Duluth Holdings Q1 2025: Navigating Contradictions in Promotions, Marketing Strategies, and Gross Margin Expectations

Promotional strategy and impact on consumer behavior, marketing and brand awareness strategies, marketing investments and brand awareness, gross margin outlook and expectations are the key contradictions discussed in Duluth Holdings' latest 2025Q1 earnings call.



Brand Awareness and Marketing Strategy:
- Duluth Trading is focusing on reinvigorating its brand awareness through upper funnel marketing investments, with early signs of success such as a feature on Good Morning America for Father's Day.
- The company is evaluating the marketing funnel and plans to reallocate savings from other areas to improve marketing efficacy, aiming to drive customer visits to both its website and stores.

Promotional Strategy and Consumer Response:
- Duluth Trading reduced the number of promotional days by 35% and the depth of promotions from 25% to 20%, resulting in improved sales trends, higher average order value (AOV), and increased shopper conversion rates.
- The company is balancing promotional activity and marketing to maximize customer retention and acquisition while monitoring financial and customer results.

Inventory Management and Product Assortment:
- Inventory at the end of Q1 was $176.1 million, up 29% year-on-year, with 91% of inventory being core year-round products.
- Duluth Trading is narrowing its product assortment breadth, aiming to reduce SKUs by at least 20% by spring 2026, to enhance efficiency in inventory purchases and marketing activities.

Expense Reduction and Right-Sizing:
- The company has initiated an expense savings initiative to reduce complexity and protect against potential top-line headwinds, with expected annualized savings of approximately $15 million, of which at least $10 million will be realized in the current fiscal year.
- This initiative is part of a broader approach to reduce the expense base, focusing on simplification and efficiency to support brand awareness, product innovation, and customer service.