How Duluth Trading does clicks to bricks

DECEMBER 23, 2015 | BY MIKE TROY

Duluth Holdings built its brand online and now, fresh of its first quarter as a public company, the quirky apparel retailer thinks it could open as many as 100 stores.

The company operates its stores under the Duluth Trading Company banner and didn’t open its first location until 2010, well after it had gained awareness with shoppers through distribution of catalogs and its online presence. Billing itself as a lifestyle brand for the modern, self-reliant American, the company operates just nine stores that average about 12,000-sq.-ft., and account for a little more than 10% of the company’s total sales. However, that percentage is likely to grow dramatically over time as Duluth Trading pursues a “clicks to bricks” strategy and builds out a network of as many as 100 stores.

The time frame for doing so has not been disclosed and the company is taking it slow in 2016 by only opening between three and five stores. However, the pace of expansion is likely to increase in subsequent years – Duluth Holdings completed an initial public stock offering on Nov. 25 – and as it does so the company’s site selection process will benefit from the ability to mine purchase behavior data to determine optimal locations.

Duluth Trading is off to a pretty good start having just reported its first quarter of results as a public company. Sales increased 29.9% to $55.3 million and gross margins expanded 100 basis points to 57.2% during the third quarter ended Nov. 1. However, profits declined to $1.5 million, or six cents a share, from $3 million, or 13 cents a share the prior year.

“In the quarter we incurred some expenses related to strategic investments that largely accounted for the decrease in profitability year-over-year,” said Duluth Trading CEO Stephanie Pugliese. “These investments included the implementation of our new warehouse management system and third-party logistics infrastructure necessary to support our rapid growth, while continuing to deliver an outstanding customer experience through closer proximity and reduced shipping time. In addition, our advertising expense increased as a percent of sales due to the timing of advertising campaigns that we tested in advance of the critical holiday selling period.”

Going forward, Pugliese said the company is focused on executing growth strategies such as building brand awareness to acquire customers, accelerating retail expansion, selectively broadening assortments in certain men’s product categories and growing the women’s business.

Pugliese was named CEO of Duluth Trading in Feb. 2015 after serving as president since Feb. 2012 and has held virtually every senior leadership position at the company including COO, chief merchant and vice president of product development. She arrived at the company in the fall of 2008 after previously holding merchandising roles at Land’s End and Ann Inc.

Around the time Pugliese was being elevated to the role of CEO, Duluth Trading created the new position of senior vice president of omnichannel customer experience and hired retail veteran Allen Dittrich. He previously held merchandising and operations roles at Allen-Edmonds Shoe Corp., Gander Mountain and the department store division of the former Dayton Hudson company.