improved customer service,” she asserted.
Image courtesy of Duluth Trading/Stephanie Pugliese