DLTH 10-K & 10-Q changes, risk factors and insider trading

Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our financial statements and related notes. These risk factors reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of our Class B common stock could decline, and you could lose part or all of your investment.

a failure in our solution-based design process to accurately identify the problems our customers are experiencing with commonly available apparel and gear or a lack of customer acceptance of new products or product features we design;

customer unwillingness to attribute premium value to our new products or product features we design relative to the commonly available apparel and gear they were intended to replace;

new, well-received product introductions by competitors;

weak economic conditions or consumer confidence, which reduce demand for our products; and terrorism, civil unrest or acts of war, or the threat thereof, which adversely affect consumer confidence and spending and/or interrupt production and distribution of products and raw materials.

Customer complaints or negative reactions to, or unfavorable publicity about, our product quality or product features, our storytelling or irreverent advertising, the shopping experience on our website or in our retail stores, product delivery times, customer data privacy and security practices or customer support, especially on blogs, social media, other third-party websites and our website, could rapidly and severely diminish consumer use of our website and catalogs,direct mail, visits to our retail stores and consumer confidence in us and result in harm to our brand. Furthermore, these factors could cause our customers to no longer feel a personal connection with the Duluth Trading brand, which could result in the loss of customers and materially adversely affect our business, results of operations and growth prospects.

The success of our direct-to-consumer channel depends on customers’ use of our digital platform, including our website, and response to digital marketing; if our overall marketing strategies are not successful, including in connection with our maintenanceability ofto commit adequate resources to support our marketing strategy, maintain a robust customer list and ability to effectively customize our marketing efforts based on understanding customers preferences, our business and results of operations could be materially adversely affected.

Customer response to our digital marketing is substantially dependent on merchandise assortment, merchandise availability and creative presentation, as well as the selection of customers to whom our digital marketing is directed and our catalogsdirect aremail is sent. Our maintenance of a robust customer list, which we believe includes desirable demographic characteristics for the products we offer, has also been a key component of our overall strategy. If the performance of our website and email declines, or if our overall marketing strategy is not successful, our business, results of operations and stock price could be adversely affected. In addition, the success of our marketing strategy would be negatively impacted if we are unable to commit adequate resources to support our marketing strategy.

If we fail to retain current customers or acquire new customers, or fail to do so in a cost-effective manner, we may not be able to increase net revenue or profit per active customer.

Our success depends on our ability to retain and acquire customers in a cost-effective and efficient manner. In order to retain and expand our customer base, we must appeal to current customers and acquire customers who identify with the Duluth Trading brand.brand through the proper marketing channels. We have made significant investments related to customer retention and acquisition and expect to continue to spend significant amounts to acquiredo additional customers.so. For example, our national television advertising campaigns are expensive and may not result in the cost-effective acquisition of customers. Furthermore, as our brand has become more widely known in the market, our marketing campaigns have not resulted in acquisition of new customers at the same rate as past campaigns, and this trend may continue in the future.

We also use other paid and non-paid advertising. Our paid advertising includes search engine marketing, display advertising and paid social media. In connection with our use of paid social media, damage to the reputations of individuals or companies with which we partnered could negatively impact our reputation and that of our brands. Our non-paid advertising efforts include search engine optimization, non-paid social media and email. We obtain a significant amount of traffic via search engines and, therefore, rely on search engines such as Google. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our sites can be negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search algorithms or results, causing our sites to place lower in search query results. A major search engine could change its algorithms in a manner that negatively affects our paid or non-paid search ranking, and competitive dynamics could impact the effectiveness of search engine marketing or search engine optimization. We also obtain a significant amount of traffic via social networking websites or other channels used by our current and prospective customers. As e-commerce and social networking continue to rapidly evolve, we must continue to establish relationships with these channels and may be unable to develop or maintain these relationships on acceptable terms. Additionally, digital advertising costs may continue to rise and as our usage of these channels expands, such costs may impact our ability to acquire new customers in a cost-effective manner. As usage of these channels by our customer base has not grown as expected, we have suffered a decline in customer growth and net sales. A continued decrease in the level of usage or customer growth may have a material adverse effect on our business, financial condition and operating results.

We cannot assure you that the net profit from new customers we acquire or customers we retain will ultimately exceed the cost of acquiring or retaining those customers. If we fail to deliver an outstanding customer experience, or if consumers do not perceive the products we offer to be manufactured with high quality craftsmanship, we may not be able to retain customers and acquire new customers. If we are unable to retain customers and acquire new customers, our business, results of operations and growth prospects may be materially adversely affected.affected

The apparel, footwear and accessories industry is highly competitive. We compete with a diverse group of direct-to-consumer companies and retailers, including men’s and women’s specialty apparel chains, outdoor specialty stores, apparel catalogdirect mail businesses and online apparel businesses that sell competing lines of merchandise. Our competitors may be able to adopt more aggressive pricing policies, adapt to changes in customers’ needs and preferences more quickly, devote greater resources to the design, sourcing, distribution, marketing and sale of their products or generate greater national brand recognition than us. Competitive pressures in the retail industry may require us to increase promotional markdowns, lowering our gross margin. In addition, as our business continues to expand, our competitors may seek to increase efforts to imitate our product designs, which could adversely affect our business and results of operations. An inability to overcome these potential competitive disadvantages or effectively market our products relative to our competitors could have an adverse effect on our business and results of operations.

We rely on sources for merchandise located in foreign markets, and our business has been and may thereforecontinue to be adversely affected by legal, regulatory, economic and political risks associated with international trade and those markets.

transportation delays and interruptions, including due to port congestion and the failure of suppliers or distributors to comply with import regulations;

the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions, import/export laws and regulations, and local intellectual property laws and rights owned by third parties;

changes in U.S. and non-U.S. laws (or changes in the enforcement of those laws) affecting the importation and taxation of goods, including disallowance of tax deductions for imported merchandise, imposition of unilateral tariffs on imported goods, duties, quotas, enhanced security measures at U.S. ports or imposition of new legislation relating to import quotas;

economic and political instability in the countries and regions where our suppliers are located;

compliance with U.S. and other country laws relating to foreign operations, including the Foreign Corrupt Practices Act, which prohibits U.S. companies from making improper payments to foreign officials for the purpose of obtaining or retaining business;

increases in shipping, labor, fuel, travel and other transportation costs;

the imposition of anti-dumping or countervailing duty proceedings resulting in the potential assessment of special anti-dumping or countervailing duties;

political instability, war and acts of terrorism; and the occurrence of a natural disaster, unusual weather conditions, or prolonged public health crises, epidemics or pandemics in foreign countries from which we source our products.

New initiatives have been and may be proposed in the United States that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions that, if enacted, would increase the cost of products purchased from suppliers in such countries with which we do business. Any inability on our part to rely on our foreign sources of production due to any of the factors listed above could have an adverse effect on our business, results of operations and financial condition.

We do not own or operate any manufacturing facilities and therefore depend upon independent third-party suppliers for the manufacture of our merchandise. We cannot control all of the various factors that might affect timely and effective procurement of supplies of product from our third-party suppliers and delivery of merchandise to our customers. A majority of the products that we purchase must be shipped to our fulfillment centers in Wisconsin, GeorgiaWisconsin and Utah.Georgia. While our reliance on a limited number of fulfillment centers provides certain efficiencies, it also makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health pandemics, or other unforeseen causes that could delay or impair our ability to fulfill customer orders and/or ship merchandise to our stores, which could adversely affect sales. Our ability to mitigate the adverse impacts of these events depends in part upon the effectiveness of our disaster preparedness and response planning, as well as our business continuity planning. Our use of imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, risks of damage, destruction or confiscation of products while in transit to a fulfillment center or at points of export or import, organized labor strikes and work stoppages, transportation and other delays in shipments, including as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, unexpected or significant port congestion, lack of freight availability and freight cost increases. In addition, as has happened in the past, if we experience a shortage of a popular item, we may be required to arrange for additional quantities of the item, if available, to be delivered through airfreight, which is significantly more expensive than standard shipping by sea. We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive merchandise from suppliers or deliver products to customers in a timely and cost-effective manner.

Our results of operations and financial condition are dependent on maintaining our e-commerce business and expanding our e-commerce business is an important part of our growthbusiness strategy. Dependence on our e-commerce business and its continued growth subjects us to certain risks, including:

diversion of traffic from our stores;

liability for online contentcontent, including data privacy and accessibility claims;

the need to keep pace with rapid technological change;

government regulation of the Internet, including data privacy and taxation; and threats to the computer systems that operate our website and related support systems, including viruses, malware and other malicious code, misconfiguration, systems failure or inadequacy, compromise or unauthorized access and similar disruptions.

Our growthbusiness strategy is influenced by the willingness and ability of our suppliers to efficiently manufacture our products in a manner that is consistent with our standards for quality and value. If we cannot obtain a sufficient amount and variety of quality products at acceptable prices, it could have a negative impact on our competitive position. This could result in lower revenue and decreased customer interest in our product offerings, which, in turn, could adversely affect our business and results of operations. Our arrangements with our suppliers are generally not exclusive. As a result, our suppliers might be able to sell similar or identical products to certain of our competitors, some of which purchase products in significantly greater volume. Our competitors may enter into arrangements with suppliers that could impair our ability to obtain our products from those suppliers, including by requiring suppliers to enter into exclusive arrangements, which could limit our access to such arrangements or products.

We have entered into agreements with third parties for logistics services, information technology systems (including hosting our website), operating our call center during certain hours, software development and support, catalogprint production, select marketing services, processing gift card activity, distribution and packaging and employee benefits. Services provided by any of our third-party suppliers could be interrupted as a result of many factors, such as acts of nature or contract disputes. Any failure by a third party to provide us with services for which we have contracted on a timely basis or within service level expectations and performance standards could result in a disruption of our business and have an adverse effect on our business and results of operations.

In the normal course of business we often collect, retain and transmit customer personal and credit card information, employee personal information, and other sensitive and confidential information. The protection of customercustomers' and employeeemployees' information, and the Company’s intellectual property, from potential threats is vitally important to the Company. Consumers and employees continue to have significant concerns about the security of personal information, especially when transmitted over the Internet, and the use, retention, disclosure, and privacy of such information. We continually evaluate and upgrade our information systems, security measures, and practices to combat the ever-evolving cyber risks and to comply with our legal and regulatory obligations, and we provide cybersecurity awareness training around phishing, social engineering, and other cyber risks to our employees, in an effort to elevate our cybersecurity posture and give our workforce the skills to both avoid and report cyber threats. Despite our risk management efforts, vendor due diligence, and security measures, our facilities and systems and those of our third-party service providers, are subject to increasingly complex cyber risks, including cyber extortion, data breaches, unauthorized access, denial of service, vendor or employee misconduct, ransomware and other malicious software, and data exfiltration. We and our employees and customers could suffer significant harm if any personal, financial, or credit card information was accessed or disclosed by an unauthorized third party, or our information technology systems or those of our third party providers were compromised or subject to data loss, exfiltration, corruption, or disruption. Any security incident or data breach could severely damage our reputation and our relationships with customers, business partners and employees, cause us to incur significant costs and expenses to investigate, remediate and notify affected individuals, and expose us to an increased risk of litigation, regulatory enforcement, fines and penalties, and other losses and liabilities. In addition, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become more complex and uncertain due to recent high-profile privacy and security incidents and legislative efforts across the globe. As a result, we may incur significant costs to comply with laws regarding the use, retention, disclosure, security, and privacy of personal information.

We rely significantly on information technology, and any inadequacy, interruption, integration failure or security failure of this technology or the lack of safe and timely adoption of new technologies like artificial intelligence ("AI") could harm our ability to effectively operate our business.

Our ability to effectively manage and operate our business depends significantly on information technology systems. We rely heavily on information technology to track sales and inventory and manage our supply chain. We are also dependent on information technology, including the Internet, for our direct-to-consumer sales, including our e-commerce and catalogdirect mail operations and retail business credit card transaction authorization. Despite our preventative efforts, our systems and those of our third-party service providers may be vulnerable to damage or interruption. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach of security of these systems has and could adversely impact the operations of our business, including disruption of our ability to accept and fulfill customer orders, effective management of inventory, inefficient ordering and replenishment of products, e-commerce operations, retail business credit card transaction authorization and processing, corporate email communications and our interaction with the public on social media.

We must maintain sufficient inventory levels and properly allocate inventory throughout our distribution network to operate our business successfully, but we must also avoid accumulating excess inventory, which increases working capital needsneeds. andWith excess inventory, we may also need to increase promotional markdowns, potentially lowerslowering gross margins. We obtain substantially all of our inventory from suppliers located outside the United States. Some of these suppliers often require lengthy advance notice of order requirements in order to be able to manufacture and supply products in the quantities requested. This usually requires us to order our products, and enter into commitments for the purchase of our products, well in advance of the time these products will be offered for sale. As a result, it may be difficult to respond to changes in customer demand. If we do not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, inventory levels will not be appropriate and our results of operations could be adversely affected.

We accept payments using a variety of methods, including credit cards, debit cards, Paypal, gift cards and physical bank checks. For existing and future payment methods we offer to our customers, we may become subject to additional regulations and compliance requirements (including obligations to implement enhanced authentication processes that could result in increased costs and reduce the ease of use of certain payment methods), as well as fraud.. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time, raising our operating costs and lowering profitability. We rely on third-party service providers for payment processing services, including the processing of credit and debit cards. In each case, it could disrupt our business if these third-party service providers suffer a data breach, or become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, including data privacy and security rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our systems containing payment information are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from our customers and process electronic funds transfers or facilitate other types of payments, and our business and operating results could be adversely affected. Accepting payments through these methods have in the past and may in the future also subject us to fraud, especially if the systems we have implemented to detect and prevent fraud do not operate as expected. Depending on the nature of the fraud, we may not have any recourse to recover our costs, which may have an adverse effect on our results of operations.

Our failure to comply with restrictivethe covenants under our revolving credit facility and other debt instrumentsagreement could trigger prepayment obligations.obligations

Our business requires compliance with many laws and regulations, including labor and employment, customs, truth-in-advertising, data privacy and security, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of storesstores, our website and warehouse facilities. Failure to achieve compliance could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines and penalties. We may become involved in a number of legal proceedings and audits including government and agency investigations, and consumer, employment, tort and other litigation. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies. The outcome of some of these legal proceedings, audits and other contingencies could require us to take, or refrain from taking, actions which could negatively affect our operations or require us to pay substantial amounts of money adversely affecting our financial condition and results of operations. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, causing a material adverse effect on our business, financial condition and results of operations. There can be no assurance that any pending or future legal proceedings and audits will not have a material adverse effect on our business, financial condition and results of operations.

that a majority of our board of directors consist of independent directors, as defined under the rules of NASDAQ;

that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

actual or anticipated fluctuations in our results of operations, particularly in our growth rates and margins;

the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;

announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments;

changes in operating performance and stock market valuations of other retail companies generally, or those in our industry in particular;

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

changes in our board of directors or management;

sales of large blocks of our Class B common stock, including sales by our executive officers, directors and significant shareholders;

lawsuits threatened or filed against us;

Management’s discussion focuses on fiscal 2025 results compared to fiscal 2024. Fiscal year 2025 was a 52-week period and 2024 was a 53-week period. For a discussion of fiscal 2024 results compared to fiscal 2023. Fiscal year 2024 was a 53-week period and 2023 was a 52-week period. For a discussion of fiscal 2023 results compared to fiscal 2022,2023, refer to the Company’s Annual Report on Form 10-K for the year ended JanuaryFebruary 28,2, 2024.2025.

We are a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and catalog.direct mail. In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of February 2,1, 2025,2026, we operated 6263 retail stores and three outlet stores.

Net sales in fiscal 20242025 decreased by 3.1%9.8% compared to the prior year to $626.6$565.2 million;

Net loss in fiscal 20242025 was ($43.6$16.2) million compared to prior year net loss of ($9.9$43.6) million; and Adjusted EBITDA in fiscal 20242025 decreasedincreased $18.0to $24.9 million compared to the prior year toof $14.6 million.

Our management’s discussion and analysis includes market sales metrics for our stores, website and catalogdirect mail sales. Market areas are determined by a third-party that divides the United States and Puerto Rico into 280 unique geographical areas. Our store market sales metrics include sales from our stores, website and catalog.direct mail. Our non-store market sales metrics include sales from our website, catalogdirect mail and orders placed through the call center.

Selling, general and administrative expenses include all operating costs not included in cost of goods sold. These expenses include all payroll and payroll-related expenses and occupancy expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization. They also include marketing expense, which primarily includes television, digital and social media advertising, catalogprint production, mailing and print advertising costs, as well as all logistics costs associated with shipping product to our customers, consulting and software expenses and professional services fees. Selling, general and administrative expenses as a percentage of net sales is usually higher in lower-volume quarters and lower in higher-volume quarters because a portion of the costs are relatively fixed.

We define Adjusted EBITDA as consolidated net (loss) income before depreciation and amortization, and interest expense and provision for income taxes adjusted for the impact of certain items,expense, including non-cash and other items we do not consider representative of our ongoing operating performance. We believe Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other items. This non-GAAP measure may not be comparable to similarly titled measures used by other companies.

We believe Free Cash Flow is a useful measure of performance as an indication of the Company’s ability to generate cash and provides additional perspective on our ability to efficiently use capital in executing our growthbusiness strategy. We use Free Cash Flow to facilitate a comparison of our operating performance on a consistent basis from period-to-period and our ability to generate cash.

Gross profit decreased $16.5$6.9 million, or 5.1%,2.2%, to $301.6 million in fiscal 2025 compared to $308.5 million in fiscal 2024 compared to $325.0 million in fiscal 2023.2024. As a percentage of net sales, gross margin decreasedincreased to 53.4% of net sales in fiscal 2025 compared to 49.2% of net sales in fiscal 2024 compared to 50.3% of net sales in fiscal 2023.2024. The decreaseincrease in gross margin rate was primarily duedriven toby aan lowerincrease mixin ofaverage fullunit priceretail sales asfrom customers’reduced purchasingpromotional activity increasedcoupled during periods of promotions, partially offset bywith an improvement in product costs from our direct to factory sourcing initiative.initiative, partially offset by tariff costs.

Selling, general and administrative expenses increaseddecreased $3.1$27.1 million, or 0.9%,8.0%, to $310.5 million in fiscal 2025 compared to $337.6 million in fiscal 2024 compared to $334.5 million in fiscal 2023.2024. Selling, general and administrative expenses as a percentage of net sales was 54.9% in fiscal 2025 compared to 53.9% in fiscal 2024 compared to 51.7% in fiscal 2023.2024.

The increase in selling, general and administrative expense as a percentage of net sales was mainly driven by increasedthe overhead costs, partially offset by optimizationdecrease in net sales. We are not able to reduce SG&A at the same pace as the decline in sales as a result of our outboundfixed shippingcost network.base.

Interest expense increased $0.4$0.6 million to $5.2 million in fiscal 2025 compared to $4.6 million in fiscal 2024 compared to $4.2 million in fiscal 2023.2024. The increase in interest expense was primarily attributable to increased interest rates onhigher outstanding debt inthroughout fiscal 20242025 compared to fiscal 2023.2024 partially offset by a decrease in interest rates.

Income tax expense was $1.2 million in fiscal 2025 compared to income tax expense of $2.4 million in fiscal 2024 compared to income tax benefit of $2.9 million in fiscal 2023.2024. Our effective tax rate related to controlling interest was (7.8%) in fiscal 2025 compared to (5.7%) in fiscal 2024 compared to 22.4% in fiscal 2023.2024. The provision for fiscal 2025 and fiscal 2024 reflected the establishment of a valuation allowance against the net amount of deferred tax assets as well as pre-tax loss in the current and prior year.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreasedincreased $18.0to $24.9 million tofrom $14.6 million in fiscal 2024 compared to $32.7 million in fiscal 2023.2024. As a percentage of net sales, Adjusted EBITDA decreasedincreased to 4.4% of net sales in fiscal 2025 compared to 2.3% of net sales in fiscal 2024 compared to 5.1% of net sales in fiscal 2023.2024.

Free cash flow decreasedincreased $14.8$41.8 million to $16.6 million in fiscal 2025 compared to ($25.2) million in fiscal 2024 compared to ($10.4) million in fiscal 2023.2024. The decreaseincrease was primarily driven by higherlower inventory levels compared to aan reductionincrease in inventory in the prior year,year partiallycoupled offset bywith a decrease in purchases of property and equipment.

We spent $17.4$17.8 million in fiscal 20242025 on capital expenditures, inclusive of investments in software hosting implementation costs, which are included in Prepaid expenses & other current assets on the Company’s Consolidated Balance Sheets. We expect to spend approximately $20.0 million in fiscal 2025 on capital expenditures. Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year. During the first three quarters of our fiscal year, we typically are net users of cash in our operating activities as we acquire inventory in anticipation of our peak selling season, which typically occurs in the fourth quarter of our fiscal year. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

Investing activities consist primarily of capital expenditures related to ainvestments newin fulfillmentinfrastructure, centerretail stores and information technology.

Financing activities consist primarily of borrowings and payments related to our revolving line of credit and other long-term debt, as well as payments on finance lease obligations.

For fiscal 20242025 and fiscal 2023,2024, net cash used in financing activities was $3.8 million and $3.3 million, respectively, primarily consisting of payments on finance lease obligations.

On May 14, 2021, the Company terminated its prior credit agreement, and entered into a credit agreement (the “Credit Agreement”), which was treated as a modification for accounting purposes. The Credit Agreement originally matured on May 14, 2026 and provided for borrowings of up to $150.0 million that were available under a revolving senior credit facility, with a $5.0 million sublimit for issuance of standby letters of credit, as well as a $10.0 million sublimit for swing line loans. At the Company’s option, the interest rate applicable to the revolving senior credit facility was a floating rate equal to: (i) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.25% to 2.00% determined based on the Company’s rent adjusted leverage ratio, or (ii) the base rate plus the applicable rate of 0.25% to 1.00% based on the Company’s rent adjusted leverage ratio. The Credit Agreement iswas secured by essentially all Company assets and requiresrequired the Company to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the Credit Agreement.

On July 8, 2022, the Company entered into the First Amendment to the Credit Agreement (the “First Amendment”), which was treated as a modification for accounting purposes. The First Amendment amendsamended the Credit Agreement in order to (i) increase the revolving commitment from $150.0 million to $200.0 million; (ii) extend the maturity date from May 14, 2026 to July 8, 2027; (iii) amend the pricing index to replace BSBY with the Term Secured Overnight Financing Rate; and (iv) reduce the commitment fee in some instances.

On January 31, 2025,2025 the Company entered into the Second Amendment to the Credit Agreement (the “Second Amendment”), which was treated as an extinguishment for accounting purposes.. The Second Amendment amendsamended the Credit AgreementAgreement, in orderpart, to (i) decrease the revolving commitment from $200.0$200 million to $100.0$100 million; (ii) revise the definition of “Applicable Rate” to provide for pricing terms in the event of a Rent Adjusted Leverage Ratio greater than or equal to 3.50:1.0; (iii) limit the exceptions to the prohibition on restricted payments to (a) making dividends or distributions by any subsidiary to the Company, and (b) the acquisition of equity interests in satisfaction of tax withholding obligations associated with restricted stock or awards under employee incentive plans; and (iv) provide that the Maximum Rent Adjusted Leverage Ratio and the Minimum Fixed Charge Coverage Ratio willwould be measured commencing on the fiscal quarter ending May 2, 2021 and measured quarterly thereafter as of the last day of each fiscal quarter of the Company (other than for the fiscal quarter ending February 2, 2025). The reduction in the revolving commitment was intended to rightsize the credit facility with the Company’s cash needs to fund seasonal inventory builds and capital expenditure expectations and resulted in fee savings. The Credit Agreement was extinguished on April 28, 2025, resulting in a write down of $0.2 million of debt issuance costs related to the terminated line of credit.

We evaluated the development and selection of our critical accounting estimates and believe that the following involveinvolves a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position, and are therefore discussed as critical.

The Company recognizes ROU assets and lease liabilities related to leases on the Company’s consolidated balance sheets. The Company determines if an arrangement is, or contains, a lease at inception. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities reflect the obligation to make lease payments arising from the lease. At any given time during the lease term, the lease liability represents the present value of the remaining lease payments and the ROU asset is measured at the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs and the remaining balance of lease incentives received. Both the lease ROU asset and liability are reduced to zero at the end of the lease. See Note 3 “Leases,” of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.10‑K.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established if it is more likely than not that some portion or all of the deferred income tax asset will not be realized. A valuation allowance was recognized for the yearyears ended February 1, 2026 and February 2, 2025.

See Note 9 “Income Taxes,” of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.10‑K.

The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year. Fiscal 2026 is a 52-week period and ends on January 31, 2027. Fiscal 2025 was a 52-week period and ended on February 1, 2026. The three months of fiscal 2026 and fiscal 2025 represent our 13-week periods ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively.

We are a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel and accessories sold primarily through our own omnichannel platform. We offer products nationwide through our website and direct mail. In 2010, we initiated our omnichannel platform with the opening of our first store. Since then, we have expanded our retail presence, and as of MayAugust 3,2, 2026, we operated 63 retail stores and three outlet stores.

Net sales decreased by 4.0%7.8% over the prior year firstsecond quarter to $98.6$121.4 million, and net sales decreased by 6.2% in the first six months of the year to $220.0 million;

See the “Reconciliation of Net Income (Loss) Income to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures. See also the information under the heading “Adjusted EBITDA” in the section “How We Assess the Performance of Our Business” for our definition of Adjusted EBITDA.

On February 20, 2026, the U.S. Supreme Court issued a ruling relating to tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). Following the ruling, the U.S. Customs and Border Protection and other federal agencies issued additional guidance and took actions affecting the assessment, collection, refund, and/or protest of certain tariffs. We are evaluatingcontinuing to evaluate the impact of these developments on previously paid tariffs and related matters, including the potential for refunds or otheradditional recovery. At this time, we cannot reasonably estimate the amount or timing of any further recovery, if any, or the ultimate impact of these developments on our condensed consolidated financial statements.

We define Adjusted EBITDA as consolidated net income (loss) income before depreciation and amortization, and interest expense, including non-cash items, and other itemscharges or benefits resulting from transactions or events that are highly variable, significant in size, and that we do not considerbelieve representativeare indicative of our ongoing operatingor performance.future business operations. We believe Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other items. This non-GAAP measure may not be comparable to similarly titled measures used by other companies.

Three Months Ended MayAugust 3,2, 2026, Compared to Three Months Ended MayAugust 4,3, 2025

The decrease in net sales for the three months ended MayAugust 3,2, 2026 was primarily driven by a decline in direct-to-consumer net sales resulting from declines in web traffic and web conversion due to reduced promotional activity partially offset by higher average order values. The decline in direct-to-consumer net sales was partially offset by an increase in store net sales driven by improved shopper conversion and higher average order values.

The increase in gross profit and gross margin rate for the three months ended MayAugust 3,2, 2026 was primarily driven by a net reduction of cost of goods sold of $16.0 million related to refunds of previously incurred tariff charges as discussed in further detail above. The gross margin rate was also favorably impacted by an increase in average unit retail sales from reduced promotional activity coupled with an improvement in product costs from our direct to factory sourcing initiative. Excluding the impact of tariff refunds, gross margin was 59.6% for the three months ended August 2, 2026, compared to 54.7% for the three months ended August 3, 2025.

The decreaseincrease in selling, general and administrative expense and as a percentage of net sales for the three months ended MayAugust 3,2, 2026 was mainly driven by leveragean onincrease outboundin advertising and shipping costsexpenses, duewhich towas higherpartially averageoffset orderby valuesleverage in variable expenses in our fulfillment centers and stores coupled with alower reduction in personnel and marketing relatedoverhead expenses.

The impairment charge recorded during the threesix months ended MayAugust 3,2, 2026 related to the closure of our Salt Lake City fulfillment center and corresponding leasehold improvements, which is discussed in further detail in Note 2 of our Notes to Condensed Consolidated Financial Statements. The impairment charge recorded during the threesix months ended MayAugust 4,3, 2025 related to certain software that was no longer utilized in our operations.

The restructuring expenses incurred for the threesix months ended MayAugust 3,2, 2026 related to the closure of our Salt Lake City fulfillment center. The restructuring expenses incurred for the six months ended August 3, 2025 related to a reduction in force to right-size our expense structure. Refer to Note 13 of our Notes to Condensed Consolidated Financial Statements for further information on the closurerestructuring ofexpenses the fulfillment center.incurred.

Interest expense decreased for the threesix months ended MayAugust 3,2, 2026 due to a lower average balance on our outstanding line of credit.

TheIncome decreasetax wasexpense decreased for the six months ended August 2, 2026 primarily drivendue byto the recognition of additional valuation allowance established in the first quarter of 2025.

Reconciliation of Net Income (Loss) to EBITDA and EBITDA to Adjusted EBITDA

The following table presents reconciliations of net income (loss) to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-U.S. GAAP financial measures, for the periods indicated below. See the above section titled “How We Assess the Performance of Our Business,” for our definition of Adjusted EBITDA.

The increase in Adjusted EBITDA was primarily due to tariff refunds received in the second quarter of 2026 along with leverage across our cost of goods sold and operating expenses as discussed above in the “Results of Operations” section.

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. AtAs Mayof 3,August 2, 2026, our net working capital was $62.3$85.7 million, including $6.1$26.8 million of cash and cash equivalents.

Net Cash Used in Operating Activities

Operating activities consist primarily of net income (loss) adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in operating assets and liabilities.

The decreaseincrease in cash usedprovided inby operating activities for the threesix months ended MayAugust 3,2, 2026 was primarily due to the tariff refunds received, increase in gross margin rate, lower net outflows on trade payables and accrued expenses, and a decrease in selling, general and administrative expenses as discussed in further detail above, and decreased trade payables and accrued expenses primarily from improved inventory management.above.

Net Cash Used in Investing Activities

The increasedecrease in cash used in investing activities was primarily driven by ana increasedecrease in purchases of property and equipment.

Net Cash Provided by Financing Activities

The decrease in cash provided by financing activities for the threesix months ended MayAugust 3,2, 2026 was primarily due to lower proceeds from our line of credit as a result of lower use of cash in our operations.