Duluth Holdings Inc. (DLTH) Q1 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the Duluth Holdings First Quarter 2021 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Donni Case, Investor Relations for Duluth Holdings. Please go ahead.

Thank you, and welcome to today’s call to discuss Duluth Trading’s first quarter financial results. Our earnings release, which we issued this morning, is available on our Investor Relations website at ir.duluthtrading.com under Press Releases. I am here today with Steve Schlecht, non-executive Chairman; Sam Sato, President and Chief Executive Officer; and Dave Loretta, Chief Financial Officer. On today’s call, management will provide prepared remarks, and then we’ll open the call to your 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. And with that, I’ll turn the call over to Steve Schlecht, non-executive Chair of Duluth Trading. Steve?

Thank you for joining today’s call. We are pleased to report a solid first quarter with net sales growing more than 21% to $133 million year-over-year. Operating income was positive at $2 million and adjusted EBITDA was $10 million. We also reduced inventory by $31 million compared to the prior year period. Also our balance sheet is as strong as it has been in recent years, which positions us well to execute our strategic initiatives. Direct channel sales increased almost 2% against tough direct channel comps in the first quarter of last year. Retail store sales were up 93%, a significant increase from the comparable period when all stores were closed for roughly half of the quarter. It looks like consumer shopping patterns are beginning to normalize as COVID fears moderate. Well, these are encouraging signs. It’s still too early to know what the new normal will be post-pandemic. What we do know is that our strong omni-channel model will serve our customers well regardless of how they want to shop and that our customers are responding very favorable to our spring/summer collections as they head outdoors. Dave will fill in the details in this – in his commentary on this. Over the past 20 months, I’ve had the privilege of leading our incredible Duluth team during some challenging times. And I couldn’t be prouder of their dedication to our brand and customers. When we start to see some light at the end of the tunnel, my number one priority was to find the right person who has a proven track record in retail and who shares our core values. I am delighted to introduce you to that person, Sam Sato, our new President and Chief Executive Officer. He’s only the third CEO in Duluth Trading 21-year history. Many of you may have met Sam while he was CEO of Finish Line, a leading specialty retailer that had over 900 branded U.S. locations and achieved $1.8 billion in net sales under his leadership. With over three decades of retail industry experience and proven results in omni-channel growth, Sam brings more than 15 years of applied executive leadership, working across business divisions and product categories. During his tenure at Finish Line, he spearheaded a successful merger with JD Sports develop business extension strategies, including a key partnership with Macy’s and created a road map for a digital and mobile first evolution, all of which contributed to significant top line sales growth. Sam started his career at Nordstrom, climbing the ranks from store sales associate to Vice President, Corporate Merchandising, which speaks volumes to his talent and work ethic. I will now turn the call over to Sam to share his thoughts on what attracted him to Duluth and what he has observed during the first month on the job. Sam?

Thank you, Steve. I’m honored to have joined Duluth, a company with such a rich heritage in delivering an unmatched brand experience and exceptional customer service. I have spent the last few weeks getting to know our people and I’m very impressed with the talent and energy throughout the ranks of the company. And I want to thank everyone for being so welcoming. I also want to thank our directors for electing me to the Board on May 27. They are an impressive group with complimentary backgrounds and I look forward to their expert guidance. Duluth have great potential and I’m excited about our future. Over the past month, I have been meeting with as many folks within the organization as I can, as well as the senior leadership team and division heads to fully understand how specific initiatives can help us scale and grow the business. I believe partnering with our talented team along with my past experiences will enable us to drive top line growth, increased profitability and unlock our full potential. From my early observations, there has already been a lot of heavy lifting and the building blocks are in place, strong omni-channel position, a deep and engaging relationship with our customers, a commitment to new product innovation and a customer centric culture that informs and drives our decision. What I’m thinking about now is how to leverage assets, how to broaden the brand reach, while maintaining its integrity and how to enable a digital forward business to meet the evolving needs of our customers. While all retail CEOs are thinking about many of the same things, I want to engage our team to think holistically about the enterprise and how their contributions can make one plus one equal three. To me, that’s how we create long-term value. Over the next 90 days, we plan to dig in deep and evolve our long-term strategic plan and I look forward to sharing our thoughts on the next conference call. Now, I’ll turn the call over to Dave to provide an overview of first quarter results. Dave?

Thanks, Sam, and good morning, everyone. Before jumping into the results for the quarter, I also want to welcome Sam. Ironically, we both spent significant time at Nordstrom early in our careers, and we now share an appreciation for the future potential of Duluth. Turning to the first quarter results. We reported net sales of $133.4 million, up 21.4% compared to the prior year with both our store and digital channels delivering growth this quarter. Retail store sales were up 93%, a significant increase from the comparable period when all stores were closed roughly half of the quarter. In addition, the combined store and digital sales in our store markets grew 33% over last year, as many customers who shifted their spend last year to direct during the early stages of the pandemic now shifted back to the stores. As we move through the second quarter and lap the period when stores were gradually reopening under COVID precautions, we expect the retail channel will land roughly 50% up from last year. Our direct channel was up 2%, topping last year’s growth rate of 32% when most consumers were under stay at home orders and online shopping surge. In Q1 2020, our deep promotional actions and digital prospecting drove record high online orders and new buyers. This year, the number of new buyers was less than last year by 29%, but sales per customer was up 20% overall. Breaking down Q1 direct sales month-by-month, momentum accelerated in February through mid-March with sales up 50% year-over-year in that channel, but then flipped below last year by the end of March as we lap the heavy promotional offers. During April, the direct channel was down 38% versus last year. In May, comparable direct sales were down 20% and our outlook for the second quarter is that direct channel sales will land down in the mid-teens range. Regardless of the sales shift between channels, we continue to see broad growth momentum in our seasonal and year-round assortment as well as our emerging brands. Our men’s business overall was up 25% compared to last year and women’s business was up 15%. In both men’s and women’s, we’re receiving favorable response to our spring and summer collections, especially for outdoor activities that played to our strengths like gardening, hiking and fishing. In men’s, seasonal outerwear, outdoor active and underwear led the way. New incremental sales from 40 Grit and Best Made contributed 500 basis points with the men’s total growth rate. We relaunched 40 Grit in April with an enhanced creative and copy approach to drive steady volume each week. Customers responding well to seasonal basics, accounting for 40% of the 40 Grit business, we’ve also introduced a handful of core 40 Grit styles on Amazon, the further test and learn alternative channels of distribution. Sales for our new premium Best Made brand were above our expectations. We reinstated the brand’s traditional red sale event to exit acquired inventory prior to our plan relaunch later this summer. In Alaskan Hardgear, sales were up 79%, driven by clearance of winter outerwear items and healthy full price selling on the lightweight spring and summer collection. In women’s, we have a strong response to woven bottoms, line extensions in core fabrication, such as Dang Soft for underwear and seasonal goods, such as shorts, skorts and capris. We continued our commitment to newness with launch of our women’s swimwear line, which has been well received. On April 7, we launched a women’s line for 40 Grit, a no-frills workwear line that appeals to younger, more price sensitive customers. Early results are positive with 40 Grit shorts, overalls and knit tops as the most popular items. We also have plans to unlock the potential of our Alaskan Hardgear and Best Made brands with the addition of a women’s line for both of those brands. As we mentioned on our last call, we entered into a pilot test with Tractor Supply Company to have Duluth Trading displays of Buck Naked underwear in 13 of their stores. Early results of the pilot support a rollout to an additional 100 Tractor Supply stores during July. We see this as a great opportunity to expand our brand awareness with a top tier partner and we’ll continue to monitor progress for future expansion. The initiatives we undertook throughout last year to make the company stronger and more competitive are producing results and generating investment capital. In addition to the investments in our customer data platform, which deepens our ability to personalize the marketing outreach, our decision to pause and reevaluate new store growth and getting inventory levels under control has strengthened our balance sheet and sources of growth capital. Also, by reallocating marketing dollars out of the first quarter and into the second, third and fourth quarters, we have the flexibility to go on the offense with our emerging brands, while still driving deeper customer penetration in our core Duluth brand. As I’ll share shortly, the quarterly shifts and certain expenses may flex bottom line results up or down, but our commitment to realize operating margin expansion in 2021 overall is very much intact. Last quarter, we mentioned the likelihood of near-term delays and inventory receipts due to shipping channel disruptions and congestion caused by record high imports. Certain core items and seasonal resets were impacted due to the delays. While offset the inventory strains, we shifted the timing of some marketing events that drove full-price selling out of Q1 into Q2. Even with these actions, we achieved a first quarter gross profit margin improvement of 230 basis points to 49.9%, reflecting a higher mix of full-price sales overall. To mitigate ongoing supply disruptions, we’re pulling key fall winter inventory receipts forward, where we can and will be flexing our promotional events in the later quarters as needed, if inventory flows continue to be constrained. That said, we do expect year-over-year gross margin rate to increase in the second and third quarters, although less than the increased just realized in the first quarter. Turning to expenses, SG&A for the first quarter decreased 9.3% to $64.6 million compared to $71.3 million last year. As a percentage of net sales, SG&A expense decreased to 48.5% compared to 64.9% last year. This included an increase of $2.5 million in general and administrative expenses offset by a $9 million decrease in advertising and marketing expenses and $200,000 of selling expenses. Selling expenses as a percentage of net sales decreased 330 basis points to 15% compared to 18.3% last year, driven by shipping costs leverage from a lower percentage of direct sales versus store sales combined with higher average order size and direct. Within our distribution centers, we are experiencing challenges in hiring as competition for hourly staff has been extremely tough. Our plans beginning this summer are to increase hourly wage rates in our distribution network in order to attract and retain quality team members and better position of company competitively. Factoring in the wage rate increases, we still expect to gain operating leverage on selling costs through the balance of 2021, due to the efficiency gains we’re realizing in direct fulfillment activities, higher average order size compared to last year and productivity gains from the capital investments and expansion of our distribution network. On the advertising front, we considerably decreased our spend compared to last year, largely due to pulling out of national TV media in the quarter, reduced digital prospecting spend and shifting some catalog releases from Q1 into Q2. Advertising and marketing costs as a percentage of net sales decreased 1000 basis points to 8.4% compared to 18.4% last year. As I mentioned earlier, our plans for ad spend in 2021 is to shift dollars to periods where spend can make a greater impact on either driving sales or building brand awareness. Also, investing deeper in the brand development of Alaskan Hardgear, 40 Grits and Best Made will likely offset the efficiencies we’re gaining on core Duluth advertising. As a result, we expect the next three quarters, we will see deleverage on our advertising expense, but the full year we’ll be flat to last year on a percent of sales basis. General and administrative expenses as a percentage of net sales decreased 310 basis points to 25.1% compared to 28.2% last year, due to higher sales volume. Our current store count of 64 reflects the closing of our Mall of America pilot store in April. As we discussed before, we have paused our retail store expansion until there’s more clarity around consumer buying patterns post-pandemic. Right now, we have only one signed lease in Cherry Hill, New Jersey for 2021. Looking beyond this year, we’ll be studying several new store concepts in conjunction with a deeper strategic growth assessment led by Sam. Over the next two quarters, we will see incremental workforce costs that represent new skills and talent in our product development, creative, marketing and digital areas. We will also see added expenses related to the recovering the short-term cost savings we took last year on staff and leadership compensation. As such, we don’t expect to realize leverage on G&A expenses in the second and third quarter. Adjusted EBITDA for the first quarter was $10.1 million, an increase from the negative adjusted EBITDA of $11.6 million in Q1 2020. Our net income was $500,000 or $0.02 per diluted share compared to a net loss of $15 million or a loss of $0.47 per share reported in the first quarter last year. Moving on to the balance sheet. As Steve stated, we are in the strongest position in recent years. We ended the quarter with net working capital of $73.5 million, including $26.1 million in cash and $17.6 million outstanding on our term line of credit. We enhanced our liquidity position with the renewal of our credit facility that extends to a new five-year term. The facility is now an all revolved restructure of $150 million plus an optional $50 million accordion feature if we need to expand for strategic growth opportunities. On a side note, this facility is the first corporate syndicated loan facility to include the new Bloomberg benchmark BSBY rate as a replacement to LIBOR. The improved loan structure and loan pricing tiers lowers our borrowing costs by over 100 basis points. Before the facility renewals and subsequent to quarter end, we paid off the term loan balance and currently have $5 million outstanding on the new revolver. We expect our peak borrowing needs will be between $30 million to $40 million in the fall, which compares to $92 million at its peak last fall. Our overall inventory position is back in sync with our sales demand, which led to improved inventory turns and free cash flow generation of $10.4 million in Q1. As I mentioned before, the strong positive cash flow and increased liquidity position will allow us to fund growth initiatives such as scaling our emerging brand platform, investing in core category expansions and new product innovations, as well as investing in greater automation in our distribution center network. Given our first quarter financial results, the current business trends by channel and the potential for elevated inventory flow disruptions and inflationary pressures, we are updating our guidance for fiscal year 2021. We now expect to deliver the following: net sales in the range of $695 million to $710 million, gross profit percentage improvement of 50 to 100 basis points, operating margin improvement of at least 100 basis points, depreciation and amortization is estimated at $31 million to $32 million, adjusted EBITDA is expected to be $68 million to $71 million, EPS in the range of $0.66 to $0.72 per diluted share and capital expenditures, including the software hosting implementation costs of $15 million to $16 million. In closing, we’re pleased with the momentum in the business today, yet cautious about an uneven consumer recovery and supply chain challenges. Where we’re most optimistic is the power of our brand development capabilities and potential to scale the emerging brands through digital capabilities, widen our customer base and cement dilute as the premier can-do lifestyle brand. Sam and I look forward to sharing more on our next call about the strategic initiative that will enable this growth and realize our value creation mandate. And finally, I’d like to thank Steve on behalf of the entire organization for his years of dedicated service, especially over the last 20 months as he led the company through some very challenging time. With that, I’ll open the call for questions.

Thank you. [Operator Instructions] And today’s first question comes from Jonathan Komp with Baird. Please go ahead.

Yes. Hi. Thank you. I got a couple of bigger picture questions, but first maybe Dave to start off maybe on the topic of really the near-term momentum in the business. It was helpful that you outlined the direct sales trends by month and some expectations. But could you maybe first just talk about the total sales trends you saw during the quarter and then any near-term expectations for the total sales growth?

Yes, John. How you doing? Can you hear me here?

I can. Yes.

Okay, great. Yes. Well, in total, we were trending very close to where we landed on the full quarter. It was really a quite a shift between direct and the retail stores through that period of time. But we were trending higher than 20% early in the quarter. And then when going against last year’s comps on direct, we started to see that impact on that channel, but the stores were making up for it. So throughout the quarter, we were really seeing some pretty healthy total growth rate. The one period in mid-March where we saw significant growth was during our global event. And we also had a significant amount of clearance that we pushed through in that period of time. But overall it was fairly consistent.

In any perspective, when you look forward, obviously tougher total comparisons in Q2 and Q3, but it sounds like from an advertising perspective and maybe even a product availability perspective, you didn’t have all of the tools at your disposal in first quarter. So how do you think about near-term cycling those tougher total sales growth comparisons?

Well, we’re prepared with the marketing plan to do that. And that’s where we referred to shifting ad dollars out of the first quarter into the second quarter. And that’s going to energize our period that we’re in right now. But we’re still going again, at this moment some pretty healthy offers from a free ship, no men perspective and discounts. But we feel like we’re well armed to see growth. Although we’re not going to expect to see sales growth at 20% in the second quarter because of the tougher direct comps. But we’ll see that start to moderate as we go through second and third quarter.

Okay. Thanks for that. And then Sam, welcome. I had a bigger picture question as you’ve obviously had a limited time in the business today. But curious to hear a little bit more about your initial assessment really of the store base and how you’re viewing the omni-channel capabilities, including the systems in place and the stores in terms of the bigger picture initiatives that you laid out, especially the ability to leverage the current assets and broaden the brand reach. Just curious your initial assessment there.

Yes. Jonathan, how are you? It’s been a little while since we’ve spoken. Yes, so it’s been just about a month now. And as I said, in my prepared remarks, spending the majority of my time, getting to know the team and better understanding where we are relative to many of those topics you just mentioned. So when I think about currently there’s significant work that’s been done in terms of the strategic initiatives and key priorities for the enterprise. Certainly, the company’s in a really good position from an omni-channel perspective. Really the next step is twofold. One is really starting to identify where we can leverage some of the current things we’re doing really well. How do we leverage that to better scale the business? Second is to identify within the omni-channel framework and specifically the customer journey and customer experiences is what role each touch point plays as well as each support mechanism plays. So where does our digital marketing, digital channel, brand voice, target consumer voice play in our forward looking strategy and how does that support each of our unique brands? What role specifically does digital play beyond commerce? Equally important, what role do stores play? And I believe, the physical plant has an extremely important role in our omni-channel ecosystem. We’re going to assess the needs of the stores and specifically, how they help impact and broaden our brand reach within certain DMAs. But suffice it to say, we’re going to be very strategic in how we assess the role of the stores and ensure that as we do start to make decisions around the future of the physical plant that we’ve got data to support that.

Great. I look forward to spending more time on each of those topics. Thanks again. And welcome.

Thank you.

And our next question today comes from Jim Duffy at Stifel. Please go ahead.

Well, thank you. Good morning, everyone. Sam, welcome to the team.

Thank you.

I have a couple of questions. Dave, I’ll start with you just on near-term dynamics. I think you mentioned you see inventory in sync with sales demand, but a lot of the comments suggest that was not the case in the first quarter and that’s the reason for the marketing dollar shift to latter quarters. Do you indeed have the inventory that you need right now in seasonally appropriate categories. And can you talk a little bit about how you see that playing out as we get into 3Q, 4Q? And then, as it relates to the guidance, you just had really nice upside to the EBITDA in the first quarter, but didn’t pass that through, I guess, due to the marketing dollar shift. Would you expect the marketing dollar shift to indeed drive sales as well?

Yes. I guess, let me start there, Jim. We do think that the marketing dollars are going to drive the support the top line, but we’re reallocating it into a portion of that into our emerging brands, which does take a bit of heavier lifting to build the brand awareness and the efficiencies that, that you can gain aren’t as great with our core Duluth Brand. So it will be a bit of investing for the longer-term to get those brands up to a larger scale. On an inventory front, we did come into the year feeling very heavy in inventory. Our clearance position was as high as it’s ever been. And we used clearance marks a little steeper in the middle of March to clear through that and get us back into position going forward. So compared to last year, Jim, if you recall, we were running significantly high inventory levels over prior years and we’re way out of whack with our sales growth. So at this point, we do feel like we’re well-positioned our seasonal goods were clearing through as we’re marking in the season, but our year round is still a bigger majority of our inventory position. And that’s where we’re feeling good today, but inventory flows heading into August and September could delay some of those being in the right place at the right time. Not in a significant way, but we want to be very nimble and how we address the inventory position relative to events we might have. So I’d say, we’re feeling good about inventory position, and we’re going to end the year and in an aggregate it’ll have that right size to the sales plan we’ve got in front of us.

Very clear. Thanks for that, Dave. And then Sam, I wanted to ask a bigger picture question. Have you recognized the early days in your tenure there, but you did make a comment about exploring opportunities to broaden brand reach while maintaining integrity. I remember with Finish Line, you had the initiative with Macy’s. Can you just speak about how you’re thinking about that relative to potential opportunities for the Duluth Brand, I’ll just Tractor Supply pilot fits in with that and any initial thoughts there? I think investors would appreciate. Thank you.

Thanks, Jim. Yes. So a couple of things I’d say one is, as Dave just mentioned, we’re starting to I believe transition and appropriately beyond just the Duluth Trading Company brand and really into multi-brand. So today, we’ve now got four different brands that we’re beginning to focus our efforts around in Duluth, Alaskan Hardgear, 40Grit and Best Made. And so much of our internal discussions have been around, how do we develop and grow those brands independent of each other without losing some of the core values of what’s made Duluth, what it is today and that’s really around product innovation, quality, performance, and benefit attributes of the products that we made. The opportunity to expand our broad – our brand reach is really about expanding the groups of consumers we speak with. And so we’re doing some work now on how we frame that up and ultimately how we start to, as I said in my prepared remarks, make one plus one equal three. As it relates to other potential growth opportunities like Tractor Supply, we’re in the very, very early stages there. And while we’re pleased with the results and we’re going to continue to partner closely with them and learn more about how that business might work, much of our time and effort is going to be around developing these unique brand propositions and really building out our ability to scale, multi-brand not only currently, but into the future as well.

Thank you, Sam.

Yes. You bet.

[Operator Instructions] Today’s next question comes from Dylan Carden with William Blair. Please go ahead.

Great. Thank you very much. Just curious, the sort of the scale back in marketing was pretty profound in this quarter, and you kind of came in ahead of sales expectations you made a comment there about sales per customer. I’m just curious if there are any learnings as it relates to channels of advertising capacity to pull back on advertising. It sounds like you’re going to ramp it back up, but what – just what you took away from the quarter as it relates to the overall lower marketing budget.

Yes. Sure, Dylan. This quarter, it is typically a quarter that allows us to address any overhang of inventory and it’s our lowest gross margin quarter. So despite the improvement in gross margin year-over-year, really, if you go back a couple of years, we’re still at a lower gross margin rate. And the way, the reason I’m talking about that is because that was a heavy driver of the sales in this period relative to the marketing spend, full price selling is where we really like to see our second quarter and certainly third quarters carry the day on that front. So the marketing shift from pulling out of national TV, it wasn’t as impactful, because we replaced it with some very compelling offers. And I think a larger buyer file just coming into this fiscal year. I think our learning is, now that we’ve got tools and our toolbox to be more personalized with the outreach and target customers, there’ll be less of a need to spend money on the broad national TV media and use that just during the periods when we can really carry a larger really address a larger area, but most of the market is going to be more targeted even some of the streaming and connected TV channels that’s – and digital channels that’s where we’re going to see the marketing allocation go to. So that gives us a confidence that it’s – that we’ll see down the road more of a leverage there, but hopefully that kind of addressed your question, Dylan.

Yes. No, it does. Thank you. And then I guess, just kind of curious about, maybe this is a question for everyone on the call, but you mentioned there, which is why I feel, I can ask about it. You sort of rethinking the retail strategy, it’s early days, but kind of maybe what points you think you can address or change longer term in the retail strategy. And then some of the bilanguage here is kind of moving maybe more towards a wholesale distribution model. And you had mentioned sort of Tractor Supply, a 100 plus opportunity. Does that mean you actually expand to a 100 plus Tractor Supply? I’m just kind of curious how you’re viewing the two channels of distribution go forward.

Yes, I’ll start. And maybe Sam add some points on that. The Tractor Supply expansion to a 100 points is, is that we’ll have a display in a 100 of their stores in the next month. And they’re not large displays, they’re still four items of our Buck Naked with the size range and color display. So it’s a – it fits within their apparel category. And we’re going to learn more from that. We’re going to be in markets that we haven’t been in, in fact markets that we haven’t had any brick and mortar presence in. So that’s going to be an interesting learning for us as well. But can’t say that is going to inform our retail strategy. We still are going to wait and see how the balance of the year plays out with a shotgun behavior through the holidays, obviously, holidays are our big part of our business. And giving us time to really rethink our version of a store. So that that to come Dylan and sure. Turn it over to Sam for some thought.

Yes. Dylan, I would just add that. The Tractor Supply piece, while it is going – it’s going well, we’re pleased with it. It’s – at this stage, it’s a slow burn, the whole subject around wholesale. Our real focus is going to be on some really powerful opportunities we have right now. And that’s an investing in and developing our own brands. We’ve got four powerful brands that we believe have the makings for long-term growth initiatives. And as we develop and build those businesses out, certainly, wholesale becomes a consideration, but that’s down the road. Our current focus is going to be around creating these unique brand proposition so that we can grow each of those brands independent of each other, but then start to get some leverage on some of those core support mechanisms, be it logistics or infrastructure. And as Dave talked earlier about, our brand marketing spend, we’ll start to get some leverage by building that the top line on those four brands. So that’s really going to be our focus, specific to retail, so our stores, as I said earlier, it’s a really important part of an omni-channel strategy, certainly, critical from a consumer journey perspective, as well as brand building. And so, by no means, are we suggesting we’re going to stop opening stores, we’re just pausing until we can do more work get better strategic insight into the role of stores. And importantly, better understand the opportunities by market and where those stores should be open in support of our bigger enterprise strategy. So more to come on that.

That’s much clear. Thank you for that. I guess, it sort of leads into a question and if I’m allowed here one more. Just around sort of the product launches for this year, as you kind of lean into the success you’re having with some of these 40 Grit and Alaskan Hardgear. Are there more for product launches in those verticals to kind of look forward to in this year?

Yes. Dylan, we’ve got in our core Duluth category, we’ve got some product launches, a new underwear line coming out. And really where we’re seeing a lot of success is taking some of our core fabrication and applying it into new items. And that’s playing out within our women’s line. We’ve got new items coming in the fall season there. Alaskan Hardgear, some new outerwear configurations that we’re going to be releasing in the fall season. So 40 Grit and Alaskan Hardgear, we – I mentioned on my remarks that we’re going to introduce a women’s component to that’s coming next year. But we’re in development now there too, because we think really across all four of these brands, there’s the long-term potential to serve the whole family and individuals not just men. So look forward to that.

I would add, I would add Dylan, this fall, we’re launching Best Made. So up until this point, the products we’ve been selling are really products that we acquired with Best Made. But this fall will actually be our launch of the offer that was designed and created by our team here. So we’re really excited about the Best Made launch coming up August – August-ish, I believe.

That’s great. There’s the Best Made launch come with any sort of change – sort of back to my original question change in marketing. I mean, one of the things about that brand was always its catalog and how successful they were with that. Are you kind of thinking about how you message that brand a little bit differently than maybe how you speak to the Duluth core customer?

Yes, we’re talking about that, obviously, the digital will play a critical role in that. At this stage, I don’t believe we’re talking too much about catalog. I think, certainly – I think in totality, there’s a significant digital opportunity for us and certainly within Best Made. I think that there’s a nice fit given the quality and in the premium price points we’re selling there.

Got you. Thanks for indulging me and all those, Sam, nice to have you on board.

Yes. Thank you. Appreciate it,

Ladies and gentlemen, this concludes today’s question-and-answer session and today’s conference. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.