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The call portrays a company in the midst of a deliberate strategic turnaround: management has prioritized margin expansion, inventory and SKU rationalization, fulfillment consolidation, and balance sheet improvement, delivering meaningful margin and liquidity gains and a return to adjusted profitability. Those operational successes came with near-term top-line pressure—particularly in direct digital channels and certain product lines—driven by an intentional pullback from promotions and ongoing SKU rationalization. Management raised adjusted EBITDA guidance and signaled stabilization in the back half, but first-half sales are expected to be down meaningfully. Overall, the results indicate solid progress toward structural profitability and healthier unit economics, offset by near-term revenue declines and some one-time charges.
Management affirmed full‑year fiscal 2026 net sales guidance of $540–$560 million (down ~1% to 5% vs. prior year), with first‑half sales expected to decline 6%–10% (including a 230‑basis‑point headwind from not repeating a prior wholesale order) and stabilization in the back half of the year at roughly −2% to +2%; they reiterated prior gross‑margin assumptions (~54% for the year vs. 53.4% prior year) while noting Q1 gross margin of 57.4% (a 540‑bp YoY expansion) and that they are tracking ahead, modeling an incremental ~30 bps benefit from the promotional reset into full‑year margin; adjusted EBITDA guidance was raised to $28–$32 million (up from $26–$30M), capex was affirmed at ~$12 million (≈2.2% of sales), tariff assumptions remain unchanged (IEEPA tariffs of ~$12M paid last year are being pursued for refund but no benefit is included), and the company expects continued working‑capital discipline supporting a net liquidity position of roughly $100 million.
Gross margin expanded by ~540 basis points to 57.4% of net sales (from ~52% prior year), driving a 6.1% increase in gross profit dollars. Adjusted EBITDA turned positive at $2.6 million (improvement of $6.4 million vs. prior-year Q1). Adjusted EPS improved to negative $0.20 from negative $0.44 a year ago.
Total global promotional days were reduced by over 50% and depth of discount cut by ~700 basis points, which led to full-price sales growth of nearly 14%, average unit retail up 17% YoY and total average order value uplift of 16%.
Inventory declined by $43.7 million or 24.8% to $132.4 million versus prior year. SKUs were reduced by over 20%, spring/summer seasonal inventory cut by 42%, clearance dollars down 17.4% and clearance units down 22.3%, with store in-stock levels improving by ~900 basis points.
Net liquidity improved to approximately $100 million versus $45 million a year ago. Free cash flow improved by $42.6 million compared to the same period last year.
SG&A decreased by $3.4 million or 5.2% to $61.8 million and leveraged 70 basis points as a percent of sales. Shipping/variable costs leveraged by 130 basis points due to fulfillment center consolidation and productivity gains; overhead expenses down 2%.
Retail stores delivered positive comps with store net sales up 3.3% to $41.5 million (driven by higher AOV and two new stores). Core collections (~2/3 of sales) grew 7% YoY. Specific product successes included strong performance in men's Buck Naked and growth in women's Heirloom Gardening bibs; first-layer and underwear collections showed double-digit growth.
Fulfillment network consolidated from 4 centers to 2 over the last 18 months, capturing fulfillment efficiencies and maximizing the automated Adairsville facility.
Full-year adjusted EBITDA guidance was raised to $28 million–$32 million (up from prior $26 million–$30 million) while maintaining net sales guidance of $540 million–$560 million.
Sales per customer increased 10% YoY and Net Promoter Score improved 16% year-over-year, indicating higher quality, more resilient customer engagement.
Good day, and welcome to the Duluth Holdings First Quarter 2026 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Steffes. Please go ahead.
Thank you, and welcome to today's call to discuss Duluth Trading's first 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 Heena Agrawal, 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 risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. 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.
With that, I will turn the call over to Stephanie.
Good morning, everyone...