Duluth Holdings Inc. Annual Report 2018

← All annual reports

FY2018 Annual Report · Duluth Holdings Inc.

Loading PDF…

DULUTH HOLDINGS INC. 2018 ANNUAL REPORT

PO BOX 159 | 201 EAST FRONT STREET | MOUNT HOREB, WI 53572

BUILDING THE

EXECUTIVE MANAGEMENT

CORPORATE INFORMATION

FOR
LONG-TERM VALUE CREATION

2018 was a year of exciting and strategically important milestones at Duluth Trading Company. Major initiatives
were completed to support the company’s long-term business plans. These successes will support the competitive
growth of the Duluth Trading brand across its omnichannel platform for years to come. New Order Management
and E-commerce technology delivered an improved digital shopping experience. New customer services such
as E-gift cards and “Buy Online, Pick Up in Store” offered greater customer shopping flexibility and convenience.
These plus distribution center upgrades and strong new product offerings succeeded in driving sales and
engagement, with greater efficiency than ever, and positioned Duluth Trading for the future.

Stephen L. Schlecht

Executive Chairman of the Board and Founder

Stephanie L. Pugliese

President and Chief Executive Officer

Senior Vice President and Chief Financial Officer

David Loretta

Allen L. Dittrich

Senior Vice President and Chief Operating Officer

MAY 2018

A (cid:31)(cid:31)(cid:31)U (cid:31) U(cid:31)(cid:31)(cid:31)S(cid:31)(cid:31)(cid:31)T 2018

OCTOBER 2018

BOARD OF DIRECTORS

OMS
ORDER
MANAGEMENT
SYSTEM

• SHOP WHERE YOU WANT

• OMNICHANNEL RETURNS

• OPERATIONAL EFFICIENCY

• ELECTRONIC GIFT CARDS

NEW ORDER
MANAGEMENT SYSTEM
Better customer visibility across channels,
plus tools to manage ship-from-store, buy
online, pick-up in stores, and omnichannel
returns. Enhanced operational efficiency
and new sales opportunities.

NEW E-COMMERCE PLATFORM
State-of-the art new e-commerce platform
for a better mobile, tablet and desktop
shopping experience, more flexible content
management and personalized communica-
tion. New website design, better navigation,
improved search and more secure shopping.

BUY ONLINE,
PICK UP IN STORE
flexibility,

choice

greater

Greater
in
customer purchase options. Online orders
placed by 4 pm ready for pickup the next
morning tested and implemented in select
stores. Rollout to be complete mid 2019.

SEPTEMBER 2018

NOVEMBER 2018

Corporate Development Resources, Inc.

Forward-looking Statements

BELLEVILLE DISTRIBUTION CENTER UPGRADES
New multi-level picking mezzanine delivers totes via conveyor to pick-
ing zones. Increased outbound order packing efficiency, increased
capacity, fewer peak hires required.

NEW HEADQUARTERS FACILITY
New four-story 108,000-square-foot corporate headquarters building
in Mount Horeb, Wisconsin. A spacious canteen with wooden tables,
lounge seating and a fourth floor outdoor deck.

Corporate Offices

Duluth Trading Company

201 East Front Street

P.O. Box 159

Mount Horeb, WI 53572

Tel: 608-424-1544

Web: duluthtrading.com

Independent Auditors

Grant Thornton LLP

Registrar and Transfer Agent

Computershare

P.O. Box 505000

Louisville, Kentucky 40233-5000

www.computershare.com/us

Tel: 877-736-3001

Class B Common Stock

NASDAQ Global Select Market

Symbol: DLTH

Form 10-K and Other Reports

Our Annual Report on Form 10-K, charters of the

Board’s committees and our code of ethics are made

available on our website: ir.duluthtrading.com, and

shareholders may request printed copies (which will

be provided free of charge) from Investor Relations.

Email: Duluth@finprofiles.com

The SEC also maintains a website that contains

reports, proxy information and statements, and other

information regarding registrants who file electronically

with the SEC. The website address is: www.sec.gov.

This Annual Report contains “forward-looking

statements” within the meaning of the Private

Securities Litigation Reform Act of 1995. All

forward-looking statements are subject to risk and

uncertainties including the risks and uncertainties

described under Part I, Item 1A “Risk Factors,” in our

Annual Report on Form 10-K for the fiscal year ended

February 3, 2019.

Stephen L. Schlecht

Executive Chairman of the Board

Stephanie L. Pugliese

President and Chief Executive Officer

E. David Coolidge III

Vice Chairman

William Blair & Company, L.L.C.

Francesca M. Edwardson

Former Chief Executive Officer

American Red Cross of Chicago and

Northern Illinois

David C. Finch

President

Finch Grocery Company, LLC

Thomas G. Folliard

President

Brenda I. Morris

Chief Financial Officer

Apex Parks Group

Scott K. Williams

Chief Executive Officer and Director

Batteries Plus Bulbs

2018 PRODUCT LAUNCHES

harder-working

Tough. Functional. Comfortable. Since 1991,
we’ve been innovating gear for can-do guys
and highly capable women. 2018 saw the
introduction
fabrics;
smart new products
like Magnet-Front
Wrinklefighter Shirts; expanded selection in
Alaskan Hardgear®; and Women’s Plus Sizes.
The
launch of Spit & Polish Apothecary
expanded Duluth Trading’s “share of closet” to
the household bathroom medicine cabinet.

SPIT & POLISH
GROOMING
GOODS AND
SPIFFIN’
SUPPLIES

ALASKAN HARDGEAR®
EXPANDED WORKWEAR LINE

MAGNET-FRONT
WRINKLEFIGHTER SHIRT

WOMEN’S SHIFTLESS
CARDIGAN SWEATER

YOU ASKED, WE DELIVERED.
Introducing
WOMEN’S PLUS SIZES
UP TO 3X

WOMEN’S PLUS SIZING

HOODED LIMBER JAC
FIRE HOSE® SHIRT JAC

ARMACHILLO® BULLPEN®
UNDERWEAR

NEW INNOVATIONS IN 2019

PIT-PROOF
UNDERSHIRTS

ALASKAN HARDGEAR®
BEARSCRAPE JERSEY

CAPSTONE
BOOTS

HANG
GLIDER
BOXER
BRIEFS

WOMEN’S
SOL SURVIVOR
TUNIC

50 LOCATIONS AS OF
APRIL 2019!

Our philosophy “there’s got to be
a better way” finds expression in
store themes, displays, photos,
and memorabilia that honor local
culture and history and hard-
working people past and present.
Duluth Trading isn’t just a store,
it’s an experience!

15 NEW STORES
IN 2018!

32) Anchorage, AK
33) West Fargo, ND
34) Colorado Springs, CO
35) Lubbock, TX
36) Denton, TX
37) Portland, OR
38) Columbus, OH
39) Arlington, TX
40) Golden, CO
41) Ramsey, NJ
42) North Canton, OH
43) Greensboro, NC
44) Oklahoma City, OK
45) South Portland, ME
46) Cary, NC
47) Friendswood, TX*
48) Katy, TX*
49) Wichita, KS*
50) Spokane Valley, WA*

*NEW in 2019

DEAR SHAREHOLDERS,

At Duluth Trading, innovation and growth are at the core of everything we do. We
center our brand around solution-based products that are unique in the marketplace
and serve a customer base that exemplifies the spirit of the modern, self-reliant
American. We deliver that product to our customers through distribution channels
that we control, and we maintain direct lines of communication to and from our
valuable brand fans so that we can continue to grow, innovate, and serve them
better in the future.

In last year’s letter to our shareholders, we laid out an ambitious, yet achievable,
plan for 2018 to ensure the future success of Duluth Trading for years to come.
In addition to creating new products that serve our customers and building our
brand reach, we undertook several initiatives that focused on strengthening our
omnichannel model: expanding our omnichannel footprint with the opening of 15
new stores, investing in technology and infrastructure, and strengthening the bench
of our talented team. In 2018 we accomplished these goals, yet our job is far from
finished. Today’s retail environment requires a dynamic and flexible organization, so
innovation and constant improvement will always remain part of our DNA. In this
letter, we want to share our 2018 achievements and what’s ahead for 2019.

OUR UNIQUE BRAND

Duluth Trading started with the premise that when faced with a
challenge, we think that “there’s got to be a better way” to solve
it. That foundational idea started 30 years ago and remains as
our core principle today. We continue to serve customers who are
hands-on and creative and appreciate a job well done. We strive
to exceed their expectations with new solutions to old problems in
apparel and gear, with engaging and humorous storytelling, and
with an experience that is rich and rewarding. To us, high customer
satisfaction is the best way to drive brand awareness and long-
term value for all our stakeholders. We interact with our customers
through our own channels, and we believe that the omnichannel
model is the best reflection of our commitment to exceed customer
expectations by providing them the ability to shop when, where,
and how they want.

THE ROLE OF DULUTH TRADING STORES

The best way to fulfill the true promise of an omnichannel model
is to build brick and mortar stores. When we first embarked
on building stores, we were met, not surprisingly, with some
skepticism. With daily reports of massive store closings, it looked
like we were “bucking the trend,” when in fact we viewed it as
“setting the trend” for online retailers. Today many online retailers
are following suit, because the advantages of providing a store
environment cannot be denied.
Over 80 percent of apparel purchase decisions are made within
the four walls of a store. The ability to see, touch, and try on
a product is a deciding factor for many purchases. We set out
to provide our customers with this important connection to our
brand, and not just through a storefront or pop-up, but with “A
Store Like No Other” that truly delights customers and reflects the
full expression of the Duluth Trading brand.
We started out with 9 stores at year-end 2015, and ended 2018
with 46 stores. With the 15 locations we opened this year, Duluth
Trading stores now span coast-to-coast from Portland, Oregon, to
Portland, Maine. Overall, our stores accounted for 38 percent of total
net sales and 31 percent of total new customer growth in 2018.
At the time of this letter, we have 50 stores. This puts us at the
halfway mark to our goal of 100 stores located in markets where
we have strong concentrations of Duluth Trading customers. The

value proposition of locating stores in markets where we have many
Duluth customers is compelling.

markets well beyond what we could have achieved with a direct
business alone.

• Retail stores create multiple touchpoints that allow us to grow
• They drive market share growth in both new and established

store markets. The power of the omnichannel model continues to
prove out as evidenced by established store markets consistently
achieving direct growth at higher rates than markets without stores.

• Retail stores attract new and valuable customers. They shop

more across channels and product categories and spend more
than direct-only customers.

THE ROLE OF TECHNOLOGY AND
INFRASTRUCTURE IMPROVEMENTS

To create a seamless omnichannel experience and strengthen
our competitive position in this age of increasing consumer
expectations, we implemented several major initiatives, building a
strong and scalable infrastructure that will enhance our efficiency
and ability to serve our customers, including:

customer and inventory visibility across the omnichannel
platform.

• State-of-the-art order management system that gives us
• Improved e-commerce and mobile experiences that will
• Initial deployment in seven retail locations of buy-online-pick

accelerate our ability to personalize content and product
visibility for each customer.

up-in-store (BOPIS), which creates multiple opportunities: it
gets product to the customer faster than shipping, it encourages
in-store purchases at time of pickup, and it ensures that the
product will be available when customers make the trip. As of
this letter, nearly all of our stores now have the ability to handle
BOPIS orders.

it will allow us to utilize inventory across the entire network and
maximize revenue in all markets.

• Ship-from-store that went live in seven locations; longer term,
• Enhanced point-of-sale system that gives us the ability to serve our
• Upgraded logistics and warehouse operations that will expedite

customers better and process customer returns more efficiently.

order fulfillment and improve distribution center productivity.

THE ROLE OF INNOVATION

Innovation is the hallmark of the Duluth Trading brand, from our
solution-based apparel, to our engaging storytelling in advertising
and marketing campaigns, to our No Bull Guarantee. In the spirit
of innovation and willingness to try new things, we launched a
women’s business that now accounts for 25 percent of our total
sales and has catapulted our brand awareness to women. And
we continue to delight her with new solutions like No-Yank®
Tanks, Dry-on-the-Fly® apparel, and now a line of Plus Sizes.
We see opportunity to expand the women’s business with new
product introductions and marketing campaigns that will increase
our penetration of this very large lifestyle apparel market. We
will leverage this momentum by expanding the square footage
dedicated to women’s in our retail stores, growing the women’s
Plus business, and increasing our share of her closet through new
collections of innovative product throughout the year.
Our men’s business grew 19 percent year-over-year, with our
innovative line of Alaskan Hardgear® achieving a 3-year CAGR
of 95 percent. We have a lot of opportunity to grow this popular
sub-brand by expanding its retail footprint in appropriate store
markets and by leveraging its brand appeal beyond outerwear with
year-round apparel. We will continue to serve our men’s customer
through new solution-based apparel and memorable marketing.
Most importantly, we gained some critical insights into the ever-
increasing importance of “newness,” especially as it relates to
driving retail store volume. Delivering fresh assortments to our
retail stores resonates with consumers, attracts new customers
to the brand, and boosts traffic. We increased our new product
introductions this past year, and we will accelerate our pace by
introducing more innovative products as well as more new styles,
sizes, and color options to create a pipeline of fresh product year-
round. We plan to double the number of SKUs in our women’s
Plus Size category and will also continue to build out our women’s
business, Alaskan Hardgear, and men’s base layers, which are
significant and proven drivers of growth.

2018 FINANCIAL REVIEW

As we closed out fiscal 2018, we marked our 36th consecutive
quarter of increased year-over-year net sales growth. For the full
year, net sales grew 20.5 percent to $568 million, with net income
of $23 million or $0.72 per diluted share. Adjusted EBITDA
increased 11.6 percent to $51.8 million.
Our team worked hard to deliver these results in the face of a
challenging fourth quarter. We began the holiday shopping season
with a strong showing on Black Friday and Cyber Monday. As we
got closer to Christmas and through January, however, we
experienced a slowdown in customer response, and felt the
impact of lower traffic across all our channels. In part we were
not immune to the overall slowdown in consumer spending amid
the worries over the government shutdown, stock market volatility,
slower tax return processing, and weather issues.
Internally, we also encountered some challenges in the quarter.
Misaligned inventory throughout the channels delayed some of
our new and high-demand products from hitting the market in
time to reap the full benefit of the holiday season. Even with
these issues, we delivered a quarter that was 15 percent ahead
of last year in revenues.

Our balance sheet at year-end remained strong, with a cash
balance of approximately $0.7 million, net working capital of
$65.6 million, and $16.5 million outstanding on our $130.0
million line of credit.

LOOKING AHEAD: 2019 INITIATIVES

While our 2018 financial results did not meet our initial
expectations, we succeeded in hitting our marks on implementing
all the major IT and infrastructure projects that were scheduled
for the year. This was no small feat, and we are grateful to our
team whose efforts delivered a strong platform capable of scaling
with our growth and adapting to customer preferences for years
to come. Looking forward, our focus will be on optimizing our
investments and maximizing the opportunities we see to enrich
brand awareness and engagement across all contact points with
our customers.

• Our focus will be on the business categories that offer the

greatest momentum and opportunity for increased market
penetration, including key categories in men’s, women’s, and
Alaskan Hardgear. We will introduce proportionately more new
product innovations and drive awareness for these categories
with strong marketing campaigns.

model with the addition of 15 new stores as well as completing
the rollout of customer-engaging programs like BOPIS.

• We intend to continue to expand and refine our omnichannel
• Our job will be to optimize the investments made this past year to

have a tangible impact on our business. They include improving
the speed of our order management system and honing the
assortment and inventory planning tool to get us closer to true
localization of store inventories throughout the chain.

• Executing these productivity improvements will begin to leverage

the variable costs associated with our investments. It is also
our goal to improve operating margin and become cash flow
positive in 2019.

IN CLOSING

The investments made to date have not been just in brick and
mortar and IT systems, but also in the talent and training it takes to
build a strong and deep bench. We remain fully committed to our
long-term strategy of building the Duluth Trading brand through an
omnichannel and customer experience that we entirely control. In
2018 we took some big and necessary steps to build a stronger,
more competitive Duluth Trading, and we are more enthusiastic
than ever about the future prospects of our business.
Finally, we want to thank our Board of Directors for their guidance
and our Duluth colleagues, who are true brand ambassadors
in everything they do. Most importantly, we are grateful to our
shareholders for your continued support and to all our loyal
customers who made this successful year possible.

Stephen L. Schlecht
Executive Chairman and Founder
Duluth Holdings Inc.

Stephanie L. Pugliese
President and Chief Executive Officer
Duluth Holdings Inc.

Summary of Financial Performance

Direct, Retail, and Total Net Sales
$568.1

20.5%

Diluted EPS

25.3%

$471.4

$140.5

$471.4
$217.5

$0.66

$0.59

$0.72

23.7%

31.1%

$304.1
$37.8

$231.9
$23.0

$266.3

$376.1
$66.4

$309.7

$208.9

FY 14

$330.9

$350.6

FY 16

FY 15
Direct Sales

FY 17
Retail Sales

FY 18

FY 14

FY 15

FY 16

FY 17

FY 18

Adjusted EBITDA and % of Net Sales

(1)

11.5%

11.2%

$34.0

$26.7

11.0%

$41.2

9.8%

$46.4

9.1%

$51.8

FY 14

FY 15

FY 16

FY 17

FY 18

Adjusted EBITDA $

Adjusted EBITDA % of net sales

Number of Stores and Total Gross Sq. Footage

689,185

438,912

Capital Expenditures, Net of Proceeds
from Finance Lease Obligations

$50.8

$42.8

205,826

96,939

FY 15

FY 16

FY 17

FY 18

68,080

FY 14

$5.3

FY 14

$28.7

$7.3

FY 15

FY 16

FY 17

FY 18

(1) Non-GAAP measure. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – How We Assess the Performance of Our Business and Reconciliation
of Net Income to EBITDA and EBITDA to Adjusted EBITDA” of our fiscal 2018 Form 10-K for a reconciliation of non-GAAP measures to the most comparable GAAP measures.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(cid:95)(cid:95)(cid:3)(cid:3)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended February 3, 2019
OR

(cid:133)(cid:133)(cid:3)(cid:3)TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission file No. 001-37641

DULUTH HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Wisconsin

(State or other jurisdiction of
incorporation or organization)

201 East Front Street, Mount Horeb, Wisconsin

(Address of principal executive offices)

39-1564801

(I.R.S. Employer
Identification Number)

53572

(Zip Code)

Registrant’s telephone number, including area code: (608) 424-1544
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Class B Common Stock, No Par Value

Name of each exchange on which registered

NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:133) No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No (cid:95)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act

of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (cid:95) No (cid:133)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes (cid:95) No (cid:133)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be

contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. (cid:95)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
Non-accelerated filer
Emerging Growth Company

(cid:134)(cid:3)
(cid:134)
(cid:95)(cid:3)

Accelerated filer
Smaller reporting company

(cid:95)(cid:3)
(cid:134)(cid:3)
(cid:3)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with

any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. (cid:95)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:133) No (cid:95)
The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $241.1 million based upon the closing

price on the last business day of the registrant’s most recently completed second fiscal quarter (July 29, 2018).

The number of shares outstanding of the Registrant’s Class A common stock, no par value, as of April 16, 2019, was 3,364,200. The number of

shares outstanding of the Registrant’s Class B common stock, no par value, as of April 16, 2019 was 29,288,730.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed within 120 days of February 3, 2019 are incorporated by reference in this

Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

TABLE OF CONTENTS

PART I

ITEM 1.

BUSINESS

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2.

PROPERTIES

ITEM 3.

LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

Executive Officers of Duluth Holdings Inc.

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

ITEM 6.

SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PART III

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED SHAREHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE

ITEM 16. FORM 10-K SUMMARY

SIGNATURES

EXHIBIT INDEX

Page

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical or
current fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements refer to
our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies,
future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to
historical or current facts. These statements may include words such as “anticipate,” “could,” “design,” “estimate,” “expect,”
“project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely”
and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or
financial performance or other events. For example, all statements we make relating to our estimated and projected earnings,
revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations,
growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking
statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ
materially from those that we expected, including:

(cid:120)

our ability to maintain and enhance a strong brand image;

our ability to successfully open new stores;

effectively adapting to new challenges associated with our expansion into new geographic markets;

generating adequate cash from our existing stores to support our growth;

the impact of changes in corporate tax regulations and sales tax;

identifying and responding to new and changing customer preferences;

containing the increase in the cost of mailing catalogs, paper and printing;

the success of the locations in which our stores are located;

our ability to attract customers in the various retail venues and locations in which our stores are located;

adapting to declines in consumer confidence and decreases in consumer spending;

competing effectively in an environment of intense competition;

our ability to adapt to significant changes in sales due to the seasonality of our business;

price reductions or inventory shortages resulting from failure to purchase the appropriate amount of inventory in
advance of the season in which it will be sold;

natural disasters, unusually adverse weather conditions, boycotts and unanticipated events;

our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices;

increases in costs of fuel or other energy, transportation or utility costs and in the costs of labor and employment;

the susceptibility of the price and availability of our merchandise to international trade conditions;

failure of our vendors and their manufacturing sources to use acceptable labor or other practices;

our dependence upon key executive management or our inability to hire or retain the talent required for our
business;

failure of our information technology systems to support our current and growing business, before and after our
planned upgrades;

disruptions in our supply chain and distribution centers;

our inability to protect our trademarks or other intellectual property rights;

infringement on the intellectual property of third parties;

acts of war, terrorism or civil unrest;

the impact of governmental laws and regulations and the outcomes of legal proceedings;

changes in U.S. and non-U.S. laws affecting the importation and taxation of goods, including imposition of
unilateral tariffs on imported goods;

(cid:120)

our ability to secure the personal and/or financial information of our customers and comply with the security
standards for the credit card industry; and

our failure to maintain adequate internal controls over our financial and management systems.

We make many of our forward-looking statements based on our operating budgets and forecasts, which are based upon
detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the
impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

See the “Risk Factors” section of this Annual Report on Form 10-K for a more complete discussion of the risks and
uncertainties mentioned above and for discussion of other risks and uncertainties. All forward-looking statements attributable to
us are expressly qualified in their entirety by these cautionary statements as well as others made in this annual report and
hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us
in the context of these risks and uncertainties.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you.
Furthermore, the forward-looking statements included in this Annual Report on Form 10-K are made only as of the date hereof.
We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.

ITEM 1.

BUSINESS

PART I

Unless the context indicates otherwise, the terms the “Company,” “Duluth,” “Duluth Trading,” “Duluth Holdings,”

“we,” “our” or “us” are used to refer to Duluth Holdings Inc.

The following discussion contains references to fiscal years 2018, 2017 and 2016, which refer to our fiscal years ended

February 3, 2019, January 28, 2018, and January 29, 2017, respectively. Fiscal year 2018 was a 53-week period. Fiscal years
2017 and 2016 were 52-week periods.

In fiscal 2018, we opened a total of 15 retail stores and added approximately 250,000 gross square feet to our stores.

Duluth Trading is a rapidly growing lifestyle brand of men’s and women’s casual wear, workwear and accessories sold
exclusively through our own channels. We offer a comprehensive line of innovative, durable and functional products, such as
our Longtail T® shirts, Buck NakedTM underwear and Fire Hose® work pants, which reflect our position as the Modern, Self-
Reliant American Lifestyle brand. Our brand has a heritage in workwear that transcends tradesmen and appeals to a broad
demographic of men and women for everyday and on-the-job use. More than 90% of our fiscal 2018 net sales consisted of
proprietary products sold under our Duluth Trading brand name. We believe the foundation of our success is our culture of
“poking average in the eye” by seeing things for what they could be and should be and finding a way to make them exactly that,
and we like to do it all with a big, toothy grin.

Our products solve the problems our customers experience with the limitations of commonly available apparel and gear.

Our design process reflects a “there’s gotta be a better way” attitude, resulting in differentiated products with unique features
that appeal to a broad array of customers. Our products represent enduring styles that go beyond short-lived fashion trends. We
strive to make shopping for our products fun by using attention-grabbing advertisements that are humorous, irreverent and
quirky and serve to reinforce our brand identity. We also use storytelling to differentiate our products in the marketplace and
create emotional connections with our customers. We provide our customers with a unique and entertaining experience across
all channels through our content-rich website, catalogs and “store like no other” retail environment. We treat our customers like
next-door neighbors, as exemplified by our exceptional customer service and unconditional “No Bull Guarantee” on all
purchases.

To protect the integrity of the Duluth Trading brand, we offer our products exclusively through our omnichannel
distribution network, consisting of our website, catalogs and retail stores. This model creates multiple touch points with our
customers and enables us to control both our Duluth Trading brand expression and the pricing of our products. Our distribution
strategy eliminates the need to sell through third-party retailers, allowing us to focus on our core competencies of product
development, storytelling and serving customers. Our direct segment, consisting of our website and catalogs, offers products
nationwide and represented approximately 62% of our fiscal 2018 net sales. In 2010, we added retail to our omnichannel
platform with the opening of our first store. Since then, we have expanded our retail presence, and, as of February 3, 2019, we
operated 43 retail stores and three outlet stores. Our retail segment represented approximately 38% of our fiscal 2018 net sales.

Duluth Trading was founded in 1989 when two brothers in the home construction industry were tired of dragging tools
from job to job using discarded five-gallon drywall compound buckets. The two brothers were never satisfied with the status
quo and believed “there’s gotta be a better way.” So they invented the Bucket Boss® - a ruggedly durable canvas tool organizer
that fits around a drywall bucket and transformed the way construction workers organized their tools. Capitalizing on their
initial success, these brothers launched a catalog that later became known as Duluth Trading Company. Under the initial
philosophy of “Job Tough, Job Smart,” this catalog was dedicated to improving and expanding on existing methods of tool
storage, organization and transport. In December 2000, GEMPLER’S Inc., a Wisconsin corporation and an agricultural and
horticultural supply catalog business founded and owned by Stephen L. Schlecht, acquired Duluth Trading and brought the two
mail order companies together. Both catalogs had customers who worked outside and embraced the spirit of hands-on, self-
reliant Americans. In February 2003, the GEMPLER’s catalog business was sold to W.W. Grainger (NYSE:GWW) and
proceeds from that sale were used to fund the growth of Duluth Trading. With that transaction, GEMPLER’S changed its
corporate name to Duluth Holdings Inc.

From what began as an idea aimed at those working in the building trades, Duluth Trading has become widely recognized
brand and proprietary line of innovative and functional apparel and gear. We have created strong brand awareness, built a loyal
customer base and generated robust sales momentum. We have done so by sticking to our roots of “there’s gotta be a better
way” and through our relentless focus on providing our customer with quality, functional products.

Our Growth Strategies

Our goal is to expand the reach of the Duluth Trading brand, using strategies that will further drive growth and

profitability:

(cid:120)

Building Brand Awareness to Continue Customer Acquisition. We are a rapidly growing lifestyle brand and have
built strong brand awareness and successfully acquired customers over the past years. As a relatively young brand,
we believe that we have a significant opportunity to build even greater brand awareness. We plan to introduce
potential customers to our brand through our national television and digital advertising campaigns, retail store
expansion and catalogs. We have made significant investments in marketing to build brand awareness among our
potential customers and expect to achieve leverage from these investments as our business continues to grow.

Accelerating Retail Expansion. We believe our customers’ purchasing decisions are heavily influenced by the
availability of our retail stores. We believe that our customers’ desire to shop in stores, combined with the number
of potential markets for our retail stores and the compelling unit economics of our existing retail stores, provide us
with a significant opportunity to grow our U.S. retail presence. We have identified markets with the potential for
approximately 100 U.S. store locations that feature high concentrations of existing Duluth Trading customers and
potential customers that fit our brand demographics. We anticipate opening 15 stores during fiscal 2019. Our
existing retail stores have been profitable in both metropolitan and rural locations across multiple markets and have
achieved an average payback of less than two years. For fiscal 2019, top priority efforts are underway to drive
awareness of and traffic to our stores with total market growth being our key success. Key drivers of our retail
stores will include fresh assortments each season, targeted marketing and a more personalized web and store
experience. We plan to continue building our organization and investing in software systems and operational
infrastructure to support the growth in our retail segment. Based on our experience to date, we believe the
combination of our direct and retail channels in an individual geographic market substantially increases the net
sales and customer acquisition potential in that market. For example, since opening our retail stores in the
Minneapolis-St. Paul metropolitan area, our direct segment net sales in that area have continued to grow.
Additionally, we believe our retail stores provide ancillary marketing benefits by giving new and existing
customers a destination to experience our brand.

Selectively Broadening Assortments in Certain Men’s Product Categories. We believe there is an opportunity to
grow our men’s business by selectively broadening our assortment in certain product categories that exhibit high
growth potential and resonate with the lifestyle of our core men’s customers, such as our Duluth-built business
wear, outerwear and footwear. Through product introductions that expand seasonality and occasions for wear, we
believe we can grow our share of closet with new and existing men’s customers.

Growing Our Women’s Business. Since launching in 2005, our women’s business has grown significantly to
represent approximately 25% of our net sales in fiscal 2018. We believe that we have a significant opportunity to
continue to grow our women’s business through customer acquisition, and we plan to continue to leverage all of
our marketing channels, including national television and digital advertising, retail stores and our catalogs to do so.
We expect that our women’s business will continue to represent an increasing portion of our net sales, and
accordingly, we are allocating a higher percentage of our total advertising budget to the women’s business. We
believe that as our retail footprint expands, our women’s business will continue to grow based on our current
customers’ shopping patterns. While the core of our women’s product assortment will continue to consist of
solution-based apparel that fits the Modern, Self-Reliant American Lifestyle, we plan to selectively expand our
product offering to appeal to a wider range of female customers.

Our Sales Channels

Our omnichannel business strategy allows our sales channels to work in synergy to seamlessly deliver a consistent brand

experience to the customer, including consistent marketing, pricing and product presentation. All sales channels are fully
integrated, including stores, website, catalogs and customer contact centers. Our marketing campaigns and technology
advancements are designed to generate demand for our omnichannel business rather than separate sales channels. Store sales
are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a
different store location if an item is not available at the original store. Website and catalog orders are primarily shipped to our
customer through our fulfillment centers or customers can view in-store inventory from our website and can choose ship to
store through our Buy-Online-Pickup-In-Store program. In addition, website orders can be returned at store locations. As
customers continue to utilize multiple sales channels, we have and will continue to adapt our approach to meet that demand.
We sell our products exclusively through our direct and retail channels, giving us complete control of our brand presentation as
well as direct interaction with the customer.

Direct Segment

Our direct channel, which comprised approximately 62% of our fiscal 2018 net sales, reaches customers nationwide

through our website and catalogs.

(cid:120)

e-Commerce. Our website, www.duluthtrading.com, serves as a storefront for our product assortment and provides
an interactive, user-friendly, content-rich customer experience. Our website’s homepage and category content,
including pricing, seasonal promotions and products, are updated frequently in order to keep them current and
seasonally appropriate, which coincides with updates to our catalogs and retail store displays. Our entire product
offering is available on our website with certain new products offered exclusively online during their initial
introduction, as well as out-of-season but in-stock products. Our website features humorous product videos and
customer testimonials that educate our customers on the features and benefits of our products, which we believe
enhances our visitors’ shopping experience. We believe our e-commerce experience has been successful in
converting website visitors into customers. We offer our new and existing customers the ability to shop across
multiple platforms and devices, including mobile devices, tablets and desktop computers. During fiscal 2018, we
sold merchandise to customers through our website in all 50 states and had approximately 54.7 million website
visits, an increase of approximately 18% from fiscal 2017.

Catalog. Our catalog business is an important part of our heritage and a key differentiator in our market. Our
catalogs serve as a tangible vehicle for our authentic and humorous storytelling and drive customers to visit our
website and retail stores. During fiscal 2018, we published 35 catalog issues and distributed over 50 million copies,
approximately 14 million of which were mailed to prospective customers. Our catalogs reflect our tailored
approach to marketing and include particular expressions of our brand that resonate with our target customers. We
produce separate catalogs for our men’s and women’s product offerings, showcasing illustrations in our men’s
catalogs and featuring women of “grit and substance” in our women’s catalogs. In addition to generating a portion
of our direct net sales, we believe our catalogs are clever, informative and eye catching and are a vital part of
building the Duluth Trading brand.

Retail Segment

In 2010, we opened our first retail store and have since expanded our retail presence, operating 43 retail stores and three

outlet stores as of February 3, 2019. In fiscal 2018, our retail stores produced $217.5 million in net sales, representing
approximately 38% of total net sales, compared to $140.5 million in net sales in fiscal 2017, representing 30% of total net sales.
Our existing stores have been profitable in both metropolitan and rural locations. During fiscal 2018, our retail store customer
visits increased by 44% to approximately 5.9 million visits, compared to approximately 4.1 million visits in fiscal 2017. Our
retail stores allow us to reach customers who prefer to shop in a brick and mortar setting and give new and existing customers
the opportunity to touch and feel our innovative products before making a purchase decision. Our stores range in size from
approximately 6,000 to 14,000 selling square feet and are designed to bring our brand to life by creating a unique and
entertaining experience, including engaging sales associates, a compelling and complete product assortment, custom made
fixtures to fit our brand, free wireless Internet and complimentary coffee and water. We also showcase unique attractions at
each retail store that celebrate the heritage of the local area, such as the tool museum in our Mt. Horeb, Wisconsin store and the
“Exploded Tractor” exhibit in our Ankeny, Iowa store. We believe these local community elements help promote customer
loyalty and drive repeat purchases.

Our retail stores also provide ancillary marketing benefits, such as brand visibility in high traffic areas. We provide
additional conveniences to customers at our stores, as they can order our products online and have them shipped for free to our
store for pick up. Customers can also return products purchased online at our retail stores and can buy certain Duluth Trading-
branded products not available in the store at the registers or in-store kiosks and have them shipped directly to their homes.

Retail Store Expansion Opportunities and Site Location

We believe we have a compelling retail model that supports our ability to grow our store footprint in both new and
existing markets across the United States with the potential to simultaneously enhance our direct segment sales in those markets
and overall sales potential of the area. Unlike traditional brick and mortar retailers, we are able to leverage the wealth of
customer data from our direct segment to identify potential markets for new stores that feature high concentrations of existing
Duluth Trading customers and potential customers that fit our brand demographics.

We select the potential markets for our new stores based on existing customer data from our direct segment and select our

store locations based on customer input, access to the freeway, visibility, store accessibility and parking. Our retail stores are
built as iconic restorations, renovations of an existing building, or build-to-suit. In a build-to-suit retail store, the retail store is
built to our specific design and footprint. Our current retail store information also informs our future merchandising decisions.

We plan to continue building our organization and investing in software systems and operational infrastructure to support the
growth in our retail segment.

Our Products

We offer a comprehensive line of innovative, durable and functional casual wear, workwear and accessories for both men

and women. Our product assortment includes shirts, pants, underwear, outerwear, footwear, accessories and hard goods. Our
products feature proprietary designs and distinct names, such as our Longtail T® shirts, Buck NakedTM underwear, Fire Hose®
work pants and No-YankTM Tank. The table below presents net sales by business for the last two fiscal years.

(in thousands)
Men's
Women's
Hard goods/other
Total net sales

Fiscal Year Ended

February 3, 2019

January 28, 2018

$ Change

% Change

395,536 $
141,244
31,322

568,102 $

333,536 $
110,343
27,568

471,447 $

62,000
30,901
3,754
96,655

18.6%
28.0%
13.6%
20.5%

We offer a stable product assortment, which appeals to our customers for their everyday and on-the-job use. The majority

of our products represent enduring styles that go beyond short-lived fashion trends. We believe many of our customers’
purchases are driven by our thoughtful design and high quality craftsmanship, and our best-selling styles tend to be items that
carry over year to year with only minor updates.

We believe the authenticity of our products is driven by a number of factors, including our solution-based design process,

use of technical materials, sophisticated manufacturing methods and innovative product features. Our products are sold at
competitive prices and are designed to offer superior performance with added features such as underarm panels for more
freedom of movement, triple-stitched seams for durability and mid-leg utility pockets for functionality. We also collaborate
with our suppliers to develop advanced fabrics that we sell under our trademarks. For example, we incorporate our Duluthflex®
Fire Hose® cotton canvas into products to provide strength and abrasion resistance with stretch for freedom of movement.

Product Development

We are focused on developing apparel and gear that builds upon the Duluth Trading brand’s product heritage of “there’s
gotta be a better way,” resulting in distinctive products with enhanced features. We primarily use an innovative feedback-based
design process through which we actively seek the input of our customers, including a group of more than 100 products testers
with expertise in the trades industry. These trades panel members have become an integral part of our product development
process, as they test and evaluate select products in intense conditions, providing real-time feedback on performance and
functionality. Members of our product development team also regularly read online customer product reviews, attend
tradeshows and collaborate with our vendors, which facilitates new product innovation. Our product development team
incorporates all of this input to develop new product solutions and features, ensure consistent fit, style and color and design
functional and durable fabrics.

Marketing

Our marketing strategy is designed to build brand awareness, acquire new customers, enhance customer loyalty and drive

sales transactions. We are nationally known for our creative, irreverent and quirky advertising that features our Giant Angry
Beaver, Buck Naked Guy and Grab-Happy Grizzly characters to showcase our brand philosophy, humor and innovation. We
also feature testimonials in our marketing campaigns, which put our products in context, tying them to the individuals who
represent our core customer, who leads a hands-on lifestyle, values a job well-done and is often outdoors for work and hobbies.
We believe our customers identify with the inspiring stories of real men and women, recognize our products’ versatility and
appreciate the extreme and demanding conditions our products can withstand.

We pursue our marketing strategy through multiple forms of media, which gives our products an identity and enhances

our brand:

(cid:120)

Television. We advertise on cable and broadcast television networks to build brand awareness for both men’s and
women’s products and to reach a large, national audience. These advertisements feature both our animated
characters and female models, and are intended to be humorous, irreverent and quirky in order to grab the viewer’s
attention, while highlighting the particularly innovative, solution-based features of our core products and the
Duluth Trading name.

(cid:120)

Digital and Email Marketing. We employ a variety of digital and online advertising strategies. These efforts
include display advertising, digital video advertising, search engine marketing and optimization and targeted email,
which we send to customers to introduce new products and offer promotions on select merchandise.

Catalogs. Our catalogs are an important part of our heritage and represent a tangible vehicle for our authentic and
humorous storytelling. In fiscal 2018, we published 35 catalog issues and distributed over 50 million catalogs,
approximately 14 million of which were mailed to prospective customers. Our catalogs support both sales channels,
and we believe serve as an important customer acquisition tool by driving visits to our website and retail stores.

Social Media. We have an engaged social media community, which allows us to personally connect with our
customers online, and we believe further raises brand awareness. We maintain a social media presence on
Facebook, Pinterest, YouTube and Twitter.

Radio, Collateral Print and Outdoor Marketing. We use traditional radio and collateral print advertising, such as
newspaper inserts and postcards, and billboards in the areas surrounding our retail stores to build brand awareness,
drive traffic to our website and stores, highlight certain promotions and events and support new store openings.

Event Sponsorship. We sponsor both national and local events, including the STIHL TIMBERSPORTS Series, a
competition of the world’s top lumberjack athletes, with a national airing on the ABC television network. In 2017,
we secured a five-year partnership as the “Official Off-Sled Outfitter” of USA Luge, providing vests, pants, socks,
boots and other cold-weather gear and were featured at the 2018 Winter Olympic Games in Pyeongchang, South
Korea.

Customer Service

We are committed to providing outstanding customer service and believe in treating our customers like next-door
neighbors. Our retail stores are stocked with a comprehensive assortment of our products and staffed with knowledgeable and
well trained sales associates. We stand behind all purchases with our unconditional “No Bull Guarantee.” Our call center is
open 24 hours a day, seven days a week and is staffed with friendly, knowledgeable representatives dedicated to making every
customer experience positive. As a convenience to our customers, we offer live chat through our website, which is available
from 7 A.M. to 8 P.M. Central Time on weekdays and 8 A.M. to 5 P.M. Central Time on weekends.

Manufacturing

We do not own or operate any manufacturing facilities. Instead, we arrange with third-party vendors for the

manufacturing of our merchandise. We have built strong, long-term relationships with our vendors. In fiscal 2018, 52% of our
purchases came from our largest supplier, an agent partner in Hong Kong who manages multiple factories across Asia,
including Cambodia, China, Indonesia and Vietnam. Approximately 15% of our purchases in fiscal 2018 came from our second
largest supplier, which is based in Thailand. We believe sourcing inventory through this agent allows us to leverage the agent’s
purchasing power with multiple factories, as well as transportation and logistics capabilities, allowing our internal team to focus
on our core competencies of product development, storytelling and serving customers, rather than factory and mill management
or logistics.

Our sourcing strategy focuses on identifying and employing vendors that provide quality materials and fine craftsmanship

that our customers expect of our brand. To ensure that our high standards of quality and timely delivery of merchandise are
met, we work closely with our third-party agent partners. All of our products are produced according to our specifications, and
we require all of our manufacturers to adhere to strict regulatory compliance and standards of conduct. We seek to ensure the
consistent quality by employing Duluth Trading-certified factory auditors to selectively examine pre-production samples,
conduct periodic site visits to certain of our vendors’ production facilities and inspect inbound shipments at our distribution
centers.

Distribution Centers

Our distribution centers are currently located across the United States in order to minimize transit times to our customers.
We own and operate a distribution center in Belleville, Wisconsin, that is approximately 190,000 square feet of production and
warehouse space, of which 75,000 square feet was added in July 2016. Our Belleville distribution center stocks and replenishes
products in our retail stores and handles our direct segment distribution needs for the Midwest. We also contract with two third-
party logistics (“3PLs”) centers in Sparks, Nevada and Carlisle, Pennsylvania. Orders are generally assigned to the distribution
center closest to the customer’s ship-to location. We believe our current distribution network will allow us to substantially
improve delivery times to key customer concentrations in the Eastern and Western United States and is well-positioned to
provide sufficient capacity to support our planned continued growth for the foreseeable future.

Returns Center

We currently lease approximately 30,000 square feet of warehouse space located in Verona, Wisconsin. Our returns

center handles the majority of direct sales returns.

Information Technology

We use technology to provide customer service, business process support and business intelligence across our sales
channels. We continually aim to have more efficient supply chain and distribution systems operations. Our Distributed Order
Management systems provide us with omnichannel capabilities that have a global view of available-to-promise inventory
management and also process direct orders from our retail stores. Our Belleville distribution center implemented a new
warehouse management system in July 2015. Our Product Lifecycle Management System, which launched in June 2015,
systematically coordinates efforts across our product development teams, allowing these teams to dedicate their time to
building and executing solution-based product introductions. Our Vendor Portal is a web-based system that allows us to
interface with key partners. In 2018, we implemented a new Order Management System (“OMS”) and a new E-commerce
website. Our new OMS allows us to manage inventory cost and pricing, and seamlessly process customer orders across all
channels. It will also provide us with flexible pricing and promotions to satisfy our customers’ needs. The new E-commerce
website allows us to provide our customers with a reliable and secure channel to shop our products. This allows us to
comfortably scale to meet our anticipated customer demands.

Competition

We operate primarily in the apparel, footwear and accessories industry, which 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,
department stores, outdoor specialty stores, apparel catalog businesses and online apparel businesses. We compete principally
on the basis of brand recognition, innovation, product quality, customer service and price. To stay ahead of our competition, we
continue to develop innovative solution-based products for which we create unique selling propositions that incorporate humor
and storytelling.

Intellectual Property

Our trademarks are important to our marketing efforts. We own or have the rights to use certain trademarks, service
marks and trade names that are registered with the U.S. Patent and Trademark Office, trademark offices in other jurisdictions,
or exist under common law in the United States and other jurisdictions. The “Duluth Trading Co” trade name and trademark is
used both in the United States and internationally, and is material to our business. Trademarks that are important in identifying
and distinguishing our products and services are Alaskan Hardgear®, Armachillo®, Ballroom®, Cab Commander®, Crouch
Gusset®, Dry on the Fly®, Duluth Trading Co®, Duluthflex®, Fire Hose®, Longtail T®, No Polo Shirt®, No Yank® and Wild Boar
Mocs®. Our rights to some of these trademarks may be limited to select markets. We also own domain names, including
“duluthtrading.com.”

Employees

As of February 3, 2019, we employed 859 full-time and 1,935 part-time and flexible part-time employees, 1,630 of which

were employed at our retail stores. The number of employees, particularly part-time employees, fluctuates depending upon
seasonal needs. Our employees are not represented by a labor union and are not party to a collective bargaining agreement. We
consider our relations with our employees to be good.

Seasonality

Our business experiences seasonal fluctuations. Our net sales and net income are generally highest in the fourth fiscal

quarter, which includes the holiday sales period. The following table presents net sales and net income for the fourth quarter as
a percentage of the fiscal year.

Fiscal Year

(in thousands)

2018
2017
2016

4Q
Net Sales

4Q Net Sales
% of Fiscal year

4Q
Net Income

4Q Net Income
% of Fiscal Year

$
$
$

250,541
217,805
174,653

44.1 %
46.2 %
46.4 %

$
$
$

20,620
19,528
13,993

89.0 %
83.6 %
65.6 %

Regulation and Legislation

We are subject to labor and employment laws, truth-in-advertising laws, privacy laws, safety regulations, consumer
protection regulations and other laws that regulate retailers and govern the promotion and sale of merchandise and the operation
of stores and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with
applicable laws.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to

reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
are made available free of charge on or through our website at www.duluthtrading.com under the “Investors” tab as soon as
reasonably practicable after such reports are filed with, or furnished to the SEC.

ITEM 1A. RISK FACTORS

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. 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.

Risks Related To Our Business

If we fail to offer products that customers want to purchase, our business and results of operations could be adversely
affected.

Our products must satisfy the desires of customers, whose preferences change over time. In order to be successful, we
must design, obtain and offer to customers innovative and high-quality products on a continuous and timely basis. Failure to
effectively respond to customer needs and preferences, or convey a compelling brand image or price-to-value equation to
customers may result in lower net sales and gross profit margins.

Our success depends in part on management’s ability to effectively anticipate or identify customer needs and preferences

and respond quickly with marketable product offerings in advance of the actual time of sale to the customer. Even if we are
successful in anticipating or identifying our customers’ needs and preferences, we must continue to develop and introduce
innovative, high-quality products and product features in response to changing consumer demand.

Factors that could affect our ability to accurately forecast consumer demand for our products include:

(cid:120)

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.

There can be no assurance that we will be able to successfully anticipate or identify our customers’ needs and preferences
and design products and product features in response. As a result, we may not successfully manage inventory levels to meet our
future order requirements. If we fail to accurately forecast consumer demand, we may experience excess inventory levels or a
shortage of product required to meet the demand. Inventory levels in excess of consumer demand may result in inventory write-
downs and the sale of excess inventory at discounted prices, which could have an adverse effect on the image and reputation of
our brand and negatively impact profitability. On the other hand, if we underestimate demand for our products, our third-party

manufacturers may not be able to produce sufficient quantities of our products to meet consumer requirements, and this could
result in delays in the shipment of products and lost revenue, as well as damage to the image and reputation of our brand and
our relationship with our customers. These risks could have a material adverse effect on our brand as well as our results of
operations and financial condition.

Our business depends on our ability to maintain a strong brand. We may not be able to maintain and enhance the Duluth
Trading brand if we receive unfavorable complaints, negative publicity or otherwise fail to live up to consumers’
expectations, which could materially adversely affect our business, results of operations and growth prospects.

We currently offer a differentiated brand to our customers defined by solution-based products manufactured with high

quality craftsmanship, humorous and distinctive marketing, and an outstanding customer experience. Maintaining and
enhancing the Duluth Trading brand is critical to expanding our base of customers. If we fail to maintain our brand, or if we
incur excessive expenses in this effort, our business, operating results and financial condition may be materially adversely
affected. We anticipate that, as we raise our profile nationally and attract an increasing amount of competition, maintaining and
enhancing our brand may become increasingly difficult and expensive and may require us to make substantial additional
investments in areas such as marketing, store operations, merchandising, technology and personnel.

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, 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.

Our marketing strategy of associating our brand and products with the Modern, Self-Reliant American Lifestyle may not be
successful with future customers.

We have been successful in marketing our products by associating our brand and products with a heritage of workwear

and the Modern, Self-Reliant American Lifestyle. To sustain long-term growth, we must continue to be successful in promoting
our products to customers who identify with this lifestyle. If our customer base declines through natural attrition and is not
replaced by new customers due to, for example, a lack of personal identification with this lifestyle, our net sales could decline,
which could adversely affect our business, results of operations and financial condition.

Our net sales and profits depend on the level of consumer spending for apparel, footwear and accessories, which is sensitive
to general economic conditions and other factors. An economic recession or a decline in consumer spending could have a
material adverse effect on our business and results of operations.

The apparel, footwear and accessories industry has historically been subject to cyclical variations and is particularly

affected by adverse trends in the general economy. The success of our business depends on consumer spending. There are a
number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer
income, interest rates, consumer credit availability, unemployment, stock market performance, extreme weather conditions,
energy prices and tax rates in the national, regional and local markets where we sell our products. A decline in actual or
perceived economic conditions or other factors could negatively impact the level of consumer spending and have a material
adverse impact on our business and results of operations.

Retail store expansion could reduce the revenue of our direct channel and adversely affect the operating results of our retail
channel.

The growth in the number of our retail stores may draw customers away from our website and catalogs, which could
materially adversely affect net sales from our direct channel. As we increase the number of our retail stores, our stores may
become more highly concentrated in the geographic regions we serve. As a result, the number of customers and related net sales
at individual stores may decline and the payback period may be increased. In addition, as we open more retail stores, and if our
competitors open stores with similar formats, our retail store format may become less unique and may be less attractive to
customers as a shopping destination. If either of these events occurs, the operating results of our retail channel could be
materially adversely affected.

If we cannot successfully implement future retail store expansion, our growth and profitability could be adversely impacted.

We plan to open approximately 15 new retail stores in fiscal 2019. Our ability to open new retail stores in a timely

manner and operate them profitably depends on a number of factors, many of which are beyond our control, including:

(cid:120)

our ability to manage the financial and operational aspects of our retail growth strategy, including making
appropriate investments in our software systems, information technology and operational infrastructure;

our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data
to accurately determine consumer demand for our products in the locations we select;

our ability to negotiate favorable lease agreements;

our ability to properly assess the profitability and payback period of potential new retail store locations;

the availability of financing on favorable terms;

our ability to secure required governmental permits and approvals;

our ability to hire and train skilled store operating personnel, especially management personnel;

the availability of construction materials and labor and the absence of significant construction delays or cost
overruns;

our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in
the areas where new retail stores are built;

our ability to establish a supplier and distribution network able to supply new retail stores with inventory in a
timely manner;

our competitors building or leasing stores near our retail stores or in locations we have identified as targets for a
new retail store;

consumer demand for our products, which drives traffic to our retail stores; and

general economic and business conditions affecting consumer confidence and spending and the overall strength of
our business.

We may not be able to grow the number of our retail stores, achieve the net sales growth and payback periods historically

achieved by our retail stores or maintain consistent levels of profitability in our retail stores, particularly as we expand into
markets now served by other apparel chains, outdoor specialty stores, apparel catalog businesses and online apparel businesses.
In addition, the substantial management time and resources which our retail store expansion strategy requires may result in
disruption to our existing business operations which may decrease our profitability.

We may face risks and new challenges associated with our geographic expansion.

As we expand our retail store locations, we may face new challenges that are different from those we currently encounter.

Our expansion into new geographic markets could result in increased competitive, merchandising, distribution and other
challenges. We may encounter difficulties in attracting customers in our new retail locations due to a lack of customer
familiarity with our brand, our lack of familiarity with local customer preferences, competition with new competitors or with
existing competitors with a large, established market presence and seasonal differences in the market. Our ability to expand
successfully into other geographic markets will depend on acceptance of our retail store experience by customers in those
markets, including our ability to design our stores in a manner that resonates locally and to offer the correct product assortment
to appeal to consumers in such markets. There can be no assurance that any newly opened stores will be received as well as, or
achieve net sales or profitability levels consistent with, our projected targets or be comparable to those of our existing stores in
the time periods estimated by us, or at all. If our stores fail to achieve, or are unable to sustain, acceptable net sales and
profitability levels, our business, results of operations and growth prospects may be materially adversely affected.

Furthermore, our retail stores may be located in regions that will be far from our Mount Horeb, Wisconsin headquarters

and will require additional management time and attention. Failure to properly supervise the operation and maintain the
consistency of the customer experience in those retail stores could result in loss of customers and potentially harm future net
sales prospects.

We may be unable to keep existing retail store locations or open new retail locations in desirable places, which could
materially adversely affect our sales and profitability.

We may be unable to keep existing retail locations or open new retail locations in desirable places in the future. We
compete with other retailers and businesses for suitable retail locations. Local land use, local zoning issues, environmental
regulations and other regulations may affect our ability to find suitable retail locations and also influence the cost of leasing or
buying them. We also may have difficulty negotiating real estate leases for new stores, renewing real estate leases for existing
stores or negotiating purchase agreements for new sites on acceptable terms. In addition, construction, environmental, zoning
and real estate delays may negatively affect retail location openings and increase costs and capital expenditures. If we are
unable to keep up our existing retail store locations or open new retail store locations in desirable places and on favorable
terms, our net sales and profits could be materially adversely affected.

Competitive pricing pressures with respect to shipping our products to our customers may harm our business and results of
operations.

Given the size of our direct segment net sales relative to our total net sales, shipping and handling revenue has had a

significant impact on our gross profit and gross profit margin. Historically, this revenue has partially offset our shipping and
handling expense included in selling, general and administrative expenses. Online and omnichannel retailers are increasing
their focus on delivery services, with customers increasingly seeking faster, guaranteed delivery times and low-price or free
shipping. To remain competitive, we have been required to offer discounted, free or other more competitive shipping options to
our customers, which has resulted in declines in our shipping and handling revenue and increased shipping and handling
expense. We expect further declines in shipping and handling revenues as compared to prior years. Further declines in shipping
and handling revenues may have a material adverse effect on our gross profit and gross profit margin, as well as our Adjusted
EBITDA to the extent there are not commensurate declines, or if there are increases, in our shipping and handling expense.

We may be subject to additional tax liabilities or may be subject to changes in our effective tax rate that may have a negative
impact on our earnings.

H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for
Fiscal Year 2018” (the “Tax Act”) made broad and complex changes to U.S. law, and in certain instances, lacks clarity and is
subject to interpretation until additional Internal Revenue Service guidance is issued. The ultimate impact of the Tax Reform
Act may differ from the Company’s estimates due to changes in the interpretations and assumptions made as well as any
forthcoming regulatory guidance, and any negative impact may be material. The Company will continue to assess the
provisions of the Tax Reform Act and the anticipated impact to its income tax expense and will disclose the anticipated impact
on its consolidated financial statements in future financial filings until the final impact is determined.

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

Substantially all of our merchandise is imported from suppliers in China and other emerging markets in Asia and Central
America, either directly by us or through our agents. Our reliance on suppliers in foreign markets creates risks inherent in doing
business in foreign jurisdictions, including:

(cid:120)

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;

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

(cid:120)

political instability and acts of terrorism.

Any increase in the cost of merchandise purchased from these suppliers or restriction on the merchandise made available

by these suppliers could have an adverse effect on our business and results of operations.

Manufacturers in China have experienced increased costs in recent years due to shortages of labor and the fluctuation of
the Chinese Yuan in relation to the U.S. dollar. If we are unable to successfully mitigate a significant portion of such product
cost increases, our results of operations could be adversely affected.

New initiatives 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.

The success of our direct channel depends on customers’ use of our digital platform, including our website, and response to
catalogs and digital marketing; if our overall marketing strategies, including our maintenance of a robust customer list, is
not successful, our business and results of operations could be materially adversely affected.

The level of customer traffic and volume of customer purchases through our direct channel, which accounted for
approximately 62% of our net sales in fiscal 2018, is substantially dependent on our ability to provide a content-rich and user-
friendly website, widely distributed and informative catalogs, a fun, easy and hassle-free customer experience and reliable
delivery of our products. If we are unable to maintain and increase customers’ use of our e-commerce platform, including our
website, and the volume of purchases decline, our business and results of operations could be adversely affected.

Customer response to our catalogs and digital marketing is substantially dependent on merchandise assortment,
merchandise availability and creative presentation, as well as the selection of customers to whom our catalogs are sent and to
whom our digital marketing is directed, changes in mailing strategies and the size of our mailings. 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, catalogs and email declines, or if our overall marketing
strategy is not successful, our business, results of operations and stock price could be adversely affected.

Dependence on our e-commerce sales channel subjects us to numerous risks that could have a material adverse effect on
our business, financial condition and results of operations.

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 growth strategy. Dependence on our e-commerce business and its
continued growth subjects us to certain risks, including:

(cid:120)

diversion of traffic from our stores;

liability for online content;

the need to keep pace with rapid technological change;

government regulation of the Internet, including 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 failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales, increase our costs,

diminish our growth prospects, and damage our brand, which could negatively impact our business, financial condition and
results of operations.

We are subject to payment-related risks.

We accept payments using a variety of methods, including credit cards, debit cards, 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 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.

We rely on third-party service providers, such as UPS and the United States Postal Service (“USPS”), to deliver products
purchased through our direct channel to our customers and our business could be negatively impacted by disruptions in the
operations of these third-party service providers.

Relying on third-party service providers puts us at risk from disruptions in their operations, such as employee strikes,
inclement weather and their inability to meet our shipping demands. If we are forced to use other delivery service providers,
our costs could increase and we may be unable to meet shipment deadlines. Moreover, we may be unable to obtain terms as
favorable as those received from the transportation providers we currently use, which would further increase our costs. In
addition, if our products are not delivered to our customers on time, our customers may cancel their orders or we may lose
business from these customers in the future. We may be subject to shipping surcharges during the peak holiday shopping
season, which may have a negative impact on our earnings. These factors may negatively impact our financial condition and
results of operations.

Increases in postage, paper and printing costs could adversely affect the costs of producing and distributing our catalogs
and promotional mailings, which could have an adverse effect on our business and results of operations.

Catalog mailings are a key aspect of our business and increases in costs relating to postage, paper and printing would

increase the cost of our catalog mailings and could reduce our profitability to the extent that we are unable to offset such
increases by raising prices, by implementing more efficient printing, mailing, delivery and order fulfillment systems or by using
alternative direct-mail formats.

We currently use the USPS for distribution of substantially all of our catalogs and are therefore vulnerable to postal rate

increases. The current economic and legislative environments may lead to further rate increases or a discontinuation of the
discounts for bulk mailings and sorting by zip code and carrier routes, which we currently leverage for cost savings.

Paper for catalogs and promotional mailings is a vital resource in the success of our business. The market price for paper

has fluctuated significantly in the past and may continue to fluctuate in the future. In addition, the continued consolidation or
closings of production facilities in the United States may have an impact on future pricing and supply availability of catalog
paper. We do not have multi-year fixed-price contracts for the supply of paper and are not guaranteed access to, or reasonable
prices for, the amounts required for the operation of our business over the long term.

We also depend upon external vendors to print and mail our catalogs. The limited number of printers capable of handling

such needs subjects us to risks if any printer fails to perform under our agreement. Most of our catalog-related costs are
incurred prior to mailing, and we are not able to adjust the costs of a particular catalog mailing to reflect the actual subsequent
performance of the catalog.

If we fail to 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 acquire customers in a cost-effective manner. In order to expand our customer base,

we must appeal to and acquire customers who identify with the Duluth Trading brand. We have made significant investments
related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. For
example, our national television advertising campaigns are expensive and may not result in the cost-effective acquisition of
customers. Furthermore, as our brand becomes more widely known in the market, future marketing campaigns may not result in
the acquisition of new customers at the same rate as past campaigns.

We believe that many of our new customers originate from word-of-mouth and other non-paid referrals from existing

customers. Therefore, we must ensure that our existing customers remain loyal in order for us to continue receiving those
referrals. If our efforts to satisfy our existing customers are not successful, we may not be able to acquire sufficient numbers of
new customers through word-of-mouth and other non-paid referrals so as to continue to grow our business in a cost-effective
manner, and we may be required to incur significantly higher marketing expenses in order to acquire new customers.

We also use other paid and non-paid advertising. Our paid advertising includes search engine marketing, display
advertising and paid social media. 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,
Yahoo! and Bing. 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. If the level of usage of these channels by our customer base
does not grow as expected, we may suffer a decline in customer growth or net sales. A significant decrease in the level of usage
or customer growth would 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 will ultimately exceed the cost of acquiring
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 acquire new customers. If we are unable to acquire
new customers, our growth prospects may be materially adversely affected.

If we fail to manage our growth effectively, our business, financial condition and operating results could be harmed.

To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and

expand our infrastructure of people, information systems and facilities and expand, train and manage our employee base. We
have rapidly increased employee headcount to support the growth in our business, and we intend for this growth to continue for
the foreseeable future. The number of our employees increased from 89 full-time employees and 220 part-time and flexible
part-time employees as of December 31, 2009 to 859 full-time employees and 1,935 part-time and flexible part-time employees
as of February 3, 2019, and we expect to add a significant number of employees in fiscal 2019. To support continued growth,
we must effectively integrate, develop and motivate a large number of new employees. Failure to manage our hiring needs
effectively or successfully integrate new employees may have a material adverse effect on our business, financial condition and
operating results.

Additionally, the growth of our business places significant demands on our management and other employees. The
growth of our business may require significant additional resources to meet these daily demands, which may not scale in a cost-
effective manner or may negatively affect the quality of our website, retail stores, call center and other aspects of the customer
experience. We are also required to manage relationships with a growing number of suppliers, customers and other third
parties. Our information technology systems and our internal controls and procedures may not be adequate to support future
growth of these relationships. If we are unable to manage the growth of our organization effectively, our business, financial
condition and operating results may be materially adversely affected.

We depend on cash generated from our operations to support our growth, which could strain our growth.

We primarily rely on cash flow generated from our direct and retail sales and borrowings under our credit facility to fund

our current operations and our growth initiatives. It takes a significant amount of cash to open a new retail store. If we open a
large number of stores relatively close in time, the cost of these retail store openings and the cost of continuing operations could
reduce our cash position or increase our debt. An increase in our cash flow used for new stores could adversely affect our
operations by reducing the amount of cash available or borrowing capacity to address other aspects of our business.

In addition, as we expand our business, we will need significant amounts of cash to pay our existing and future lease

obligations, purchase inventory, pay personnel and invest in our infrastructure and facilities. If our business does not generate
sufficient cash flow from operations to fund these activities and sufficient funds are not otherwise available from our existing
revolving credit facility or future credit facilities, we may need additional equity or debt financing. If such financing is not
available to us on satisfactory terms, our ability to operate and expand our business or to respond to competitive pressures
would be limited and we could be required to delay, curtail or eliminate planned store openings. Moreover, if we raise
additional capital by issuing equity securities or securities convertible into equity securities, your ownership may be diluted.
Any debt financing we may incur may impose on us covenants that restrict our operations and will require interest payments
that would create additional cash demands and financial risk for us.

We maintain debt that could adversely affect our operating flexibility and put us at a competitive disadvantage.

The borrowings under our revolving credit facility typically peak during our third or fourth fiscal quarter, and reached a

peak of $65.0 million in November of fiscal 2018.

Our level of debt and the limitations imposed on us by our credit agreement could have important consequences for

investors, including the following:

(cid:120)

we may not be able to obtain additional debt financing for future working capital, capital expenditures, to support
our growth plans, or other corporate purposes or may have to pay more for such financing;

borrowings under our revolving credit facility are at a variable interest rate, making us more vulnerable to increases
in interest rates; and

we could be less able to take advantage of significant business opportunities and to react to changes in market or
industry conditions.

We may be unable to accurately forecast our operating results and growth rate, and our growth rate may decline over time.

We may not be able to accurately forecast our operating results and growth rate. We use a variety of factors in our
forecasting and planning processes, including historical results, recent history and assessments of economic and market
conditions, among other things. The growth rates in net sales and profitability that we have experienced historically may not be
sustainable as our customer base expands and we achieve higher market penetration rates, and our percentage growth rates may
decrease. The growth of our sales and profitability depends on the continued growth of demand for the products we offer, and
our business is affected by general economic and business conditions. A softening of demand, whether caused by changes in
customer preferences or a weakening of the economy or other factors, may result in decreased net sales or growth. In addition,
we experience seasonal trends in our business, and this variability may make it difficult to predict net sales and could result in
significant fluctuations in our operating results from period to period. Furthermore, most of our expenses and investments are
fixed, and we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our net
sales results. Failure to accurately forecast our operating results and growth rate could cause our actual results to be materially
lower than anticipated, and if our growth rates decline as a result, investors’ perceptions of our business may be adversely
affected, and the market price of our Class B common stock could decline.

If we cannot compete effectively in the apparel, footwear and accessories industry, our business and results of operations
may be adversely 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
catalog 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. 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.

Our product designs are not protected by substantial intellectual property rights.

Due to the rapid pace of change in the apparel, footwear and accessories industry, the length of time it takes to obtain

patents and the expense and uncertainty of obtaining patent protection, we have not taken steps to obtain patent protection for
our innovative product designs. Competitors have attempted to copy our product designs in the past, and we expect that if we
are able to raise our national profile, our products may be subject to greater imitation by existing and new competitors. If we
are not able to continue rapid innovation of new products and product features, our brand may be harmed and our results of
operations may be materially adversely affected.

If we are unable to protect or preserve our brand image and our proprietary rights, our business may be adversely affected.

We regard our trademarks, copyrights, trade secrets and similar proprietary rights as critical to our success. As such, we

rely on trademark and copyright law, trade secret protection and confidentiality agreements with our associates, consultants,
suppliers and others to protect our proprietary rights. Nevertheless, the steps we take to protect our proprietary rights may be
inadequate and we may experience difficulty in effectively limiting the unauthorized use of our trademarks and other
intellectual property worldwide. Unauthorized use of our trademarks, copyrights, trade secrets or other intellectual property
rights may cause significant damage to our brand and our ability to effectively represent ourselves to agents, suppliers, vendors,

licensees and/or customers. While we intend to enforce our intellectual property rights, there can be no assurance that we are
adequately protected in all countries or that we will prevail when defending our trademark and proprietary rights. If we are
unable to protect or preserve the value of our trademarks, copyrights or other intellectual property rights for any reason, or if we
fail to maintain our brand image due to merchandise and service quality issues, actual or perceived, adverse publicity,
governmental investigations or litigation or other reasons, our brand and reputation could be damaged and our business may be
adversely affected.

We may be subject to liability if we infringe upon the intellectual property rights of third parties.

Third parties may sue us for alleged infringement of their proprietary rights or use intellectual property rights to interfere

with or attempt to interfere with the manufacture of products for us or the supply of products to us. The party claiming
infringement might have greater resources than we do to pursue its claims, and we could be forced to incur substantial costs and
devote significant management resources to defend against such litigation. If the party claiming infringement were to prevail,
we could be forced to discontinue the use of the related trademark or design and/or pay significant damages or enter into
expensive royalty or licensing arrangements with the prevailing party, assuming these royalty or licensing arrangements are
available at all on an economically feasible basis, which they may not be. We could also be required to pay substantial
damages. Such infringement claims could harm the Duluth Trading brand. In addition, any payments we are required to make
and any injunction we are required to comply with as a result of such infringement could adversely affect our financial results.

If our key suppliers or service providers were unable or unwilling to provide the products and services we require, our
business could be adversely affected.

During fiscal 2018, approximately 52% of our products were sourced through a third-party purchasing agent and another

15% of our products were sourced through another vendor. The remaining products were sourced from a variety of domestic
and international suppliers. If these suppliers are unable or unwilling to provide the products or services that we require or
materially increase their costs, our ability to offer and deliver our products on a timely and profitable basis could be impaired,
which could have a material adverse effect on our business, financial condition and results of operations. We do not have
written agreements with our top suppliers, and we cannot assure that any or all of our relationships will not be terminated or
that such relationships will continue as presently in effect. Furthermore, if any of our significant suppliers were to become
subject to bankruptcy, receivership or similar proceedings, customs actions, or other legal actions, we may be unable to arrange
for alternate or replacement relationships on terms as favorable as our current terms, which could adversely affect our sales and
operating results.

Our growth 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 rely on third parties to provide us with services in connection with certain aspects of our business, and any failure by
these third parties to perform their obligations could have an adverse effect on our business and results of operations.

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, catalog production,
select marketing services, 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.

Increases in the price of raw materials, fuel and labor, or their reduced availability, could increase our cost of goods and
cause delays.

The price and availability of cotton may fluctuate substantially, depending on a variety of factors, including demand,

acreage devoted to cotton crops and crop yields, weather patterns, supply conditions, transportation costs, energy prices, work
stoppages, government regulation and government policy, economic climates, market speculation and other unpredictable
factors. Fluctuations in the price and availability of fuel, labor and raw materials, such as cotton, could affect our cost of goods

and an inability to mitigate these cost increases, unless sufficiently offset with our pricing actions, might cause a decrease in
our profitability, while any related pricing actions might cause a decline in our sales volume. Additionally, any decrease in the
availability of raw materials could impair our ability to meet our production or purchasing requirements in a timely manner.
Both the increased cost and lower availability of merchandise, raw materials, fuel and labor may have an adverse impact on our
cash flow and working capital needs as well as those of our suppliers.

Our business is seasonal, and if we do not efficiently manage inventory levels, our results of operations could be adversely
affected.

Our business is subject to seasonal influences, with net sales and net income realized during the fourth quarter of our

fiscal year, which includes the holiday season. See Part I, Item 1 Business, under the heading “Seasonality,” for our net sales
and net income realized during the fourth quarter of our fiscal year for each of the past three fiscal years.

We must maintain sufficient inventory levels to operate our business successfully, but we must also avoid accumulating

excess inventory, which increases working capital needs and potentially lowers 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 expect a disproportionate amount of our net sales to occur during our fourth quarter. If we do not stock or restock

popular products in amounts sufficient to meet customer demand, it could significantly affect our revenue and our future
growth. If we overstock products, we may be required to take significant inventory markdowns or write-offs and incur
commitment costs, which could reduce profitability. We may experience an increase in our net shipping cost due to
complimentary upgrades, split-shipments and additional long-zone shipments necessary to ensure timely delivery for the
holiday season. Furthermore, if too many customers access our website within a short period of time due to increased holiday
demand, we may experience system interruptions that could make our website unavailable or prevent us from efficiently
fulfilling orders, which may reduce the volume of products we sell as well as the attractiveness of our product offerings. In
addition, we or our third-party service providers may be unable to adequately staff our fulfillment and customer service centers
during these peak periods, and our delivery service providers and other fulfillment companies may be unable to meet the peak
seasonal demand.

As a result of holiday sales, inventories, accounts payable and borrowings under our revolving line of credit typically

reach their highest levels in October or November of each year (other than as a result of cash flow provided by or used in
investing and financing activities). Inventories, accounts payable and borrowings under our revolving line of credit then decline
steadily during the holiday season, resulting in our cash typically reaching its highest level, and borrowings under our revolving
line of credit reaching their lowest level, as of December 31 of each year.

If our independent suppliers do not use ethical business practices or comply with applicable regulations and laws, our
reputation could be materially harmed and on our business and results of operations may be adversely affected.

Our reputation and customers’ willingness to purchase our products depend in part on our suppliers’ compliance with

ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, freedom of
association, unlawful inducements, safe and healthy working conditions and with all legal and regulatory requirements relating
to the conduct of their business. While we operate compliance and monitoring programs to promote ethical and lawful business
practices, we do not exercise ultimate control over our independent suppliers or their business practices and cannot guarantee
their compliance with ethical and lawful business practices. Violation of labor or other laws by our suppliers, or the divergence
of a supplier’s labor practices from those generally accepted as ethical in the United States, could materially hurt our reputation,
which could have an adverse effect on our business and results of operations.

If we fail to timely and effectively obtain shipments of products from our suppliers and deliver merchandise to our
customers, our business and operating results could be adversely affected.

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 distribution centers in Wisconsin, Nevada and Pennsylvania. While our
reliance on a limited number of distribution centers provides certain efficiencies, it also makes us more vulnerable to natural
disasters, weather-related disruptions, accidents, system failures 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 distribution 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, 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.

We rely upon third-party land-based and air freight carriers for merchandise shipments from our distribution centers to
customers and our retail stores. Accordingly, we are subject to the risks, including labor disputes, union organizing activity,
inclement weather and increased transportation costs, associated with such carriers’ ability to provide delivery services to meet
outbound shipping needs. In addition, if the cost of fuel rises, the cost to deliver merchandise from distribution centers to
customers and our retail stores may rise and, although some of these costs are paid by our customers, such costs could have an
adverse impact on our profitability. Failure to procure suppliers of products from our third-party suppliers and deliver
merchandise to customers and our retail stores in a timely, effective and economically viable manner could damage our
reputation and adversely affect our business. In addition, any increase in distribution costs and expenses could adversely affect
our future financial performance.

Inventory shrinkage could have a material adverse effect on our business, financial condition and results of operations.

We are subject to the risk of inventory loss and theft. Although our inventory shrinkage rates have not been material, or
fluctuated significantly in recent years, we cannot assure you that actual rates of inventory loss and theft in the future will be
within our estimates or that the measures we are taking will effectively reduce the problem of inventory shrinkage. Although
some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory
shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business,
financial condition and results of operations.

We are subject to data security and privacy risks that could negatively affect our results, operations or reputation.

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 customer and employee
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 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 catalog
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 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.

Our failure to retain our executive management team and to attract qualified new personnel could adversely affect our
business and results of operations.

We depend on the talents and continued efforts of our executive management team. The loss of members of our executive
management may disrupt our business and adversely affect our results of operations. Furthermore, our ability to manage further
expansion will require us to continue to attract, motivate and retain additional qualified personnel. We believe that having an
executive management team with qualified personnel who are passionate about our brand, have extensive industry experience
and have a strong customer service ethic has been an important factor in our historical success, and we believe that it will
continue to be important to growing our business. Competition for these types of personnel is intense, and we may not be
successful in attracting, integrating and retaining the personnel required to grow and operate our business profitably.

An inability to attract and retain qualified employees to meet our staffing needs in our corporate office, stores, distribution
center or call center could result in higher payroll costs and adversely affect our operating results.

Our performance is dependent on attracting and retaining a large number of qualified employees. Many of our strategic

initiatives require that we hire and/or develop associates with appropriate experience. Attracting and retaining a sufficient
number of qualified employees to meet our staffing needs may be difficult, since the competition for these types of personnel is
intense. Many of our staffing needs in our stores, fulfillment centers and call center are entry-level or part-time positions with
historically high rates of turnover. If we cannot attract and retain employees with the qualifications we deem necessary to meet
our staffing needs in our corporate office, stores, fulfillment centers and call center, our ability to effectively operate may be
adversely affected. In addition, our staffing needs are especially high during the peak holiday season. We cannot be sure that
we will be able to attract and retain a sufficient number of qualified personnel in future periods.

We may be subject to increased labor costs due to external factors, including changes in laws and regulations, and we may
be subject to unionization, work stoppages or slowdowns.

Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels,

prevailing wage rates, minimum wage legislation, actions by our competitors with respect to compensation levels and changing
demographics. Changes that adversely impact our ability to meet our labor needs in a cost-effective manner could adversely
affect our operating results. In addition, the employer mandate provisions of the Patient Protection and Affordable Health Care
Act (the “PPACA”), changes in regulations under the PPACA, changes in federal and state minimum wage laws and other laws
and regulations relating to employee benefits could cause us to incur additional wage and benefit costs, which could negatively
impact our business, financial condition and results of operations.

Currently, none of our employees are represented by a union. However, our employees have the right under the National
Labor Relations Act to form or affiliate with a union.

The National Labor Relations Board continually considers changes to labor regulations, many of which could
significantly affect the nature of labor relations in the United States and how union elections and contract negotiations are
conducted. If some or all of our employees were to become unionized and the terms of the collective bargaining agreement
were significantly different from our current compensation arrangements, it could increase our costs and adversely impact our
profitability. Moreover, participation in labor unions could put us at increased risk of labor strikes and disruption of our
operations.

Prior to our IPO, we were treated as an “S” corporation under Subchapter S of the Internal Revenue Code, and claims of
taxing authorities related to our prior status as an “S” corporation could harm us.

Concurrent with and as a result of our IPO, our “S” corporation status terminated, and we are currently treated as a “C”

corporation for federal and applicable state income tax purposes. As a “C” corporation, we are subject to federal and state
income taxes. In addition, if the unaudited, open tax years in which we were an “S” corporation are audited by the Internal
Revenue Service (the “IRS”), and we are determined not to have qualified for, or to have violated, our “S” corporation status,
we will be obligated to pay back taxes for all relevant open tax years on all of our taxable income while we were an “S”

corporation, interest and possibly penalties, however, we may have the right to reclaim a portion of the tax distributions we
made to our shareholders during those periods pursuant to a tax indemnification agreement with our existing shareholders. Any
such claims could result in additional costs to us and could have a material adverse effect on our results of operations and
financial condition.

We entered into a tax indemnification agreement with our existing shareholders prior to the IPO and could become
obligated to make payments to them for any additional federal, state or local income taxes assessed against them for fiscal
periods prior to the completion of our IPO.

Prior to our IPO, we were treated as an “S” corporation for U.S. federal income tax purposes. Concurrent with and as a
result of our IPO, our “S” corporation status terminated and we are currently subject to federal income taxes and state income
taxes. In the event of an adjustment to our reported taxable income for a period or periods prior to termination of our “S”
corporation status, our shareholders during those periods could be liable for additional income taxes for those prior periods.
Therefore, prior to the consummation of our IPO, we entered into a tax indemnification agreement with the then-existing
shareholders. Pursuant to the tax indemnification agreement, we agreed to indemnify and hold harmless each such shareholder
on an after-tax basis against additional income taxes, plus interest and penalties, resulting from adjustments made, as a result of
a final determination made by a competent tax authority, to the taxable income we reported as an “S” corporation. Such
indemnification will also include any reasonable and documented out-of-pocket expenses arising out of a claim for such tax
liability.

Unseasonal or severe weather conditions may adversely affect our merchandise sales.

Our business is adversely affected by unseasonal weather conditions. Sales of certain seasonal apparel items, especially
outerwear, are dependent in part on the weather and may decline in years in which weather conditions do not favor the use of
these products. Sales of our spring and summer products, which traditionally consist of lighter weight clothing, are adversely
affected by cool or wet weather. Similarly, sales of our fall and winter products, which are traditionally weighted toward
outerwear, are adversely affected by mild, dry or warm weather. Severe weather events may impact our ability to supply our
retail stores, deliver orders to customers on schedule and staff our retail stores, fulfillment centers and call center, which could
have an adverse effect on our business and results of operations.

We may be subject to assessments for additional taxes, including sales taxes, which could adversely affect our business.

In accordance with current law, we pay, collect and/or remit taxes in those states where we or our subsidiary, as
applicable, maintain a physical presence. While we believe that we have appropriately remitted all taxes based on our
interpretation of applicable law, tax laws are complex and their application differs from state to state. It is possible that some
taxing jurisdictions may attempt to assess additional taxes and penalties on us or assert either an error in our calculation, a
change in the application of law or an interpretation of the law that differs from our own, which may, if successful, adversely
affect our business and results of operations.

An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-
of-state companies. Additionally, the Supreme Court of the United States recently ruled in South Dakota v. Wayfair, Inc. et al,
or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s
state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to
calculate, collect and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to
collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some
taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by
state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional
administrative burdens for us and decrease our future sales, which could have an impact on our business, financial condition
and results of operations.

We may become involved in a number of legal proceedings and audits, and outcomes of such legal proceedings and audits
could adversely affect our business, financial condition and results of operations.

Our business requires compliance with many laws and regulations, including labor and employment, customs, truth-in-

advertising, 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 stores 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.

We may engage in strategic transactions that could negatively impact our liquidity, increase our expenses and present
significant distractions to management.

We may consider strategic transactions and business arrangements, including, but not limited to, acquisitions, asset
purchases, partnerships, joint ventures, restructurings and investments. Any such transaction may require us to incur non-
recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or
disrupt our management or business, which could harm our operations and financial results.

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

Our failure to comply with the restrictive covenants under our revolving credit facility and other debt instruments could
result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings before
their due date. If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial
condition could be adversely affected by increased costs and rates.

Changes to accounting rules or regulations could significantly affect our financial results.

Our consolidated financial statements are prepared in accordance with U.S. GAAP. New accounting rules or regulations

and changes to existing accounting rules or regulations have occurred and may occur in the future. Future changes to
accounting rules or regulations could negatively affect our results of operations and financial condition through increased
compliance costs.

Risks Related to Ownership of our Class B Common Stock

The dual class structure of our common stock and the existing ownership of common stock by our executive officers,
directors and their affiliates have the effect of concentrating voting control with our executive officers, directors and their
affiliates for the foreseeable future, which will limit your ability to influence corporate matters.

Our Class A common stock has ten votes per share, and our Class B common stock has one vote per share. Given the

greater number of votes per share attributed to our Class A common stock, our Executive Chairman, Stephen L. Schlecht, who
is our only Class A shareholder, beneficially owns shares representing approximately 66.5% of the voting power of our
outstanding capital stock. As a result of our dual class ownership structure, Mr. Schlecht will be able to exert a significant
degree of influence or actual control over our management and affairs and over matters requiring shareholder approval,
including the election of directors, a merger, consolidation or sale of all or substantially all of our assets and any other
significant transaction. Mr. Schlecht owns shares representing approximately 35.3% of the economic interest of our outstanding
capital stock and, together with our other executive officers, directors and their affiliates, owns shares representing
approximately 40.7% of the economic interest and 69.3% of the voting power of our outstanding capital stock. This
concentrated control will limit your ability to influence corporate matters for the foreseeable future. For example, these
shareholders will be able to control elections of directors, amendments of our articles of incorporation or bylaws, increases to
the number of shares available for issuance under our equity incentive plans or adoption of new equity incentive plans and
approval of any merger or sale of assets for the foreseeable future. This control may materially adversely affect the market price
of our Class B common stock.

Additionally, the holder of our Class A common stock may cause us to make strategic decisions or pursue acquisitions

that could involve risks to you or may not be aligned with your interests. The holder of our Class A common stock will also be
entitled to a separate vote in the event we seek to amend our articles of incorporation in a manner that alters or changes the
powers, preferences or special rights of the Class A common stock in a manner that affects its holder adversely.

We are a controlled company within the meaning of the NASDAQ rules, and as a result, we rely on exemptions from certain
corporate governance requirements that provide protection to shareholders of other companies.

Mr. Schlecht controls more than 50% of the total voting power of our common stock, and we are considered a controlled
company under the NASDAQ corporate governance listing standards. As a controlled company, certain exemptions under the

NASDAQ listing standards exempt us from the obligation to comply with certain NASDAQ corporate governance
requirements, including the requirements:

(cid:120)

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.

Although we intend to have a majority of independent directors on our board even though we will be a controlled
company, there is no guarantee that we will not take advantage of this exemption in the future. Accordingly, as long as we are a
controlled company, holders of our Class B common stock may not have the same protections afforded to shareholders of
companies that are subject to all of the NASDAQ corporate governance requirements.

Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for
investors.

The market price of our Class B common stock may fluctuate significantly in response to numerous factors, many of

which are beyond our control, including:

(cid:120)

actual or anticipated fluctuations in our results of operations, particularly in our segment 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 technology or 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;

changes in laws or regulations applicable to our business;

changes in our capital structure, such as future issuances of debt or equity securities;

short sales, hedging and other derivative transactions involving our capital stock;

general economic conditions in the United States and abroad; and

other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to

affect the market prices of equity securities of many retail and e-commerce companies. Stock prices of many retail companies
and e-commerce companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those
companies. In the past, shareholders have instituted securities class action litigation following periods of market volatility. If
we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of
management from our business and materially adversely affect our business, financial condition and operating results.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about
our business, our share price and trading volume could decline.

The trading market for our Class B common stock will depend in part on the research and reports that securities or

industry analysts publish about us or our business, our market and our competitors. We do not have any control over these
analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share

price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports
on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure and exemption from the auditor
attestation requirements applicable to “emerging growth companies” will make our Class B common stock less attractive to
investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain

exemptions from various reduced regulatory and reporting requirements that are otherwise generally applicable to other public
companies. As an emerging growth company: (i) we are exempt from the requirement to obtain an audit of our internal control
over financial reporting pursuant to the Sarbanes-Oxley Act; (ii) we are permitted to provide less extensive disclosure about our
executive compensation arrangements; and (iii) we are not required to hold non-binding advisory votes on executive
compensation or golden parachute provisions.

We remain an emerging growth company and may continue to take advantage of these provisions until the earliest to

occur of: (i) the last day of our fiscal year following the fifth anniversary of our IPO, which will occur on the last day of fiscal
2020; (ii) the date on which we are deemed to be a “large accelerated filer” (which means (a) the market value of our common
stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal
quarter, (b) we have filed at least one annual report on Form 10-K, and (c) we have been subject to the reporting requirements
of the Exchange Act for at least twelve months); (iii) the last day of our fiscal year during which our annual gross revenue
exceeds $1.0 billion; and (iv) the date on which we issue more than $1.0 billion of non-convertible debt during the previous
three-year period.

We cannot predict if investors will find our Class B common stock less attractive or our company less comparable to
certain other public companies because we will rely on these exemptions. If some investors find our Class B common stock less
attractive as a result of our reliance on these exemptions, there may be a less active trading market for our Class B common
stock, and our stock price may be more volatile. We also cannot predict if the lack of an independent auditor’s attestation of our
internal control over financial reporting pursuant to Section 404 would allow any material design or operating effectiveness in
control deficiencies to go undetected.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability
to attract and retain additional executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the
Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NASDAQ Global Select Market
and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and
financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems
and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other
things, that we file annual, quarterly and current reports with respect to our business and results of operations. The Sarbanes-
Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over
financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control
over financial reporting, significant resources and management oversight may be required. As a result, management’s attention
may be diverted from other business concerns, which could materially adversely affect our business and results of operations.
We will need to hire additional employees or engage outside consultants to comply with these requirements, which will
increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating

uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-
consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and
governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws,
regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of
management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new
laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related
to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be
materially adversely affected.

As a result of disclosure of information in this annual report and in filings required of a public company, our business and

financial condition will become more visible, which we believe may result in threatened or actual litigation, including by
competitors and other third parties. If such claims are successful, our business and results of operations could be materially

adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and
resources necessary to resolve them, could divert the resources of our management and materially adversely affect our business,
financial condition and operating results.

In connection with the preparation of our financial statements, we identified a material weakness in our internal control
over financial reporting. Any failure to maintain effective internal control over our financial reporting could materially
adversely affect us.

In connection with the preparation of our fiscal 2018 consolidated financial statements, we identified a material weakness
in our internal control over financial reporting due to the lack of sufficient resources throughout the year. Specifically, we did
not design and implement effective internal control activities to timely correct and resolve issues resulting from converting to a
new order management system, and we did not consistently execute certain account reconciliations and analyses during fiscal
2018.

Management is committed to the planning and implementation of remediation efforts to address the material weakness, as

well as to foster continuous improvement in the Company’s internal controls. In response to the material weakness described
above, with the oversight of the Audit Committee of our Board of Directors, we have undertaken, and will continue to
undertake, steps to improve our internal control over financial reporting to address and remediate the material weakness. Our
primary efforts include to (i) evaluate resources throughout the organization to determine where current resources should be
reassigned and where additional resources are needed to consistently and timely execute internal control activities, and (ii)
design and implement additional application balancing control procedures to further automate and enhance the reconciliation
process. Management believes these measures, when fully implemented and operational, will remediate the control deficiency
we have identified and strengthen our internal control over financial reporting.

However, if the remedial measures we are implementing are insufficient, or if additional material weaknesses or
significant deficiencies in our internal control over financial reporting or in our disclosure controls occur in the future, our
future consolidated financial statements or other information filed with the SEC may contain material misstatements. Failure to
maintain effective controls or to timely implement any necessary improvement of our internal and disclosure controls could,
among other things, result in losses from errors, harm our reputation, or cause investors to lose confidence in the reported
financial information, all of which could have a material adverse effect on our business, results of operations and financial
condition.

Anti-takeover provisions in our charter documents and under Wisconsin law could make an acquisition of our company
more difficult, limit attempts by our shareholders to replace or remove our current management and limit the market price
of our Class B common stock.

Provisions in our amended and restated articles of incorporation and amended and restated bylaws may have the effect of
delaying or preventing a change of control or changes in our management. In addition to the dual class structure of our common
stock, our amended and restated articles of incorporation and amended and restated bylaws include provisions that:

(cid:120)

permit the board of directors to establish the number of directors and fill any vacancies and newly created
directorships;

authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a
shareholder rights plan;

provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and

establish advance notice requirements for nominations for election to our board of directors or for proposing
matters that can be acted upon by shareholders at annual or special shareholder meetings.

These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management

by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing
the members of our management. In addition, because we are incorporated in Wisconsin, the Wisconsin control share
acquisition statute and Wisconsin’s “business combination” provisions would apply and limit the ability of an acquiring person
to engage in certain transactions or to exercise full voting power of acquired shares under certain circumstances. As a result,
offers to acquire us, which may represent a premium over the available market price of our Class B common stock, may be
withdrawn or otherwise fail to be realized.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

The following table sets forth the location, primary use and size of our leased and owned facilities as of February 3, 2019

(except as noted).

Number of

Stores

Primary Use

Retail Segment

Gross
Square Footage

Leased/Owned

1
1
1
2
1

2
1
1
3
4
2
1
1
4
1
4

1
2
1
3
1

1
3
1

Store
Store
Store
Store
Store

Store
Store
Store
Store
Store
Store
Store
Store
Store
Store
Store

Store
Store
Store
Store
Store

Store
Store
Store

Leased to Open New Store
Store
Store
Store
Store
Store
Store
Store
Store
Store

Direct Segment
Corporate headquarters
Distribution center
Returns center

Direct/Retail
Outlet store and call center
Outlet store and call center
Outlet store and call center

12,951
16,360
13,300
34,945
14,528

28,410
14,557
12,249
45,588
61,900
27,692
20,801
14,557
58,420
9,166
53,646

15,456
41,672
15,536
44,650
15,000

25,409
52,643
19,075

16,026
16,000
15,385
15,656
14,557
15,656
9,792
15,656
15,536

108,000
220,000
30,000

17,890
12,777
15,560

Leased
Leased
Leased
Leased
Leased

Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased

Leased
Leased
Leased
Leased
Leased

Leased
Leased
Leased

Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased

Leased
Owned
Leased

Owned
Leased
Leased

Location

North East
Maine
Massachusetts
New Jersey
Pennsylvania
Rhode Island

Midwest
Illinois
Indiana
Iowa
Michigan
Minnesota
Missouri
Nebraska
North Dakota
Ohio
South Dakota
Wisconsin

South

Kentucky
North Carolina
Oklahoma
Texas
Virginia

West

Alaska
Colorado
Oregon

Friendswood, TX (1)
Katy, TX (1)
Wichita, KS (1)
Spokane Valley, WA (2)
Jacksonville, FL
Rogers, AR
Danbury, CT
Madison, AL
Round Rock, TX

Mount Horeb, WI
Belleville, WI
Verona, WI

Belleville, WI
Oshkosh, WI
Redwing, MN
____________________________
(1) Opened in March 2019.
(2) Opened in April 2019.

The leases on our retail stores expire at various times and are subject to renewal options. We consider these properties to

be in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity to meet our
anticipated requirements.

ITEM 3.

LEGAL PROCEEDINGS

From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. We are not

presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our
business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we
determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

Executive Officers of Duluth Holdings Inc.

The following is a list of names and ages of executive officers of Duluth Trading indicating all positions and offices held

by each such person and each such person’s principal occupation(s) or employment during the past five years. Officers are
appointed annually by the Board of Directors at the meeting of directors immediately following the annual meeting of
shareholders. There are no family relationships among these officers, nor any arrangement or understanding between any
officer and any other person pursuant to which the officer was selected. The information presented below is as of April 5, 2019.

Name
Stephen L. Schlecht

Age Office
71 Mr. Schlecht is the founder of our Company and has served as Executive Chairman of the

Board since February 2015. Mr. Schlecht has served on our board of directors since our
founding in 1986. Mr. Schlecht previously served as our Chief Executive Officer from
February 2003 to February 2015, as President from February 2003 to February 2012 and as
President and Chief Executive Officer of GEMPLER’S, Inc., which he founded in 1986,
until February 2003. Mr. Schlecht holds a B.S.B.A. degree and an M.B.A. from
Northwestern University. Mr. Schlecht has over 48 years of experience in the direct
marketing and retail industries and has extensive leadership experience and strategic vision.

Stephanie L. Pugliese

48 Ms. Pugliese has served as President of the Company since February 2012 and as Chief

David Loretta

Allen L. Dittrich

Executive Officer since February 2015. Ms. Pugliese has previously served as our President
and Chief Operating Officer from February 2014 to February 2015, as our Senior Vice
President and Chief Merchandising Officer from July 2010 to February 2012, and as our
Vice President of Product Development from November 2008 to July 2010. Ms. Pugliese
previously served as a senior executive in several positions with Lands’ End, Inc. from
November 2005 to October 2008, including General Merchandising Manager of Women’s
Apparel, Men’s Apparel, and the Home Division. She also previously held the position of
Vice President of Merchandising at Ann Inc. from March 2000 to May 2003. Ms. Pugliese
holds a B.A. degree in marketing from New York University Stern School of Business.
Ms. Pugliese is a seasoned executive with over 27 years of experience in the retail apparel
industry.

51 Mr. Loretta has been our Chief Financial Officer since July 2017. Mr. Loretta previously
served four years as President and Chief Financial Officer of Nordstrom Bank and led all
financial and operating functions of their proprietary card operations. During his tenure,
Mr. Loretta was responsible for financial reporting, budgeting, forecasting and long-range
strategic planning as well as operational leadership. Previously at Nordstrom, Inc., he
served as corporate Vice President and Treasurer overseeing treasury, investor relations and
corporate development. Before his 13 years with Nordstrom, Mr. Loretta was Director of
Planning and Analysis for Restoration Hardware, Inc., where he developed a companywide
budgeting, forecasting and reporting process for the retail stores, catalog direct mail and e-
commerce. Following his time at Nordstrom, Mr. Loretta launched and operated his own
company, Pacific Time, LLC, a unique food and beverage business, from 2014 to 2016.
Mr. Loretta earned an MBA from San Diego State University and a B.A. in Business
Economics from the University of California, Riverside.

64 Mr. Dittrich has served as our Senior Vice President and Chief Operating Officer since
October 2018. Mr. Dittrich has previously served as our Senior Vice President of
Omnichannel Customer Experience and Operations from February 2015 to October 2018.
He previously served as Senior Vice President of Retail at Allen-Edmonds Shoe
Corporation from November 2009 until February 2015 and Chief Executive Officer of
Retail Associates Ltd. from February 2006 to October 2008. Mr. Dittrich has also
previously served as Executive Vice President and Chief Operating Officer of Gander
Mountain from 2003 to August 2005 and Chief Merchandising and Marketing Officer from
April 1998 to 2003. Prior thereto, Mr. Dittrich served as a senior executive in several
positions with the Department Store Division at Dayton Hudson where he was employed
from 1977 to 1998, including Senior Vice President General Merchandising Manager Home
and Cosmetics and Senior Vice President General Merchandising Manager of Men’s and
Children’s. Mr. Dittrich also served on our advisory board for fiscal 2014. Mr. Dittrich
holds a B.A. degree in Business Administration and Marketing from Winona State
University. Mr. Dittrich has held multiple senior executive roles and has over 40 years of
experience in the direct marketing and retail industries.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock Listing and Trading

Our Class B common stock is traded on the NASDAQ Global Select Market under the symbol “DLTH,” since our initial

public offering on November 19, 2015. Our Class A common stock is neither listed nor traded on an exchange.

Shareholders of Record

As of April 16, 2019, there were approximately 46 holders of record based upon data provided by our transfer agent, one

of whom is the sole holder of our Class A common stock and 45 of whom are holders of our Class B common stock. We
believe the number of beneficial holders of the Company’s Class B common stock is in excess of this amount.

Dividends

Our Class B common stock began trading on November 20, 2015, since that time, we have not declared any cash

dividends, and we do not anticipate declaring any cash dividends in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding our equity compensation plans is set forth in Part III, Item 12. Security Ownership of Certain

Beneficial Owners and Management and Related Shareholder Matters.

Stock Performance Graph

The following graph compares the cumulative total return to shareholders on Duluth Holdings Inc. Class B common
stock from November 20, 2015, the first day our Class B common stock began trading on the NASDAQ Global Select Market,
through February 3, 2019, the last day of fiscal 2018, for which trading occurred, with the NASDAQ Global Select Market
Index and the NASDAQ Global Retail Index for the same period. The graph assumes an initial investment of $100 on
November 20, 2015 in our Class B common stock, the NASDAQ Global Select Market and the NASDAQ Global Retail Index.
The graph also assumes that the initial prices of our Class B common stock, the NASDAQ Global Select Market and the
NASDAQ Global Retail Index on November 20, 2015 were the closing prices on that trading day.

$220.00

$210.00

$200.00

$190.00

$180.00

$170.00

$160.00

$150.00

$140.00

$130.00

$120.00

$110.00

$100.00

$90.00

11/20/15 1/29/16 4/29/16 7/29/16 10/28/16 1/27/17 4/30/17

7/30/17

10/29/17

1/28/18

4/29/18

7/29/18

10/28/18 2/3/19

DLTH

NASDAQ Global Select Market

NASDAQ Global Retail Index

Company/Market/
Peer Group

11/20/15 01/29/16 04/29/16 07/29/16 10/28/16 01/27/17 04/30/17 07/30/17 10/29/17 01/28/18 04/29/18 07/29/18 10/28/18 02/03/19

DLTH

$100.00 $120.95 $174.29 $181.68 $195.53 $168.28 $162.27 $143.30 $148.28 $136.85 $128.35 $169.67 $213.70 $172.01

NASDAQ Global
Select Market

NASDAQ Global
Retail Index

$100.00

$90.57 $93.68 $101.31 $101.89 $111.06 $118.73 $125.16 $131.64 $147.42 $139.84 $152.01 $140.77 $142.61

$100.00

$98.18 $103.51 $107.69 $102.99 $105.32 $112.03 $112.98 $115.82 $139.48 $134.90 $141.89 $133.00 $133.98

ITEM 6.

SELECTED FINANCIAL DATA

The following selected financial data is derived from Duluth Trading’s audited consolidated financial statements, with

the exception of the information presented in the pro forma net income lines, which was unaudited, and should be read in
conjunction with the consolidated financial statements and the notes thereto in Item 8. Financial Statements and Supplementary
Data, and the information contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein. Historical results are not necessarily indicative of future results.

February 3,
2019

January 28,
2018

January 29,
2017

January 31,
2016

February 1,
2015

Fiscal Year Ended

(in thousands, except per share and number of stores data)
Consolidated Statements of Operations:
Net sales
Net income attributable to controlling interest
Basic earnings per share (Class A and Class B):
Weighted average shares
of common stock outstanding
Net income per share attributable
to controlling interest
Diluted earnings per share (Class A and Class B):
Weighted average shares
and equivalents outstanding
Net income per share attributable
to controlling interest
Pro forma net income information (Unaudited)(1):
Pro forma net income attributable
to controlling interest
Pro forma basic net income per share
attributable to controlling interest
(Class A and Class B)
Pro forma diluted net income per share
attributable to controlling interest
(Class A and Class B)
Consolidated Balance Sheets:
Cash
Total assets
Total debt, (including capital lease obligations) $
$
Working capital
Operating Data:
Number of stores(2)
Total store gross square footage
Capital expenditures
EBITDA(3)
Adjusted EBITDA(3)

$
$
$

$ 568,102 $
23,156 $
$

471,447 $
23,351 $

376,116 $
21,315 $

304,157 $
27,439 $

231,867
23,647

32,086

31,853

31,527

25,250

23,815

0.72

0.73 $

0.68 $

1.09 $

0.99

32,317

32,285

32,249

25,978

24,002

0.72

0.72 $

0.66 $

1.06 $

0.99

—

— $

17,267 $

14,188

— $

0.68 $

0.60

—

— $

0.66 $

0.59

$
731 $
$ 296,759 $
46,779 $
65,587 $

2,865 $
223,102 $
1,508 $
51,530 $

24,042 $
155,967 $
777 $
66,127 $

37,873 $
120,620 $
5,023 $
73,700 $

687,996

53,036 $
50,158 $
51,826 $

438,912

205,826

46,464 $
44,823 $
46,420 $

28,672 $
39,946 $
41,170 $

96,939
7,306 $
32,168 $
34,003 $

7,881
70,949
5,683
25,714

6
68,080
5,269
26,269
26,661

_____________________________

(1) The unaudited pro forma net income information gives effect to an adjustment for income tax expense on the income attributable to controlling interest as

if we had been a “C” corporation at an assumed combined federal, state and local effective income tax rate, which approximate our statutory income tax
rate, of 40%. No pro forma income tax expense was calculated on the income attributable to noncontrolling interest because this entity did not convert to
“C” corporation. The Company was a “C” corporation for the entire fiscal year ended February 3, 2019, January 28, 2018 and January 29, 2017, therefore
pro forma net income information is not applicable for these periods.

(2)

Includes three outlet stores as of February 3, 2019 and January 28, 2018, two outlet stores as of January 29, 2017 and January 31, 2016 and one outlet
store as of February 1, 2015.

(3) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – How We Assess the Performance of Our Business and

Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA” for our definition of Adjusted EBITDA and a reconciliation of net income
to EBITDA and EBITDA to Adjusted EBITDA, both of which are non-GAAP financial measures.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion and analysis of the financial condition and results of operations should be read in conjunction
with the consolidated financial statements and the accompanying notes and information contained in other sections included
elsewhere in this annual report, particularly, “Risk Factors,” “Selected Financial Data,” and “Business.” This discussion and
analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to our
management. The statements in this discussion and analysis concerning expectations regarding our future performance,
liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking
statements. See “Forward-Looking Statements.” These forward-looking statements are subject to numerous risks and
uncertainties, including those described under “Risk Factors.” Our actual results could differ materially from those suggested
or implied by any forward-looking statements.

The following discussion contains references to fiscal years 2018, 2017 and 2016, which refer to our fiscal years ended
February 3, 2019 January 28, 2018 and January 29, 2017, respectively. Fiscal year 2018 was a 53-week period, Fiscal years
2017 and 2016 were 52-week periods.

Overview

We are a rapidly growing lifestyle brand of men’s and women’s casual wear, workwear and accessories sold exclusively

through our own direct and retail channels. The direct segment, consisting of our website and catalogs, offers products
nationwide and represented 61.7% of our fiscal 2018 consolidated net sales, compared to 70.2% in fiscal 2017. In 2010, we
added retail to our omni-channel platform with the opening of our first store. Since then, we have expanded our retail presence,
and as of February 3, 2019, we operated 43 retail stores and three outlet stores. Net sales for our retail segment represented
38.3% of our fiscal 2018 consolidated net sales, compared to 29.8% in fiscal 2017. In fiscal 2018, we opened a total of 15 retail
stores, adding a total of approximately 250,000 gross square feet.

We offer a comprehensive line of innovative, durable and functional product, such as our Longtail T® shirts, Buck

NakedTM underwear, Fire Hose® work pants and No-Yank™ Tank, which reflect our position as the Modern, Self-Reliant
American Lifestyle brand. Our brand has a heritage in workwear that transcends tradesmen and appeals to a broad demographic
for everyday and on-the-job use.

From our heritage as a catalog for those working in the building trades, Duluth Trading has become a widely recognized

brand and proprietary line of innovative and functional apparel and gear. Over the last decade, we have created strong brand
awareness, built a loyal customer base and generated robust sales momentum. We have done so by sticking to our roots of
“there’s gotta be a better way” and through our relentless focus on providing our customers with quality, functional products.

A summary of our financial results is as follows:

(cid:120)

Net sales have increased year-over-year for 36 consecutive quarters through February 3, 2019;

Net sales in fiscal 2018 increased by 20.5% over the prior year to $568.1 million;

Net income in fiscal 2018 was flat compared to the prior year at $23.2 million;

Adjusted EBITDA in fiscal 2018 increased by 11.6% over the prior year to $51.8 million;

Our retail stores have achieved an average payback of less than two years; and

Beginning October 29, 2018, the Company consolidates TRI Holdings, LLC (“TRI”). The Company considers
itself the primary beneficiary for TRI as the Company has both the power to direct the activities that most
significantly impact the entity’s economic performance and is expected to receive benefits that are significant to
TRI.

See “Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA” section for a reconciliation of our

net income 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.

We are pursuing several strategies to continue our profitable growth, including building brand awareness to continue
customer acquisition, accelerating retail expansion, selectively broadening assortments in certain men’s product categories and
growing our women’s business.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of financial and operating measures that affect our

operating results.

Net Sales

Net sales reflect our sale of merchandise plus shipping and handling revenue collected from our customers, less returns

and discounts. Direct sales are recognized upon customer receipt of the product, while retail sales are recognized at the point of
sale. We also use net sales as one of the key financial metrics we measured against in determining our annual bonus
compensation for our employees.

Gross Profit

Gross profit is equal to our net sales less cost of goods sold. Gross profit as a percentage of our net sales is referred to as

gross margin. Cost of goods sold includes the direct cost of purchased merchandise; inventory shrinkage; inventory adjustments
due to obsolescence, including excess and slow-moving inventory and lower of cost or market reserves; inbound freight; and
freight from our distribution centers to our retail stores. Depreciation and amortization is excluded from gross profit. The
primary drivers of the costs of individual goods are raw material costs. We expect gross profit to increase to the extent that we
successfully grow our net sales. Given the size of our direct segment sales relative to our total net sales, shipping and handling
revenue has had a significant impact on our gross profit and gross profit margin. Historically, this revenue has partially offset
shipping and handling expense included in selling, general and administrative expenses. We have experienced declines in
shipping and handling revenues, and this trend is expected to continue. Declines in shipping and handling revenues may have a
material adverse effect on our gross profit and gross profit margin, as well as Adjusted EBITDA to the extent there are not
commensurate declines, or if there are increases, in our shipping and handling expense. Our gross profit may not be comparable
to other retailers, as we do not include distribution network and store occupancy expenses in calculating gross profit, but
instead we include them in selling, general and administrative expenses.

Selling, General and Administrative Expenses

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 advertising, catalog 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.

Our historical sales growth has been accompanied by increased selling, general and administrative expenses. The most

significant components of these increases are advertising, marketing, occupancy, depreciation, and payroll expenses. While we
expect these expenses to increase as we continue to open new stores, increase brand awareness and grow our organization to
support our growing business, we believe these expenses will decrease as a percentage of sales over time.

Adjusted EBITDA

We believe Adjusted EBITDA is a useful measure of operating performance, as it provides a clearer picture of operating
results by excluding the effects of financing and investing activities by eliminating the effects of interest and depreciation costs
and eliminating expenses that are not reflective of underlying business performance. We use Adjusted EBITDA to facilitate a
comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete
understanding of factors and trends affecting our business.

We define Adjusted EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense

and provision for income taxes adjusted for the impact of certain items, 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.

Results of Operations

The following table summarizes our consolidated results of operations for the periods indicated, both in dollars and as a

percentage of net sales.

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

(in thousands)
Direct net sales
Retail net sales
Net sales
Cost of goods sold (excluding depreciation and amortization)
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Other income, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to controlling interest
Percentage of Net sales:
Direct net sales
Retail net sales
Net sales
Cost of goods sold (excluding depreciation and amortization)
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Other income, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to controlling interest

350,638
217,464
568,102
257,700
310,402
273,221
37,181
5,949
383
31,615
8,450
23,165
9
23,156

61.7 %
38.3 %
100.0 %
45.4 %
54.6 %
48.1 %
6.5 %
1.0 %
0.1 %
5.6 %
1.5 %
4.1 %
0.0 %
4.1 %

330,940
140,507
471,447
210,428
261,019
223,947
37,072
1,988
421
35,505
11,878
23,627
276
23,351

70.2 %
29.8 %
100.0 %
44.6 %
55.4 %
47.5 %
7.9 %
0.4 %
0.1 %
7.5 %
2.5 %
5.0 %
0.1 %
5.0 %

309,674
66,442
376,116
161,970
214,146
179,145
35,001
194
247
35,054
13,525
21,529
214
21,315

82.3 %
17.7 %
100.0 %
43.1 %
56.9 %
47.6 %
9.3 %
0.1 %
0.1 %
9.3 %
3.6 %
5.7 %
0.1 %
5.7 %

Fiscal 2018 Compared to Fiscal 2017

Net Sales

Net sales increased $96.7 million, or 20.5%, to $568.1 million in fiscal 2018 compared to $471.4 million in fiscal 2017,
driven by gains in both direct and retail segments of $19.7 million, or 6.0%, and $77.0 million, or 54.8%, respectively, across
virtually all product categories and in both our men’s and women’s business. The inclusion of the 53rd week in fiscal 2018
amounted to an additional $7.7 million of net sales. The $77.0 million increase in retail net sales was primarily attributable to
having 46 stores in fiscal 2018 as compared to 31 stores in fiscal 2017. Fiscal 2018 was also affected by challenges with
systems implementation and inventory flow.

Gross Profit

Gross profit increased $49.4 million, or 18.9%, to $310.4 million in fiscal 2018 compared to $261.0 million in fiscal
2017. As a percentage of net sales, gross margin decreased 80 basis points to 54.6% of net sales in fiscal 2018 compared to
55.4% of net sales in fiscal 2017. The decrease in gross margin rate was primarily due to the continued decline in shipping
revenues and an increase in freight cost related to transporting inventory to our retail stores due to geographic expansion.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $49.3 million, or 22.0%, to $273.2 million in fiscal 2018
compared to $223.9 million in fiscal 2017. Selling, general and administrative expenses as a percentage of net sales increased
60 basis points to 48.1% in fiscal 2018, compared to 47.5% in fiscal 2017. The increase in selling, general and administrative

expenses of $49.3 million compared to last year was primarily attributable to increases of $6.6 million in advertising and
marketing costs, $22.0 million in selling expenses and $20.7 million in general and administrative expenses.

As a percentage of net sales, advertising and marketing costs decreased 200 basis points to 16.8% in fiscal 2018,
compared to 18.8% in fiscal 2017. The 200 basis point decrease in advertising and marketing costs as a percentage of net sales
was primarily attributable to a decrease of 170 basis points in catalog costs due to the adoption of the new revenue standard
which provides for catalog costs to be expensed upon customer receipt and a planned decrease in catalog spend as a percentage
of net sales, coupled with advertising leverage gained from a higher mix of retail net sales as discussed above.

As a percentage of net sales, selling expenses increased 140 basis points to 15.9% in fiscal 2018, compared to 14.5% in
fiscal 2017. The increase in selling expenses as a percentage of net sales was primarily due an increase of 110 basis points in
customer service due to the growth in retail, partially offset by a decline in shipping expenses attributable to the leverage gained
from an increase in the proportion of retail net sales.

As a percentage of net sales, general and administrative expenses increased 120 basis points to 15.5% in fiscal 2018,

compared to 14.2% in fiscal 2017. The 130 basis point increase in general and administrative expenses as a percentage of net
sales was primarily due to an increase in information technology support and outside services, and an increase in depreciation
as a result of more stores.

Segment Operating (Loss) Income

Corporate expenses are included in our direct segment and the majority of advertising costs are included in our direct

segment, with the exception of retail-specific advertising. As such, our direct segment is generally burdened with higher
overhead and advertising expenses. In addition, for our build to suit leases, a portion of the lease expense is included in
interest expense.

Direct segment operating loss was $0.4 million in fiscal 2018 compared to operating income of $13.2 million in fiscal

2017. Direct segment operating loss as a percentage of net sales decreased 410 basis points to (0.1)% in fiscal 2018, compared
to operating income as a percentage of net sales of 4.0% in fiscal 2017. The 410 basis point decrease in direct segment
operating income was primarily due to a decline of 100 basis points in direct gross margins, based on the factors discussed
above in gross profit, coupled with an increase in selling expenses of 220 basis points due to increased distribution costs, an
increase of 140 basis points in general and administrative expenses due to an increase in consulting fees and outside services to
support the growth of our direct business coupled with a decrease of 50 basis points in advertising and marketing costs
primarily due to a decrease in catalog costs.

Retail segment operating income increased $13.7 million, or 57.7%, to $37.5 million in fiscal 2018 compared to $23.8

million in fiscal 2017. Retail segment operating income as a percentage of net sales increased 30 basis points to 17.3% in fiscal
2018, compared to 17.0% in fiscal 2017. The 30 basis points increase in retail segment operating income was primarily due to a
decrease of 50 basis points in selling, general and administrative expenses due to leverage gained from higher retail net sales
partially offset by an increase in store labor due to the increase in store count coupled with a decline in gross margin of 10 basis
points due to the factors discussed above in gross profit.

Interest Expense

Interest expense increased $4.0 million to $6.0 million in fiscal 2018 compared to $2.0 million in fiscal 2017. The
increase in interest expense was primarily attributable to an increase in our build-to-suit retail stores, an increase in borrowings
on our revolving line of credit during fiscal 2018 as compared to the prior year and interest on TRI’s Senior Secured debt, due
to the consolidation of TRI.

Income Taxes

Income tax expense was $8.4 million in fiscal 2018 compared to $11.9 million in fiscal 2017. Our effective tax rate
related to controlling interest was 26.7% and 33.7% in fiscal 2018 and fiscal 2017, respectively. The decrease in the year-over-
year effective tax rate is due to the enactment of “An Act to Provide for Reconciliation Pursuant to Titles II and V of the
Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) that became effective January 1, 2018.

Net Income

Net income was $23.2 million in fiscal 2018 compared to $23.4 million in fiscal 2017, primarily due to the factors

discussed above.

Fiscal 2017 Compared to Fiscal 2016

Net Sales

Net sales increased $95.3 million, or 25.3%, to $471.4 million in fiscal 2017 compared to $376.1 million in fiscal 2016,
driven by gains in both direct and retail segments of $21.3 million, or 6.9%, and $74.1 million, or 111.5%, respectively, across
all product categories and in both our men’s and women’s business. The $74.1 million increase in retail net sales was primarily
attributable to the opening of 15 new stores during fiscal 2017, coupled with an entire full year of net sales from our seven
stores we opened in fiscal 2016.

Gross Profit

Gross profit increased $46.9 million, or 21.9%, to $261.0 million in fiscal 2017 compared to $214.1 million in fiscal

2016. As a percentage of net sales, gross margin decreased 150 basis points to 55.4% of net sales in fiscal 2017 compared to
56.9% of net sales in fiscal 2016. The decrease in gross margin rate was primarily due to a decline in shipping revenues, a
slight increase in global promotions, including flash sales during our fiscal fourth quarter, and an increase in freight cost for
transporting inventory from our Belleville distribution center to our stores.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $44.8 million, or 25.0%, to $223.9 million in fiscal 2017

compared to $179.1 million in fiscal 2016. Selling, general and administrative expenses as percentage of net sales decreased 10
basis points to 47.5% in fiscal 2017, compared to 47.6% in fiscal 2016. The increase in selling, general and administrative
expenses of $44.8 million was primarily attributable to increases of $10.1 million in advertising and marketing costs, $16.0
million in selling expenses and $18.7 million in general and administrative expenses.

As a percentage of net sales, advertising and marketing costs decreased 210 basis points to 18.8% in fiscal 2017,
compared to 20.9% in fiscal 2016. The 210 basis point decrease in advertising and marketing costs as a percentage of net sales
was primarily attributable to a decrease of 140 basis points in catalog costs, a decrease of 40 basis points in digital advertising,
and a decrease of 30 basis points in national television advertising as a result of leverage gained from the increase in retail net
sales as discussed above.

As a percentage of net sales, selling expenses increased 60 basis points to 14.5% in fiscal 2017, compared to 13.9% in
fiscal 2016. The increase in selling expenses as a percentage of net sales was primarily due an increase of 100 basis points in
customer service due to the growth in retail, partially offset by a decline in shipping expenses attributable to the leverage gained
from an increase in the proportion of retail net sales.

As a percentage of net sales, general and administrative expenses increased 140 basis points to 14.2% in fiscal 2017,

compared to 12.8% in fiscal 2016. The 140 basis point increase in general and administrative expenses as a percentage of net
sales was primarily due to an increase of 80 basis points in occupancy and equipment cost due to retail growth, an increase of
30 basis points in depreciation expense primarily due to the increase in stores and infrastructure and technology investments,
coupled with an increase of 20 basis points in personnel due to an increase in headcount to support the growth of the business.

Segment Operating Income

Direct segment operating income decreased $11.2 million, or 45.8%, to $13.2 million in fiscal 2017 compared to $24.5

million in fiscal 2016. Direct segment operating income as a percentage of net sales decreased 390 basis points to 4.0% in fiscal
2017, compared to 7.9% in fiscal 2016. The 390 basis point decrease in direct segment operating income was primarily due to a
decline of 160 basis points in direct gross margins, based on the factors discussed above in gross profit, coupled with a decline
of 70 basis points due to an increase in headcount to support the growth of the business, a decline of 30 basis points in
advertising and marketing, and a decline of 30 basis points due to hosting fees.

Retail segment operating income increased $13.3 million, or 126.0%, to $23.8 million in fiscal 2017 compared to $10.5

million in fiscal 2016. Retail segment operating income as a percentage of net sales increased 110 basis points to 17.0% in
fiscal 2017, compared to 15.9% in fiscal 2016. The 110 basis points increased in retail segment operating income was primarily
due to a decline of 30 basis point in advertising and marketing costs, and a 140 basis point decline in personnel expenses
primarily due to leveraged gained from higher retail sales, which was partially offset by a decline in gross margin of 80 basis
points due to the factors discussed above in gross profit.

Interest Expense

Interest expense increased $1.8 million to $2.0 million in fiscal 2017 compared to $0.2 million in fiscal 2016. The

increase in interest expense was primarily attributable to an increase in our build-to-suit retail stores and an increase in
borrowings on our revolving line of credit during fiscal 2017 as compared to the prior year.

Income Taxes

Income tax expense was $11.9 million in fiscal 2017 compared to $13.5 million in fiscal 2016. Our effective tax rate

related to controlling interest was 33.7% and 38.9% in fiscal 2017 and fiscal 2016, respectively.

The decrease in the year-over-year effective tax rate for the year ended January 28, 2018 was primarily attributable to the

$1.5 million benefit related to remeasurement of net deferred tax liabilities resulting from the enactment of Tax Act and the
benefit attributable to the reduction in the U.S. federal statutory rate in fiscal 2017 pursuant to the Tax Act.

As a result of the Tax Act, we calculated a U.S. federal statutory corporate income tax rate of 33.9% for the fiscal year

ending January 28, 2018.

Net Income

Net income increased $2.0 million, or 9.6%, to $23.4 million in fiscal 2017 compared to $21.3 million in fiscal 2016, primarily
due to the factors discussed above. Excluding the impact from the Tax Act discussed above, net income increased $0.2 million,
or 0.8% to $21.5 million in fiscal 2017.

Reconciliation of Net Income to EBITDA and EBITDA to Adjusted EBITDA

The following table represents reconciliations of net income to EBITDA and EBITDA to Adjusted EBITDA, both of
which are non-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.

(in thousands)
Net income

Depreciation and amortization
Interest expense
Income tax expense

EBITDA

Stock based compensation

Adjusted EBITDA

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

23,165 $
12,594
5,949
8,450
50,158
1,668
51,826 $

23,627 $
7,330
1,988
11,878
44,823
1,597
46,420 $

21,529
4,698
194
13,525
39,946
1,224
41,170

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $5.4
million, or 11.6%, to $51.8 million in fiscal 2018 compared to $46.4 million in fiscal 2017. As a percentage of net sales,
Adjusted EBITDA decreased 70 basis points to 9.1% of net sales in fiscal 2018 compared to 9.8% of net sales in fiscal 2017.

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA increased $5.3
million, or 12.8%, to $46.4 million in fiscal 2017 compared to $41.2 million in fiscal 2016. As a percentage of net sales,
Adjusted EBITDA decreased 110 basis points to 9.8% of net sales in fiscal 2017 compared to 10.9% of net sales in fiscal 2016.

Liquidity and Capital Resources

General

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Effective

May 17, 2018, we entered into a new credit facility which provides for borrowings of up to $80.0 million on a revolving line of
credit and an additional $50.0 million in a delayed draw term loan. The $80.0 million revolving line of credit matures on May
17, 2023 and we have the option to draw in various amounts on the $50.0 million term loan through May 17, 2020, with a
maturity on May 17, 2023. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases,
and capital expenditures associated with opening new stores, infrastructure and information technology. The most significant
components of our working capital are cash, inventory, accounts payable and other current liabilities.

We expect to spend approximately $40.0 million to $45.0 million in fiscal 2019 on capital expenditures, net of proceeds
from finance lease obligations, including a total of approximately $30.0 million to $32.0 million for new retail store expansion.
We expect capital expenditures of $2.0 million and starting inventory of $0.5 million to open a new store. We anticipate
opening 15 stores in fiscal 2019. At February 3, 2019, our working capital was $65.6 million, which includes cash of $0.7
million. 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 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.

Cash Flow Analysis

A summary of operating, investing and financing activities is shown in the following table.

(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Decrease in cash and restricted cash

Net Cash Provided by Operating Activities

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

31,095 $
(53,735)
18,642
(3,998) $

29,868 $
(53,022)
4,760
(18,394) $

20,253
(28,906)
(3,743)
(12,396)

Operating activities consist primarily of net income adjusted for non-cash items that include depreciation and

amortization, loss on disposal of property, equipment and other assets, stock-based compensation and the effect of changes in
assets and liabilities.

For fiscal 2018, net cash provided by operating activities was $31.1 million, which consisted of net income of $23.2

million, non-cash depreciation and amortization of $12.6 million, amortization of stock-based compensation of $1.7 million,
deferred income taxes of $8.0 million and loss on disposal of property and equipment of $0.2 million, offset by cash used in
operating assets and liabilities of $14.5 million. The cash used in operating assets and liabilities of $14.5 million primarily
consisted of a $11.0 million increase in inventory due to growth and supply of inventory for our new retail stores in the first
quarter of fiscal 2019 and $5.6 million increase in prepaid expense, coupled with a $7.6 million decrease in income taxes
payable, which was partially offset by increases in trade accounts payable and accrued expenses and deferred rent obligations
of $10.3 million and $7.0 million, respectively. The increase in trade accounts payable and accrued expenses were primarily
due to an increase in inventory and timing of payments.

For fiscal 2017, net cash provided by operating activities was $29.9 million, which consisted of net income of $23.6
million, non-cash depreciation and amortization of $7.3 million, amortization of stock-based compensation of $1.6 million and
deferred income taxes of $0.5 million, offset by cash used in operating assets and liabilities of $3.2 million. The cash used in
operating assets and liabilities of $3.2 million primarily consisted of a $17.6 million increase in inventory due to growth and
supply of inventory for our new retail stores in the first quarter of fiscal 2018, and a $2.3 million increase in prepaid expense,
partially offset by increases in trade accounts payable and accrued expenses and deferred rent obligations of $6.4 million and
$7.4 million, respectively, coupled with an increase in income taxes payable of $2.4 million. The increase in trade accounts
payable and accrued expenses were primarily due to an increase in inventory and timing of payments.

For fiscal 2016, net cash provided by operating activities was $20.3 million, which consisted of net income of $21.5
million, non-cash depreciation and amortization of $4.7 million, amortization of stock-based compensation of $1.2 million and
deferred income taxes of $1.5 million, offset by cash used in operating assets and liabilities of $8.7 million. The cash used in
operating assets and liabilities of $8.7 million primarily consisted of a $14.4 million increase in inventory due to growth and
supply of inventory for our new retail stores in the first quarter of fiscal 2017, coupled with a $3.0 million decrease in trade
accounts payable, primarily due to timing of payments, which was partially offset by an increase in income taxes payable of
$3.9 million, as a result of being a “C” corporation for the entire fiscal year, and accrued expenses of $4.8 million, primarily
due to increases in deferred revenue and unpaid purchases of property and equipment.

Net Cash Used in Investing Activities

Investing activities consist primarily of capital expenditures for growth related to new stores, information technology and

enhancements for our distribution and corporate facilities.

For fiscal 2018, net cash used in investing activities was $53.7 million, primarily driven by capital expenditures of $53.0

million, due mainly to the opening of 15 new stores, as well as investments in information technology and the Belleville,
Wisconsin distribution center.

For fiscal 2017, net cash used in investing activities was $53.0 million, primarily driven by capital expenditures of $46.5

million, due mainly to the opening of 15 new stores, and investments in information technology related to our order
management system and e-commerce platform and a $6.3 million purchase of an available-for-sale security.

For fiscal 2016, net cash used in investing activities was $28.9 million, primarily driven by capital expenditures of $28.7

million for the opening of seven new stores, expansion of our Belleville distribution center, and investments in information
technology.

Net Cash Provided by (Used in) Financing Activities

Financing activities consist primarily of borrowings and payments related to our revolving line of credit, long-term debts,

proceeds from finance lease obligations as well as noncontrolling interest in variable interest entities. Effective December 31,
2018, the Company deconsolidated Schlecht Retail Ventures LLC (“SRV”). Prior to the deconsolidation of SRV, financing
activities also consisted of distributions to holders of the noncontrolling interest in our variable interest entity SRV and capital
contributions to SRV. See Note 6 “Variable Interest Entities,” included in this Annual Report on Form 10-K for further
information.

For fiscal 2018, net cash provided by financing activities was $18.6 million, which included borrowings of $130.1
million on our revolving line of credit to support our capital expenditures discussed above and working capital needs, offset by
payments of $113.5 million on our revolving line of credit and proceeds of $2.3 million from finance lease obligations in
connection with our build-to-suit lease transactions.

For fiscal 2017, net cash provided by financing activities was $4.8 million, which included borrowings of $88.9 million

on our revolving line of credit to support our capital expenditures discussed above and working capital needs, offset by
payments of $88.9 million on our revolving line of credit, proceeds of $3.9 million from finance lease obligations in connection
with our build-to-suit lease transactions, $0.8 million in proceeds from long-term debt, and $0.8 million for capital
contributions to SRV.

For fiscal 2016, net cash used in financing activities was $3.7 million, primarily consisting of uses of $4.2 million

payments on long-term debt, offset by proceeds of $0.7 million for capital contributions to variable interest entities.

Line of Credit

On September 29, 2017, we entered into a first amendment to the Amended and Restated Loan Agreement dated as of
October 7, 2016 (the “Amended and Restated Agreement”), providing for borrowing availability of up to $60.0 million from
September 29, 2017 through July 31, 2019. Effective November 1, 2017, we entered into a second amendment to the Amended
and Restated Agreement, providing for borrowing availability of up to $80.0 million from November 1, 2017 through
December 31, 2017 and borrowing availability of up to $60.0 million from January 1, 2018 through July 31, 2019. The
Amended and Restated Agreement was scheduled to mature on July 31, 2019, and bore interest, payable monthly, at a rate
equal to the adjusted LIBOR rate, as defined in the Amended and Restated Agreement. The Amended and Restated Agreement
was secured by essentially all Company assets and required that we maintain compliance with certain financial and non-
financial covenants, including minimum tangible net worth and a minimum trailing twelve month EBITDA. In addition, the
Amended and Restated Agreement did not contain borrowing base limits.

Effective May 17, 2018, we entered into a new credit agreement and subsequently terminated our Amended and Restated

Agreement. The outstanding balance of $27.5 million under the Amended and Restated Agreement was paid off with
borrowings under the new credit agreement. The new credit agreement is secured by essentially all Company assets and
requires that we maintain compliance with certain financial and non-financial covenants, including a trailing twelve month
maximum rent adjusted leverage ratio and minimum fixed charge coverage ratio. See Note 4 “Debt and Line of Credit,”
included in this Annual Report on Form 10-K for further information.

As of and for the fiscal year ended February 3, 2019, we were in compliance with all financial and non-financial

covenants.

Contractual Obligations

We enter into long term contractual obligations and commitments in the normal course of business. As of February 3,

2019, our contractual cash obligations were as follows:

Total

2019

Maturing in:
2020
to
2021

2022
to
2023

2024
and
after

16,542
30,237
190,851
237,630 $

—
500
15,745
16,245 $

—
1,192
31,631
32,823 $

16,542 $
1,473
31,377
49,392 $

—
27,072
112,098
139,170

(in thousands)
Revolving line of credit
Debt (1)
Operating leases (2)
Total

_____________________________

(1) Consists of notes due to the TRI consolidation along with the capital lease obligations that represent minimum lease payments, including imputed interest
not reflected in the Consolidated Statements of Financial Position and Notes to Consolidated Financial Statements included elsewhere in this Annual
Report.

(2) Our store leases generally have initial lease terms of 5-15 years and include renewal options and rent escalation provisions.

Off-Balance Sheet Arrangements

We are not a party to any off balance sheet arrangements, except for operating leases, as discussed in “Contractual

Obligations” section above.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect amounts reported in our consolidated financial statements
and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. We evaluate our accounting policies, estimates, and
judgments on an on-going basis. We base our estimates and judgments on historical experience and various other factors that
are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions and conditions and such differences could be material to the consolidated financial statements.

We evaluated the development and selection of our critical accounting policies and estimates and believe that the
following involve 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. With respect to critical accounting policies, even a relatively minor
variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on
subsequent results of operations. However, our historical results for the periods presented in the consolidated financial
statements have not been materially impacted by such variances. More information on all of our significant accounting policies
can be found in Note 2, “Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements included
in this Annual Report on Form 10-K.

Revenue Recognition

For fiscal 2018, we recognized revenue from direct sales upon shipment of the product and from retail sales at the point

of sale. This represents the point at which the customer obtains control of the product and has the ability to direct the use of the
product.

For fiscal 2017 and prior periods, we recognized revenue from direct sales upon customer receipt of the product and from

retail sales at the point of sale.

We recognized shipping and handling fees as revenue included in net sales when generated from a customer order upon

customer receipt of the product. Costs of shipping and handling are included in selling, general and administrative expenses.

Sales tax collected is not recognized as revenue as it is ultimately remitted to governmental authorities.

We reserve for projected merchandise returns based on both historical and actual experience, as well as various other
assumptions that we believe to be reasonable. Actual merchandise returns are monitored regularly and have not been materially

different from the estimates recorded. Product returns often represent merchandise that can be resold. Amounts refunded to
customers are generally made by issuing the same payment tender as used in the original purchase. Merchandise exchanges of
the same product and price are not considered merchandise returns and are therefore excluded when calculating the sales
returns reserve.

Inventories

Our inventories are composed of finished goods and are stated at the lower of cost and net realizable value, with cost

determined using the first-in, first-out method. Net realizable value is defined as the “estimated selling prices in the ordinary
course of business, less reasonably predictable costs of completion, disposal and transportation.” To determine if the value of
inventory should be marked down below original cost, we consider current and anticipated demand, customer preference and
the inventory’s age. The inventory value is adjusted periodically to reflect current market conditions, which requires our
judgments that may significantly affect the ending inventory valuation, as well as gross margin. The significant estimates used
in inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or market reserves) and
estimates of inventory shrinkage. We adjust our inventory for obsolescence based on historical trends, aging reports, specific
identification and our estimates of future retail sales prices.

Due to these factors, our obsolescence and shrinkage reserves contain uncertainties. Both estimates have calculations that

require us to make assumptions and to apply judgment regarding a number of factors, including market conditions, the selling
environment, historical results and current inventory trends. If actual observed obsolescence or periodic updates of our
shrinkage estimates differ from our original estimates, we adjust our inventory reserves accordingly throughout the period. We
do not believe that changes in the assumptions used in these estimates would have a significant effect on our net income or
inventory balances. We have not made any material changes to our assumptions included in the calculations of the
obsolescence and shrinkage reserves during the periods presented, nor have we recorded significant adjustments related to the
physical inventory process.

Long-Lived Assets

Long-lived assets, such as property and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that may indicate impairment
include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value
of an asset, a product recall or an adverse action or an assessment by a regulator. If the sum of the estimated undiscounted
future cash flows related to the asset is less than the carrying value, we recognize a loss equal to the difference between the
carrying value and the fair value, usually determined by the estimated discounted cash flow analysis of the asset. Impairment
charges are included in selling, general and administrative expenses.

We evaluate long-lived tangible assets at an individual store level, which is the lowest level at which independent cash
flows can be identified. We evaluate corporate assets or other long-lived assets that are not store-specific at the consolidated
level.

Since there is typically no active market for our long-lived tangible assets, we estimate fair values based on the expected
future cash flows. We estimate future cash flows based on store-level historical results, current trends, and operating and cash
flow projections. Our estimates are subject to uncertainty and may be affected by a number of factors outside our control,
including general economic conditions and the competitive environment. While we believe our estimates and judgments about
future cash flows are reasonable, future impairment charges may be required if the expected cash flow estimates, as projected,
do not occur or if events change requiring us to revise our estimates.

Stock-Based Compensation – Private Company Equity Grants

We have issued restricted shares of our Class B common stock to key employees, executives and board members under
restricted stock agreements. These issuances generally vest evenly over a period ranging from two to five years from the grant
date and become fully vested on the applicable anniversary date of each restricted stock agreement, unless otherwise stated in
the terms of each individual award. Prior to November 19, 2015, we were a private company with no active public market for
our Class B common stock. The fair value of our Class B common stock was measured on September 30, 2014, December 31,
2013 and December 31, 2012 for our fiscal years 2015, 2014 and 2013, respectively. The restricted stock value was based on
the estimated fair value of our Class B common stock on the grant date, which may differ from the fair value measure dates
above. In the absence of a public trading market, we considered numerous objective and subjective factors to determine our
best estimate of the fair value of the restricted shares of our Class B common stock on the grant date. Our estimate of this stock-
based compensation was equivalent to the fair value of our Class B common stock that was ultimately expected to vest. The
stock-based compensation is recognized as compensation expense over the requisite service period or a sale or change in
control of our Company if such event occurs prior to the completion of the service period.

Our estimate of pre-vesting forfeitures, or forfeiture rate, was based on our internal analysis, which included the award
recipients’ positions within the company and the vesting period of the awards. As such, we estimated the forfeiture rate was
zero, which resulted in our recording the gross value of the awards as stock-based compensation expense in our consolidated
statements of income. We will reassess the forfeiture rate assumption in future periods.

Determination of Fair Value of Class B Common Stock on Grant Date. When we were a private company with no active
public market for our Class B common stock, we determined the estimated per share fair value of our Class B common stock on
the valuation date using a valuation consistent with the requirements of the IRS (Revenue Ruling 59-60), the Department of
Labor (Proposed Regulation—2510.3-18(b)(4)(ii)(B)) and Uniform Standards of Professional Appraisal Practice. In conducting
this valuation, we considered all objective and subjective factors that we believed to be relevant, including our best estimate of
our business condition, prospects and operating performance. Within this contemporaneous valuation performed by us, a range
of factors, assumptions and methodologies were used. The significant factors included:

(cid:120)

outlook and condition of the economy, the industry and our company;

our financial condition;

our earnings capacity and future prospects;

our dividend paying capacity;

historic sales of our Class B common stock and size of the block of Class B common stock to be valued;

market prices of publicly traded securities of companies engaged in the same or similar industry classification;

prices, terms and conditions affecting past sales of similar Class B common stock;

marketability and liquidity considerations of our Class B common stock;

physical condition, remaining life expectancy and functional and economic utility of our property and equipment;
and

relative risk of the investment.

After considering the information presented by our management, our board of directors rendered its final fair value

determination.

Class B Common Stock Valuation Methodologies. For the valuation of our Class B common stock, management
estimated on the valuation date, our common equity value on a continuing operations basis, primarily using the income and
market comparable approaches. The common equity value is the difference between the business enterprise value and debt
value after adjustment for a marketability and liquidity discount of five percent.

The income approach utilized the discounted cash flow (“DCF”) methodology by discounting the anticipated cash flow
stream from business operations. This valuation analysis involved a discrete projection of operating cash flow and a residual
value calculation at the end of the projection. The discounted cash flow was based on a detailed projection of sales, cost of
sales, operating expenses, depreciation, taxes, capital expenditures and working capital changes. Both the projected cash flows
and residual value were discounted to present value based on a weighted average cost of capital calculation.

The market comparable approach utilizes earnings, sales and equity price ratios from comparable transactions. This was a

process of collecting relevant market data, adjusting for comparability differences and applying price multipliers to the
earnings, sales and operating equity of the company. Our market comparable analysis derived values based on stock
transactions involving publicly traded companies because of the availability of complete and consistent information.
Comparable companies were selected after a database search based on standard industrial codes of publicly traded companies.
Earnings multipliers are a function of earnings growth and earnings volatility. Earnings multipliers derived for us were below
the averages for the comparable companies because of our higher asset utilization, smaller size and higher return on assets.

We believe that the procedures employed in the DCF and market comparable methodologies were reasonable and

consistent with generally accepted practices.

Income Taxes

We account for income taxes and the related accounts using the liability method in accordance with ASC Topic 740,

Income Taxes. Under this method, we accrue income taxes payable or refundable and recognize deferred tax assets and
liabilities based on differences between U.S. GAAP and tax bases of assets and liabilities. We measure deferred tax assets and
liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse, and recognize the effect
of a change in enacted rates in the period of enactment.

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.

We establish assets and liabilities for uncertain tax positions taken or expected to be taken in income tax returns, using a
more-likely-than-not recognition threshold. We recognize penalties and interest related to uncertain tax positions as income tax
expense.

See Note 9 “Income Taxes,” of Notes to Consolidated Financial Statements included in this Annual Report on

Form 10-K.

Recently Issued Accounting Pronouncements

Leases

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”)

and has since amended the standard with Accounting Standards Update 210-01, Leases: Land Easement Practical Expedient for
Transition to Topic 842; Accounting Standards update 2018-10, Codification Improvements to Topic 842, Leases; Accounting
Standards Update 2018-11, Leases: Targeted Improvements; and Accounting Standards Update 2018-20, Leases: Narrow-
Scope Improvements for Lessors. ASU 2016-02, as amended, requires lessees to record a right-of-use asset and lease liability
for almost all leases. The Company will adopt ASU 2016-02, as amended, using the current period adjustment method on
February 4, 2019, the first day of the Company’s first quarter for the fiscal year ending February 2, 2020, the Company’s fiscal
year 2019. Under this method, a cumulative effect adjustment to the opening balance of retained earnings is recognized upon
adoption and the guidance is applied prospectively. The Company has implemented a new lease management system, processes
and controls to adopt ASU 2016-02 and assist in the application of the new standard. The Company is currently evaluating the
full effect that the adoption of ASU 2016-02 will have on its financial condition, results of operations and disclosures. The
Company conducts its retail operations through leased stores and therefore, upon adoption, the Company expects to have an
increase in assets and liabilities on its consolidated financial statements, due to recording of right-to-use assets and the
corresponding lease liabilities, which is expected to be material.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Risk Factors

We are subject to interest rate risk in connection with borrowings under our revolving line of credit, which bears interest

at a rate equal to the adjusted LIBOR rate, as defined in the Amended and Restated Agreement (effective rate of 6.25% at
February 3, 2019). As of February 3, 2019, there was $16.5 million outstanding under the revolving line of credit. Based on the
average interest rate on the revolving line of credit during fiscal 2018, and to the extent that borrowings were outstanding, we
do not believe that a 10% change in the interest rate would have a material effect on our consolidated results of operations or
financial condition.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately
measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any,
on our results of operations and financial condition have been immaterial. We cannot assure you our business will not be
affected in the future by inflation.

Foreign Exchange Rate Risk

We source a substantial majority of our merchandise from various suppliers in Asia and the vast majority of purchases
are denominated in U.S. dollars. We do not hedge foreign currency risk using any derivative instruments, and historically we
have not been impacted by changes in exchange rates.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Schedule II Valuation and Qualifying Accounts

Page
47
48
49
50
51
52
53
71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Duluth Holdings Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Duluth Holdings Inc. a Wisconsin corporation and
subsidiary and affiliates (the “Company”) as of February 3, 2019 and January 28, 2018, and the related consolidated statements
of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period
ended February 3, 2019, and the related notes and schedule (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 3,
2019 and January 28, 2018, and the results of its operations and its cash flows for each of the three years in the period ended
February 3, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2002.

Chicago, Illinois
April 19, 2019

DULUTH HOLDINGS INC.
Consolidated Balance Sheets
(Amounts in thousands)

ASSETS
Current Assets:

Cash
Accounts receivable
Other receivables
Inventory, less reserve for excess and obsolete items
of $2,420 and $1,866, respectively
Prepaid expenses & other current assets
Prepaid catalog costs
Total current assets

Property and equipment, net
Restricted cash
Available-for-sale security
Goodwill
Other assets, net
Total assets

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

Trade accounts payable
Accrued expenses and other current liabilities
Income taxes payable
Current maturities of long-term debt

Total current liabilities

Finance lease obligations under build-to-suit leases
Long-term debt, less current maturities
Long-term line of credit
Deferred tax liabilities
Deferred rent obligations, less current maturities

Total liabilities

Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 10,000 shares authorized; no shares
issued or outstanding as of February 3, 2019 and January 28, 2018
Common stock (Class A), no par value; 10,000 shares authorized;
3,364 shares issued and outstanding as of February 3, 2019 and
January 28, 2018
Common stock (Class B), no par value; 200,000 shares authorized;
29,215 shares issued and 29,210 shares outstanding as of February 3, 2019 and
29,101 shares issued and 29,098 outstanding as of January 28, 2018
Treasury stock, at cost; 5 and 3 shares as of February 3, 2019 and
January 28, 2018, respectively
Capital stock
Retained earnings

Total shareholders' equity of Duluth Holdings Inc.

Noncontrolling interest

Total shareholders' equity
Total liabilities and shareholders' equity

February 3, 2019

January 28, 2018

731 $
28
4,611

97,685
12,640
2,503
118,198
167,109
2,354
6,295
402
2,401
296,759 $

25,363 $
26,530
218
500
52,611
23,034
29,737
16,542
9,722
5,003
136,649

—

2,865
52
273

89,548
7,642
1,446
101,826
109,705
4,218
6,323
402
628
223,102

17,320
25,261
7,631
84
50,296
26,578
1,424
—
2,100
3,355
83,753

—

(92)
89,849
70,592
160,349
(239)
160,110
296,759 $

(57)
88,043
48,084
136,070
3,279
139,349
223,102

The accompanying notes are an integral part of these consolidated financial statements.

DULUTH HOLDINGS INC.
Consolidated Statements of Operations
(Amounts in thousands, except per share figures)

Net sales
Cost of goods sold (excluding depreciation and amortization)
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Other income, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to controlling interest
Basic earnings per share (Class A and Class B):
Weighted average shares of
common stock outstanding
Net income per share attributable
to controlling interest
Diluted earnings per share (Class A and Class B):
Weighted average shares and
equivalents outstanding
Net income per share attributable
to controlling interest

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

568,102 $
257,700
310,402
273,221
37,181
5,949
383
31,615
8,450
23,165
9
23,156 $

471,447 $
210,428
261,019
223,947
37,072
1,988
421
35,505
11,878
23,627
276
23,351 $

376,116
161,970
214,146
179,145
35,001
194
247
35,054
13,525
21,529
214
21,315

32,086

31,853

31,527

0.72

0.73 $

0.68

32,317

32,285

32,249

0.72

0.72 $

0.66

The accompanying notes are an integral part of these consolidated financial statements.

DULUTH HOLDINGS INC.
Consolidated Statements of Comprehensive Income
(Amounts in thousands)

Net income
Other comprehensive income:
Change in value of interest rate swap agreement
Comprehensive income
Comprehensive income attributable
to noncontrolling interest
Comprehensive income attributable
to controlling interest

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

23,165 $

23,627 $

21,529

—
23,165

—
23,627

276

27
21,556

214

23,156

23,351 $

21,342

The accompanying notes are an integral part of these consolidated financial statements.

DULUTH HOLDINGS INC.
Consolidated Statements of Shareholders’ Equity
(Amounts in thousands)

Capital stock

other

interest in

Total

Treasury Retained

comprehensive variable interest shareholders'

Accumulated Noncontrolling

stock

earnings

loss

entities

Balance at January 31, 2016
Issuance of common stock
Stock-based compensation
Capital contributions
Distributions
Net income
Change in value of
interest rate swap agreement

Balance at January 29, 2017
Issuance of common stock
Restricted stock forfeitures
Stock-based compensation
Restricted stock surrendered
for taxes
Capital contributions
Distributions
Net income

Balance at January 28, 2018

Shares Amount
32,316 $ 85,389 $

60
—
—
—
—

—
1,057
—
—
—

—
32,376 $ 86,446 $

—

110
(21)
—

—
—
1,597

— $
—
—
—
—
—

3,443 $
—
167
—
(192)
21,315

—

—
— $ 24,733 $
—
—
—

—
—
—

(3)
—
—
—
32,462 $ 88,043 $

—
—
—
—

—
—
—
23,351

(57)
—
—
—
(57) $ 48,084 $

—

—
32,462 $ 88,043 $

Cumulative effect from adoption of
ASC 606 (Footnote 3)
Balance at January 29, 2018
Issuance of common stock
135
Consolidation of TRI Holdings, LLC —
Restricted stock forfeitures
(21)
—
Stock-based compensation
Restricted stock surrendered
for taxes
Deconsolidation
of Schlecht Retail Ventures LLC —
—
Net income
32,574 $ 89,849 $

138
—
—
1,668

Balance at February 3, 2019

—
—

—

(2)

(648)

—
(57) $ 47,436 $
—
—
—
—

—
—
—
—

(27) $
—
—
—
—
—

27
— $
—
—
—

—
—
—
—
— $

—
— $
—
—
—
—

1,681 $
—
—
744
(30)
214

equity
90,486
—
1,224
744
(222)
21,529

—

27
2,609 $ 113,788
—
—
1,597

—
—
—

—
794
(400)
276

(57)
794
(400)
23,627
3,279 $ 139,349

—

(648)
3,279 $ 138,701
138
(45)
—
1,668

—
(45)
—
—

(35)

—

(35)

—
23,156

—
—
(92) $ 70,592 $

—
—
— $

(3,482)
9

(3,482)
23,165
(239) $ 160,110

The accompanying notes are an integral part of these consolidated financial statements.

DULUTH HOLDINGS INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

23,165 $

23,627 $

21,529

Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
Stock-based compensation
Deferred income taxes
Loss on disposal of property and equipment
Changes in operating assets and liabilities:

Accounts receivable
Other receivables
Inventory
Prepaid expense & other current assets
Prepaid catalog costs
Trade accounts payable
Income taxes payable
Accrued expenses and deferred rent obligations

Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchase of available-for-sale security
Principal receipts from available-for-sale security
Change in other assets
Consolidation of TRI Holdings, LLC
Deconsolidation of Schlecht Retail Ventures LLC
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from line of credit
Payments on line of credit
Proceeds from long term debt
Payments on long term debt
Distributions to holders of noncontrolling interest in
variable interest entities
Proceeds from finance lease obligations
Payments on finance lease obligations under build-to-suit leases
Distributions to shareholders
Shares withheld for tax payments on vested restricted stock
Capital contributions to variable interest entities
Other
Net cash provided by (used in) financing activities
Decrease in cash and restricted cash
Cash and restricted cash at beginning of period
Cash and restricted cash at end of period
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
Supplemental disclosure of non-cash information:
Property and equipment acquired through issuance of debt
Property and equipment acquired under build-to-suit leases
Unpaid liability to acquire property and equipment

$
$

$
$
$

12,594
1,668
7,999
162

9
(4,338)
(11,013)
(5,618)
(3,261)
10,282
(7,562)
7,008
31,095

(53,036)
—
28
(438)
217
(506)
(53,735)

130,086
(113,544)
—
(416)

—
2,281
—
—
(35)
—
270
18,642
(3,998)
7,083
3,085 $

5,759 $
10,311 $

28,315 $
9,258 $
433 $

7,330
1,597
533
2

(7)
76
(17,553)
(2,320)
419
6,363
2,406
7,395
29,868

(46,464)
(6,323)
—
(235)
—
—
(53,022)

88,898
(88,898)
800
(54)

(400)
3,949
(321)
—
(57)
794
49
4,760
(18,394)
25,477
7,083 $

1,848 $
9,002 $

— $
19,537 $
2,028 $

4,698
1,224
1,536
3

(25)
(273)
(14,446)
(1,177)
1,472
(2,962)
3,917
4,757
20,253

(28,672)
—
—
(234)
—
—
(28,906)

25,385
(25,385)
—
(4,226)

(30)
—
(19)
(192)
—
744
(20)
(3,743)
(12,396)
37,873
25,477

185
6,698

—
3,369
3,485

The accompanying notes are an integral part of these consolidated financial statements.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

Duluth Holdings Inc. (“Duluth Trading” or the “Company”), a Wisconsin corporation, is a lifestyle brand of men’s and
women’s casual wear, workwear and accessories sold exclusively through the Company’s own direct and retail channels. The
direct segment, consisting of the Company’s website and catalogs, offers products nationwide. In 2010, the Company added
retail to its omnichannel platform with the opening of its first store. Since then, Duluth Trading has expanded its retail presence,
and as of February 3, 2019, the Company operated 43 retail stores and three outlet stores. The Company’s products are
marketed under the Duluth Trading Company brand, with the majority of products being exclusively developed and sold as
Duluth Trading branded merchandise.

The Company has two classes of authorized common stock: Class A common stock and Class B common stock. The

rights of holders of Class A common stock and Class B common stock are identical, except for voting and conversion rights.
Each share of Class A common stock is entitled to ten votes per share and is convertible at any time into one share of Class B
common stock. Each share of Class B common stock is entitled to one vote per share. The Company’s Class B common stock
trades on the NASDAQ Global Select Market under the symbol “DLTH.”

Basis of Presentation

The consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles

(“U.S. GAAP”). All intercompany balances and transactions have been eliminated.

The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year. Fiscal 2018, 2017 and 2016
ended on February 3, 2019, January 28, 2018 and January 29, 2017, respectively. Fiscal 2018 was a 53-week period and Fiscal
2017 and 2016 were 52-week periods.

Seasonality of Business

The Company’s business is affected by the pattern of seasonality common to most retail apparel businesses. Historically,
the Company has recognized a significant portion of its revenue and operating profit in the fourth fiscal quarter of each year as
a result of increased sales during the holiday season.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the parent, Duluth Holdings Inc., and its
wholly-owned subsidiary, Duluth Trading Company, LLC. Effective October 3, 2016, Duluth Trading Company, LLC was
dissolved and no longer consolidated, which did not impact the Company’s consolidated financial statements. Beginning
October 29, 2018, the Company also consolidates TRI Holdings, LLC (“TRI”) as a variable interest entity. Effective December
31, 2018, Schlecht Retail Ventures LLC (“SRV”) is no longer considered a variable interest entity and is not consolidated after
that date. See Note 6 “Variable Interest Entities” for further information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Revenue Recognition

The Company recognizes revenue upon shipment of the product (for direct sales) or at the point of sale (for retail store
transactions). At the time of revenue recognition, the Company provides for estimated costs that may be incurred for product
warranties and sales returns. A liability is recognized at the time a gift card is sold, and revenue is recognized at the time the
gift card is redeemed for merchandise. See Note 3 “Revenues” for further information.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

Cost of Goods Sold and Selling, General and Administrative Expenses

The following table illustrates the primary costs classified in cost of goods sold and selling, general and administrative

expenses:

Cost of Goods Sold
(cid:120)(cid:3) Direct cost of purchased merchandise
(cid:120)(cid:3) Inventory shrinkage and inventory adjustments due to

Selling, General and Administrative Expenses

(cid:120)(cid:3) Payroll and payroll-related expenses
(cid:120)(cid:3) Third party logistics ("3PL")

obsolescence
(cid:120)(cid:3) Inbound freight

(cid:120)(cid:3) Occupancy expenses related to stores and operations at the

Company's headquarters, including utilities

(cid:120)(cid:3) Freight from the Company's distribution centers to its stores
(cid:3)

(cid:120)(cid:3) Depreciation and amortization
(cid:120)(cid:3) Advertising expenses, including television advertising,

catalog production and mailing and print advertising costs

(cid:120)(cid:3) Freight associated with shipping product to customers
(cid:120)(cid:3) Consulting and professional fees

Catalog and Advertising Expenses

The Company’s direct-response advertising consists of producing, printing and mailing catalogs, which are expensed
upon receipt by customers. The Company’s non-direct response advertising costs are expensed as they are incurred. Non-direct
response advertising costs primarily consist of billboards, web marketing programs, and radio and television advertisements.

Catalog and advertising expenses were $95.2 million, $88.6 million and $78.5 million for fiscal 2018, fiscal 2017 and

fiscal 2016, respectively.

Shipping and Processing

Shipping and processing revenue generated from customer orders has been classified as a component of net sales.
Shipping and processing expense, including handling expense, has been classified as a component of selling, general and
administrative expenses. The Company incurred shipping and processing expenses of $31.4 million, $28.1 million and $24.3
million for fiscal 2018, fiscal 2017 and fiscal 2016, respectively.

Income Taxes

The Company accounts for income taxes and related accounts using the liability method in accordance with ASC Topic

740, Income Taxes (“ASC 740”). Under ASC 740, the Company accrues income taxes payable or refundable and recognizes
deferred tax assets and liabilities based on differences between U.S. GAAP and tax bases of assets and liabilities. The Company
measures deferred tax assets and liabilities using enacted tax rates in effect for the years in which the differences are expected
to reverse, and recognizes the effect of a change in enacted rates in the period of enactment. 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.

The Company establishes assets and liabilities for uncertain tax positions taken or expected to be taken in income tax
returns, using a more-likely-than-not recognition threshold. The Company recognizes penalties and interest related to uncertain
tax positions as income tax expense. See Note 9 “Income Taxes,” of these Notes to Consolidated Financial Statements for
further discussion.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. At

various times during the year, the Company has certain cash balances deposited in financial institutions in excess of federally
insured limits. The Company has not experienced any losses in such accounts and management believes it is not exposed to any
significant credit risk.

Restricted Cash

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

The Company’s restricted cash is held in an escrow account and is used to pay some portion of the construction loans

entered into by the Company and certain of its third party landlords (the “Landlords”) in connection with some of the
Company’s retail store leases. The restricted cash is disbursed based on the escrow agreement entered into by and among the
Landlords, the Company and the escrow agent.

The following table provides a reconciliation of cash and restricted cash reported within the Consolidated Balance Sheet

that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows.

(in thousands)
Cash
Restricted Cash
Total cash and restricted cash shown in the condensed consolidated statement of cash flows

February 3, 2019

731
2,354
3,085

Significant Suppliers

The Company’s principal supplier of inventory accounted for 52%, 50% and 51% of total inventory expenditures in fiscal
2018, fiscal 2017 and fiscal 2016, respectively. The Company also had a second supplier that accounted for 15%, 18% and 21%
of total inventory expenditures in fiscal 2018, fiscal 2017 and fiscal 2016, respectively.

Inventory Valuation

Inventory, consisting of purchased product, is valued at the lower of cost and net realizable value, under the first-in, first-

out method. The significant estimates used in inventory valuation are obsolescence (including excess and slow-moving
inventory and lower of cost or market reserves) and estimates of inventory shrinkage. Both estimates have calculations that
require the Company to make assumptions and apply judgement regarding a number of factors, including market conditions,
the selling environment, historical results and current inventory trends. The Company has not made any material changes to
assumptions included in the calculations of the obsolescence and shrinkage reserves as of fiscal 2018, fiscal 2017 or fiscal
2016.

Property and Equipment

Property and equipment consist of the following:

(in thousands)
Land and land improvements
Leasehold improvements
Buildings
Vehicles
Warehouse equipment
Office equipment and furniture
Computer equipment
Software

Accumulated depreciation and amortization

Construction in progress
Property and equipment, net

February 3, 2019

January 28, 2018

4,486 $
32,765
71,469
161
13,051
36,473
5,072
24,939
188,416
(34,203)
154,213
12,896
167,109 $

3,055
20,985
33,906
177
5,850
22,161
3,573
7,540
97,247
(22,739)
74,508
35,197
109,705

The Company recorded depreciation expense of $12.6 million, $7.3 million and $4.6 million for fiscal 2018, fiscal 2017
and fiscal 2016, respectively. The Company expenses all routine repair and maintenance costs that do not extend the estimated
useful life of the asset.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

Property and equipment are carried at cost and are generally depreciated using the straight-line method over the estimated

useful lives. Leasehold improvements are depreciated over the shorter of the lease term or estimated useful life. Depreciable
lives by major classification are as follows:

Land improvements
Leasehold improvements
Buildings
Vehicles
Warehouse equipment
Office equipment and furniture
Computer equipment
Software

Build-to-Suit Lease

Years
15 - 40
3 - 15
39
5 - 10
5 - 15
3 - 10
3 - 5
3 - 7

The Company may at times be involved in the construction of stores to be leased by the Company and, depending on the

extent to which the Company is involved, the Company may be deemed the owner of the leased premises for accounting
purposes during the store construction period. For leases that the Company is deemed the owner of the property during the
construction period, upon commencement of the construction project, the Company is required to capitalize the cash and non-
cash assets contributed by the landlord for construction as property and equipment on the Company’s Consolidated Balance
Sheets. Upon the completion of the construction project, the Company performs an analysis on the lease to determine if the
Company qualifies for sale-leaseback treatment. For those qualifying leases, the finance lease obligation and the associated
property and equipment are removed and the difference is reclassified to either prepaid or deferred rent and amortized over the
lease term as an increase or decrease to rent expense. If the lease does not qualify for sale-leaseback treatment, the finance lease
obligation is amortized over the lease term based on the rent payments in the lease agreement and the associated property and
equipment are depreciated over the estimated useful life.

As of February 3, 2019 and January 28, 2018, the Company capitalized $39.1 million and $36.5 million in property and

equipment, respectively, and $1.0 million and $0.3 million in accumulated depreciation, respectively, and recorded a $23.0
million and a $26.6 million non-current liability, respectively, related to build-to-suit lease transactions in which the Company
is considered the owner for accounting purposes.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired. ASC Topic 350, Intangibles-

Goodwill and Other, requires that goodwill be tested for impairment annually, or more often if an event or circumstance
indicates that an impairment loss may have been incurred. The Company’s management uses its judgment in assessing whether
goodwill may have become impaired between annual impairment tests. Indicators such as unexpected adverse business
conditions, economic factors, competitive activities, loss of key personnel and acts by governments may signal that an asset has
become impaired.

Total goodwill is reported in the Company’s direct segment. Management performed a qualitative assessment of goodwill

as of December 31, 2018, 2017 and 2016, and determined that it was more likely than not that the fair value of the Company
was greater than its carrying amount; as such, no further evaluation of goodwill was deemed necessary. No impairment was
recognized for the years ended February 3, 2019, January 28, 2018, or January 29, 2017.

Other Assets

Other assets include loan origination fees, trade names and other non-current assets which are amortized over their
estimated useful lives ranging from three to fifteen years. Other assets also include security deposits required by certain of the
Company’s lease agreements and prepaid expenses which are not expected to be amortized within the next 12 months.
Amortization expense was $0.1 million for each fiscal 2018, fiscal 2017 and fiscal 2016. Accumulated amortization was $0.4
million and $0.3 million as of February 3, 2019 and January 28, 2018, respectively.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

Scheduled future amortization of amortizable other assets are as follows as of February 3, 2019:

Fiscal year
(in thousands)
2019
2020
2021
2022
2023
Thereafter

208
208
208
208
129
1,152
2,113

Impairment of Long-Lived Assets

The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value
of the related asset or group of assets, a loss is recognized for the difference between the fair value and the carrying value of the
asset or group of assets. Such analyses necessarily involve judgment.

For fiscal 2018, fiscal 2017 and fiscal 2016, management did not identify any events or changes in circumstances that

indicated the potential impairment of long-lived assets.

Deferred Rent Obligation

Certain of the Company’s operating lease agreements contain provisions for future rent increases, a rent free period,

and/or a period in which rental payments are reduced (abated). For each such agreement, the total amount of rental payments
due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference
between rent expense recorded and the amount paid is charged to deferred rent obligations, the current portion of which is
included in accrued other expenses in the consolidated balance sheets.

Store Pre-opening Costs

Store pre-opening costs are expensed as incurred and are included in selling, general and administrative expenses.

Stock-Based Compensation

In connection with the IPO, the Company adopted the 2015 Equity Incentive Plan of Duluth Holdings Inc. (“2015 Plan”),

which provides compensation alternatives such as stock options, shares, restricted stock, restricted stock units, deferred stock
and performance share units, using or based on the Company’s Class B common stock. At the time of adoption, the Company
reserved 1,614,631 shares of Class B common stock for the issuance of awards under the 2015 Plan. On the first day of the first
four fiscal years following the IPO, the number of shares reserved for future issuance under the 2015 Plan increased by 1.25%
of the number of Class A and Class B common stock outstanding on the last day of the immediately preceding fiscal year. On
February 4, 2019, the number of Class B common stock available for future issuance under the 2015 Plan was 2,949,658
shares.

The Company accounts for its stock-based compensation plan in accordance with ASC Topic 718, Stock Compensation,

which requires the Company to measure all share-based payments at grant date fair value and recognize the cost over the
requisite service period of the award. Restricted stock issued to board members generally vests over a period of one year.
Restricted stock issued to key employees and executives typically vests over a period of two to five years based on the terms
for each individual award. The fair value of the restricted stock is determined based on the market value of the Company’s
Class B common stock on the grant date. Restricted stock forfeitures are recognized as incurred.

For restricted stock awards granted prior to the Company’s IPO, the fair value of the Company’s Class B common stock

was calculated by an independent third party and was estimated by taking the average of the results of applying discounted cash
flow and market comparable analyses. This value was then discounted due to the lack of marketability and liquidity of the
restricted stock.

Total stock compensation expense associated with restricted stock recognized by the Company was $1.6 million, $1.6

million and $1.2 million for fiscal 2018, fiscal 2017 and fiscal 2016, respectively, and is included in selling, general and
administrative expenses on the Consolidated Statements of Operations.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

The following is a summary of the activity in the Company’s un-vested restricted stock during the years ended February

3, 2019, January 28, 2018, and January 29, 2017:

Outstanding at January 31, 2016
Granted
Vested
Outstanding at January 29, 2017
Granted
Vested
Forfeited
Outstanding at January 28, 2018
Granted
Vested
Forfeited
Outstanding at February 3, 2019

Weighted average
grant date
fair value
per share

3.15
23.41
7.52
4.34
19.54
3.04
22.31
7.60
18.46
4.19
18.07
14.29

796,353 $
59,814
(61,455)
794,712
110,878
(347,825)
(21,294)
536,471
130,179
(323,958)
(21,035)
321,657 $

At February 3, 2019, the Company had unrecognized compensation expense of $2.5 million related to the restricted stock

awards, which is expected to be recognized over a weighted average period of 2.2 years.

Treasury Stock

Treasury stock consist of shares withheld in lieu of tax payments when restricted stock vests using the treasury cost

method and is classified in the Consolidated Balance Sheets as a reduction to shareholders’ equity.

Taxes Collected from Customers

The Company presents all non-income government-assessed taxes (sales, use and value-added taxes) collected from its

customers and remitted to governmental agencies on a net basis (excluded from revenue) in its consolidated financial
statements.

Other Comprehensive Income or Loss

Other comprehensive income or loss represents the change in equity from non-shareholder or non-member transactions,
which is not included in the statements of earnings but is reported as a separate component of shareholders’ equity. For fiscal
2016, other comprehensive income or loss consists of changes in the fair value of the Company’s interest rate swap agreements.

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be

received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement
date (i.e., an exit price). The exit price is based on the amount that the holder of the asset or liability would receive or need to
pay in an actual transaction (or in a hypothetical transaction if an actual transaction does not exist) at the measurement date.
ASC 820 describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, of which the
first two are considered observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar

assets or liabilities; quoted prices in markets that not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of

the assets or liabilities.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

The carrying values of cash, accounts receivable, accounts payable and long-term obligations approximate fair value. The

carrying value of goodwill and intangible assets are tested annually, or more frequently if an event occurs that indicates an
impairment loss may have been incurred, using fair value measurements with unobservable inputs (Level 3).

The fair value of the Company’s available-for-sale security was valued based on a discounted cash flow method (Level

3), which incorporates the U.S. Treasury yield curve, credit information and an estimate of future cash flows. As of February 3,
2019, the carrying value of the Company’s available-for-sale security approximates fair value.

Cost or
Amortized
Cost

February 3, 2019

Gross
Unrealized
Gains

Gross

Unrealized

Losses

January 28, 2018

Estimated
Fair Value

(in thousands)
Level 3 security:
Corporate trust

6,295 $

— $

6,295

6,323

The following table presents the future receipts related to the Company’s available-for-sale security by contractual

maturity as of February 3, 2019. Cost and estimated fair value are equal.

(in thousands)
Within one year
After one year through five years
After five years through ten years
After ten years
Total

Reclassifications

Estimated
Fair Value

117
822
1,320
4,036
6,295

With the adoption of ASU no. 2016-08, Statement of Cash Flows (Topic 230): Restricted Cash (“ASC 230”), fiscal year
2017 and 2016 cash flows from investing activities have been reclassified. See Note 15 “Recent Accounting Pronouncements”
for further information.

(in thousands)
Net cash used in investing activities:

As previously reported
Reclassification based on adoption of ASC 230
As reclassified

3. REVENUES

January 28, 2018

January 29, 2017

(55,805) $
2,783
(53,022) $

(30,341)
1,435
(28,906)

Effective January 29, 2018, the Company adopted ASC 606 using the modified retrospective method. The comparative
information presented in the condensed consolidated financial statements is not restated and is reported under the accounting
standards in effect for those periods presented. See Note 15 “Recent Accounting Pronouncements” for a discussion of the
significant changes resulting from the adoption of ASC 606.

The Company’s revenue primarily consists of the sale of apparel, footwear and hard goods. For the Company’s direct

segment, revenues are recognized upon shipment following customer payment, which is when the customer obtains control of
the product and has the ability to direct the use of the product, including, among other options, the ability to redirect the product
to a different shipping destination. For the Company’s retail segment, revenues are recognized at the point of sale. The
Company provides the customer the right of return on the product and revenue is adjusted based on an estimate of the expected
returns based on historical rates as well as events that may cause changes to historical rates. See Note 5 “Accrued Expense and
Other Liabilities” for the Company’s product returns reserve. The Company considers the sale of products in either the direct or
retail segment as a single performance obligation. Shipping and processing revenue generated from customer orders are

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

included as a component of net sales and shipping and processing expense, including handling expense, is included as a
component of selling, general and administrative expenses. Sales tax collected from customers and remitted to taxing
authorities is excluded from revenue and is included in accrued expenses.

The Company’s contract assets primarily consist of the right of return for amounts of inventory to be returned that is
expected to be resold and is recorded in Prepaid expenses and other current assets on the Company’s consolidated balance
sheets. As of February 3, 2019, the amount related the right of return for inventory to be resold was $0.9 million. The
Company’s contract liabilities primarily consist of gift card liabilities and are recorded in accrued expenses and other current
liabilities under deferred revenue (see Note 5 “Accrued Expenses and Other Current Liabilities”) on the Company’s
consolidated balance sheets. Upon the issuance of a gift card, a liability is established for its cash value. The gift card liability is
relieved and revenues on gift cards are recorded at the time of redemption by the customer. Based on historical redemption
patterns, gift cards are generally redeemed within one year and gift card breakage is not material.

The following table presents the impact of the adoption of ASC 606 on the Company’s consolidated balance sheets as of

January 29, 2018, the first day of fiscal 2018:

(in thousands)
Inventory, net
Prepaid expenses & other current assets
Prepaid catalog costs
Total current assets
Total assets

Accrued expenses and other current liabilities
Income taxes payable
Total current liabilities
Deferred tax liabilities
Total liabilities
Total shareholders' equity
Total liabilities and shareholders' equity

January 28, 2018

Adjustments due to
ASC 606

January 29, 2018

89,548 $
7,642
1,446
101,826
223,102
25,261
7,631
50,296
2,100
83,753
139,349
223,102

(629) $
1,073
(1,365)
(921)
(921)
(45)
149
104
(377)
(273)
(648)
(921)

88,919
8,715
81
100,905
222,181

25,216
7,780
50,400
1,723
83,480
138,701
222,181

The following tables present the effects of the adoption of ASC 606 on the Company’s consolidated balance sheets as of

February 3, 2019 and the Company’s consolidated statements of operations for the year ended February 3, 2019:

(in thousands)
Inventory, net
Prepaid expenses & other current assets
Prepaid catalog costs
Total current assets
Total assets

Accrued expenses and other current liabilities
Total current liabilities
Deferred tax liabilities
Total liabilities
Total shareholders' equity
Total liabilities and shareholders' equity

February 3, 2019

As Reported

Adjustments due to
ASC 606

Balances without
Adoption of ASC 606

97,685 $
12,640
2,503
118,198
296,759
26,530
52,611
9,722
136,649
160,110
296,759

1,607 $
(52)
2,198
3,753
3,753
2,656
2,656
285
2,941
812
3,753

99,292
12,588
4,701
121,951
300,512

29,186
55,267
10,007
139,590
160,922
300,512

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

February 3, 2019

As Reported

Adjustments due to
ASC 606

Balances without
Adoption of ASC 606

(in thousands)
Net sales
Cost of goods sold (excluding depreciation and amortization)
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Other income, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to controlling interest

568,102 $
257,700
310,402
273,221
37,181
5,949
383
31,615
8,450
23,165
9
23,156 $

(2,905) $
(1,959)
(946)
(1,167)
221
-
-
221
57
164
-
164 $

565,197
255,741
309,456
272,054
37,402
5,949
383
31,836
8,507
23,329
9
23,320

4. DEBT AND LINE OF CREDIT

Debt consists of the following:

(in thousands)
SRV Mortgage Term A Note
SRV Mortgage Term B Note
TRI Senior Secured Note
TRI Note
Capital lease obligations

Less: current maturities
Long-term debt

Line of credit

Schlecht Retail Ventures LLC

February 3, 2019

January 28, 2018

— $
—
26,705
3,500
32
30,237 $
500
29,737 $

16,542 $

690
783
—
—
35
1,508
84
1,424

—

SRV entered into a mortgage note (“SRV Term A Note”) with an original balance of $0.8 million. The SRV Term A

Note was scheduled to mature in September 2017 and required monthly payments of $3,300 plus interest at 3.1%, with a final
balloon payment due in September 2017. On July 20, 2017, SRV refinanced the SRV Term A Note, which extended the
maturity date to September 2022, with a final balloon payment in September 2022, and changed the interest rate to 3.69%. The
required monthly payments of $3,300 did not change.

On July 20, 2017, SRV entered into a mortgage note (“SRV Term B Note”) with an original balance of $0.8 million.
The SRV Term B Note matures in September 2022 and requires monthly payments of $3,300 plus interest at 3.69%, with a
final balloon payment in September 2022.

The SRV Term A Note and SRV Term B Note were guaranteed by the Company’s majority shareholder and

collateralized by certain real property owned by SRV in Mt. Horeb, Wisconsin.

The Company no longer consolidates SRV effective December 31, 2018, therefore the SRV Term A Note and SRV Term
B Note have been excluded from the consolidated balance sheet as of February 3, 2019, see Note 6 “Variable Interest Entities”
for further details.

TRI Holdings, LLC

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

TRI entered into a senior secured note (“TRI Senior Secured Note”) with an original balance of $26.7 million. The TRI

Senior Secured Note is scheduled to mature on October 15, 2038 and requires installment payments with an interest rate of
4.95%. See Note 6 “Variable Interest Entities” for further information.

TRI entered into a promissory note (“TRI Note”) with an original balance of $3.5 million. The TRI Note is scheduled to

mature in November 2038 and requires annual interest payments at a rate of 3.05%, with a final balloon payment due in
November 2038.

Line of Credit

On September 29, 2017, the Company entered into a first amendment to the Amended and Restated Loan Agreement
dated as of October 7, 2016 (the “Amended and Restated Agreement”), providing for borrowing availability of up to $60.0
million from September 29, 2017 through July 31, 2019. Effective November 1, 2017, the Company entered into a second
amendment to the Amended and Restated Agreement, providing for borrowing availability of up to $80.0 million from
November 1, 2017 through December 31, 2017 and borrowing availability of up to $60.0 million from January 1, 2018 through
July 31, 2019. The Amended and Restated Agreement was scheduled to mature on July 31, 2019, and bore interest, payable
monthly, at a rate equal to the adjusted LIBOR rate, as defined in the Amended and Restated Agreement. The Amended and
Restated Agreement was secured by essentially all Company assets and required the Company to maintain compliance with
certain financial and non-financial covenants, including minimum tangible net worth and a minimum trailing twelve month
EBITDA. In addition, the Amended and Restated Agreement did not contain borrowing base limits.

Effective May 17, 2018, the Company terminated its Amended Restated Agreement and entered into a new credit
agreement (the “Credit Agreement”) which provides for borrowing availability of up to $80.0 million in revolving credit (the
“Revolver”) and borrowing availability of up to $50.0 million in a delayed draw term loan (“DDTL”), for a total credit facility
of $130.0 million. The $80.0 million revolving credit matures on May 17, 2023. The $50.0 million DDTL is available to draw
upon in differing amounts through May 17, 2020 and matures on May 17, 2023. The outstanding balance of $27.5 million
under the Amended and Restated Agreement was paid off with borrowings under the Credit Agreement. The Credit Agreement
is secured by essentially all Company assets and requires 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. Furthermore, income or losses and debt incurred by TRI or any future variable interest entity that may be
required to be consolidated are excluded from the Company’s financial covenants. At the Company’s option, the interest rate
applicable to the Revolver or DDTL will be a floating rate equal to (i) the base rate plus a margin of 25 to 100 basis points,
based upon the Company’s rent adjusted leverage ratio, or (ii) a fixed rate for a one-, two-, three- or six-month interest period
equal to LIBOR for such interest period plus a margin of 125 to 200 basis points, based upon the Company’s rent adjustment
leverage ratio (effective rate of 6.25% at February 3, 2019). In addition, outstanding balances under the DDTL require quarterly
principal payments with a final balloon payment at maturity.

As of February 3, 2019, and for the fiscal year then ended, the Company was in compliance with all financial and non-

financial covenants for all debts discussed above.

Future principal maturities of all debt, which include capital leases and exclude the Company’s line of credit, are as

follows as of February 3, 2018:

Fiscal year
(in thousands)
2019
2020
2021
2022
2023
Thereafter

500
563
629
699
774
27,072
30,237

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

(in thousands)
Salaries and benefits
Deferred revenue
Freight
Product returns
Catalog costs
Unpaid purchases of property & equipment
Accrued advertising
Other
Total accrued expenses and other current liabilities

6. VARIABLE INTEREST ENTITIES

February 3, 2019

January 28, 2018

2,328 $
10,485
4,141
2,088
503
433
389
6,163
26,530 $

5,370
7,285
4,062
1,080
839
2,028
1,011
3,586
25,261

Based upon the criteria set forth in ASC 810, Consolidation, the Company has determined that it was the primary
beneficiary of two variable interest entities (“VIE”) as the Company absorbs significant economics of the entities and has the
power to direct the activities that are considered most significant to the entities.

Until December 31, 2018, the Company leased a retail store and office buildings from SRV, a VIE whose primary
purpose and activity is to own this real property. SRV is a Wisconsin limited liability company that is owned by the majority
shareholder of the Company. Until December 31, 2018, the Company considered itself the primary beneficiary for SRV as the
Company was expected to receive a majority of SRV’s expected residual returns based on the activity of SRV. As the Company
was the primary beneficiary, it consolidated SRV through that date and the leases were eliminated in consolidation.

On December 31, 2018, the Company terminated its office building lease agreement with SRV and, as a result of this

termination, the Company no longer considers itself the primary beneficiary for SRV. As such, the Company no longer
consolidates SRV effective December 31, 2018. At the time of deconsolidation, SRV had the following assets and liabilities
which were removed from the Company’s consolidated balance sheets:

(in thousands)
Cash
Property and equipment, net
Other assets, net
Total assets

Other current liabilities
Long-term debt
Noncontrolling interest in VIE

Total liabilities and shareholders' equity

December 31, 2018

506
4,366
28
4,900

18
1,400
3,482
4,900

The Company did not receive any consideration in the deconsolidation of SRV and no gains or losses were recorded for

the year ended February 3, 2019.

On August 18, 2017, the Company entered into a lease agreement with TRI, the developer of the Company’s

headquarters in Mt. Horeb, Wisconsin. The Company took occupancy on October 15, 2018. In conjunction with the lease, the
Company invested $6.3 million in a trust (see Note 2 “Summary of Significant Accounting Policies” under the header Fair
Value Measurements) that loaned funds to TRI for the construction of the Company’s headquarters. TRI is a Wisconsin limited
liability company whose primary purpose and activity is to own this real property. The Company considers itself the primary
beneficiary for TRI as the Company has both the power to direct the activities that most significantly impact the entity’s
economic performance and is expected to receive benefits that are significant to TRI. As the Company is the primary
beneficiary, it consolidates TRI and the lease is eliminated in consolidation. The Company does not consolidate the trust as the
Company is not the primary beneficiary.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

The consolidated balance sheets include the following amounts as a result of the consolidated VIEs:

(in thousands)
Cash
Other receivables
Property and equipment, net
Other assets, net
Total assets

Other current liabilities
Long-term debt
Noncontrolling interest in VIE

Total liabilities and shareholders' equity

February 3, 2019

January 28, 2018

434 $
—
28,146
1,454
30,034 $

68 $

30,205
(239)
30,034 $

655
10
4,114
53
4,832

160
1,393
3,279
4,832

The real property owned by SRV was collateral for SRV’s 2018 Notes (see Note 4 “Debt and Line of Credit”).

The Company does not consolidate Schlecht Port Washington LLC (“SPW”) because the Company is not the primary

beneficiary.

7. EARNINGS PER SHARE

Earnings per share is computed under the provisions of ASC 260, Earnings Per Share. Basic earnings per share is based

on the weighted average number of common shares outstanding for the period. Diluted earnings per share is based on the
weighted average number of common shares plus the effect of dilutive potential common shares outstanding during the period
using the treasury stock method. Dilutive potential common shares include outstanding restricted stock. The reconciliation of
the numerator and denominator of the basic and diluted earnings per share calculation is as follows:

(in thousands, except per share data)
Numerator - net income attributable to controlling interest
Denominator - weighted average shares (Class A and Class B)

Basic
Dilutive shares
Diluted

Earnings per share (Class A and Class B)

Basic
Diluted

8. SEGMENT REPORTING

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

23,156 $

23,351

21,315

32,086
231
32,317

31,853
432
32,285

$
$

0.72 $
0.72 $

0.73 $
0.72 $

31,527
722
32,249

0.68
0.66

The Company has two operating segments, which are also its reportable segments: direct and retail. The direct segment
includes revenues from the Company’s website and catalogs. The retail segment includes revenues from the Company’s retail
and outlet stores. These two operating segments are components of the Company for which separate financial information is
available and for which operating results are evaluated on a regular basis by the chief operating decision maker in deciding how
to allocate resources and in assessing performance of the segments.

Income tax expense, and corporate expenses, which include but are not limited to human resources, legal, finance,
information technology, design and other corporate related expenses, are included in the Company’s direct segment. Interest
expense, depreciation and amortization, and property and equipment expenditures, are recognized in each respective segment.
Advertising expenses are generally included in the Company’s direct segment, except for specific store advertising, which is
included in the Company’s retail segment.

Net sales by product is not presented because providing the information is impracticable. Net sales outside of the United

States were insignificant. Variable allocations of assets are not made for segment reporting. The Company does not have any
assets outside of the United States.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

Segment information is presented in the following tables:

(in thousands)
Net sales
Direct
Retail

Total net sales
Operating income
Direct
Retail

Total operating income

Interest expense
Other income, net
Income before income taxes

Net sales by business is presented in the following table:

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

350,638 $
217,464
568,102 $

(381) $

37,562
37,181
5,949
383
31,615 $

330,940 $
140,507
471,447 $

13,247 $
23,825
37,072
1,988
421
35,505 $

309,674
66,442
376,116

24,458
10,543
35,001
194
247
35,054

(in thousands)
Net sales
Men's
Women's
Hard goods/other
Total net sales

Segment total assets

(in thousands)
Direct
Retail
Total assets at period end

Segment depreciation and amortization

(in thousands)
Direct
Retail
Total depreciation and amortization

Segment capital expenditures

(in thousands)
Direct
Retail
Total capital expenditures

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

395,536 $
141,244
31,322
568,102 $

333,536 $
110,343
27,568

471,447 $

273,017
80,762
22,337
376,116

February 3, 2019

January 28, 2018

182,883 $
113,876
296,759 $

133,866
89,236
223,102

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

4,560 $
8,034
12,594 $

2,855 $
4,475
7,330 $

2,763
1,935
4,698

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

20,522 $
32,514
53,036 $

10,813 $
35,651
46,464 $

13,307
15,365
28,672

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

9. INCOME TAXES

The components of income tax expense were as follows:

(in thousands)
Current:
Federal
State

Deferred:
Federal
State

Total income tax expense

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

(589) $
1,040
451

6,971
1,028
7,999
8,450 $

9,118 $
2,227
11,345

658
(125)
533
11,878 $

10,009
1,980
11,989

1,496
40
1,536
13,525

In December 2017, the United Sates enacted new federal comprehensive tax legislation commonly referred to as the Tax

Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revised the U.S. corporate income tax regime by, among other
things, lowering the corporate tax rate from 35% to 21% effective January 1, 2018 (the “Effective Date”). When a U.S. federal
tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year
of enactment. As a result of the Tax Act, the Company calculated a U.S. federal statutory corporate income tax rate of 33.9%
for the fiscal year 2017. The U.S. federal statutory corporate income tax rate of 33.9% was the weighted daily average rate
between the pre-enactment U.S. federal statutory tax rate of 35% applicable to the Company’s current fiscal year prior to the
Effective Date and the post-enactment U.S. federal statutory tax rate of 21% applicable from January 1 to January 28 of 2018.
The U.S. federal statutory rate is 21% for fiscal years beginning after January 28, 2018. As a result of the Tax Act in fiscal
2017, the Company recorded a net benefit of $1.5 million from remeasuring its deferred tax assets and liabilities for the year
ended January 28, 2018.

The reconciliation of income tax expense to the amount computed at the federal statutory rate was as follows:

February 3, 2019

Fiscal Year Ended
January 28, 2018

January 29, 2017

(in thousands)
Federal taxes at statutory rate
Statutory rate change
State and local income taxes, net of federal benefit
Other
Total income tax expense

$ 6,637

— — %
5.3 %
0.4 %

21.0 % $ 11,939
(1,510)
1,410
39
26.7 % $ 11,878

1,679
134
$ 8,450

33.9 % $ 12,194
(4.3) %
4.0 %
0.1 %

1,315
16
33.7 % $ 13,525

35.0 %
— — %
3.8 %
0.1 %
38.9 %

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

Deferred income taxes reflect the net tax effects of temporary differences between U.S. GAAP and tax bases of assets

and liabilities. Significant components of deferred tax assets and liabilities were as follows:

(in thousands)
Deferred tax assets:
Returns allowance
Uniform capitalization
Inventory
Deferred rent
Accruals
Stock-based compensation
Advance payments
Capital lease liability
Net operating loss carryover
Federal credit carryover
Total deferred tax assets

Deferred tax liabilities:

Property and equipment
Prepaid expenses
Goodwill and intangibles
Total deferred tax liabilities
Net deferred tax liabilities

Uncertain Tax Positions

February 3, 2019

January 28, 2018

543 $

1,020
661
1,380
6,337
343
494
81
325
17
11,201

19,739
1,120
64
20,923
9,722 $

281
723
485
935
7,902
158
386
—
—
—
10,870

12,174
734
62
12,970
2,100

As of February 3, 2019 and January 28, 2018, there were no material unrecognized tax benefits. The Company does not

anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months. Any
interest and penalties related to uncertain tax positions are recorded in income tax expense. There were no amounts recorded as
tax expense for interest or penalties for the years ended February 3, 2019, January 28, 2018 and January 29, 2017.

The Company files income tax returns in the United States federal jurisdiction and in various state jurisdictions. Federal
tax returns for tax years beginning January 1, 2015, and state tax returns for tax years beginning January 1, 2014, are open for
examination.

10. LEASES

The Company is party to non-cancellable operating leases. Store leases generally have initial lease terms ranging from

five to fifteen years with renewal options and rent escalation provisions.

The Company leases retail space in Port Washington, Wisconsin, from SPW, which is owned by the majority shareholder

of the Company. The lease expires in December 2023 and is accounted for as an operating lease. The Company has the option
to renew the lease for one additional five-year period under substantially the same terms. The lease provides for base monthly
payments of $10,600 beginning in October 2013 and effective January 2015, monthly payments increase by 2% annually. As of
February 3, 2019, the base monthly payment was $11,700. Rental expense was $0.1 million for fiscal 2018, fiscal 2017 and
fiscal 2016.

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

Future minimum lease payments under the non-cancellable operating leases are as follows as of February 3, 2019:

Fiscal year
(in thousands)
2019
2020
2021
2022
2023
Thereafter
Total future minimum lease payments

Operating Leases

Related
party

Other

Total

147 $
144
147
149
136
—
723 $

15,598 $
16,013
15,327
15,444
15,648
112,098
190,128 $

15,745
16,157
15,474
15,593
15,784
112,098
190,851

Total rent expense under non-cancellable operating leases was $8.4 million, $5.5 million and $3.5 million for fiscal 2018,

fiscal 2017 and fiscal 2016, respectively.

11. RELATED PARTY TRANSACTIONS

The Company leases certain real property from an entity owned by the majority shareholder. See Note 10 “Leases.” As of

February 3, 2019, the Company also recognizes a $0.3 million receivable also due from an entity owned by the majority
shareholder.

12. RETIREMENT PLAN

The Company has a contributory 401(k) profit sharing plan (the “Plan”) which covers all employees who have attained

age 21 and who have met minimum service requirements. The Company makes quarterly non-discretionary “safe harbor”
matching contributions to the Plan equal to 100% of the basic contribution made by each participant on the first 3% of his or
her compensation plus 50% of the basic contribution made by each participant on the next 2% of his or her compensation.

The Company is also permitted to make discretionary profit sharing contributions to the Plan. There were no profit

sharing contributions for the plan year ended December 31, 2018, 2017 and 2016.

The Company’s total expenses under the Plan were $1.2 million, $0.8 million and $0.6 million for fiscal 2018, fiscal

2017 and fiscal 2016, respectively.

13. COMMITMENTS AND CONTINGENCIES

From time to time, the Company becomes involved in lawsuits and other claims arising from its ordinary course of

business. Because of the uncertainties related to the incurrence, amount and range of loss on any pending litigation or claim,
management is currently unable to predict the ultimate outcome of any litigation or claim, determine whether a liability has
been incurred or make an estimate of the reasonably possible liability that could result from an unfavorable outcome.
Management believes, after considering a number of factors and the nature of any outstanding litigation or claims, that the
outcome will not have a material effect upon the Company’s results of operations, financial condition or cash flows. However,
because of the unpredictable nature of these matters, the Company cannot provide any assurances regarding the outcome of any
litigation or claim to which it is a party or the impact on it of an adverse ruling in such matters.

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

(in thousands, except earnings per share)
Net sales
Gross profit
Operating (loss) income

Net (loss) income attributable to
controlling interest

Basic (loss) earnings per share
attributable to controlling interest
(Class A and Class B)

Diluted (loss) earnings per share
attributable to controlling interest
(Class A and Class B)

(in thousands, except earnings per share)
Net sales
Gross profit
Operating income (loss)

Net income (loss) attributable to
controlling interest

Basic earnings (loss) per share
attributable to controlling interest
(Class A and Class B)

Diluted earnings (loss) per share
attributable to controlling interest
(Class A and Class B)

First
Quarter

% of Net
Sales

Second
Quarter

% of Net
Sales

Third
Quarter

% of Net
Sales

Fourth
Quarter

% of Net
Sales

Fiscal 2018

100,207
55,940
(257)

100.0% $
55.8%
-0.3%

110,653
62,240
9,896

100.0% $
56.2%
8.9%

106,701
60,971
(2,563)

100.0% $
57.1%
-2.4%

250,541
131,251
30,105

100.0%
52.4%
12.0%

(691)

-0.7%

6,377

5.8%

(3,150)

-3.0%

20,620

8.2%

(0.02)

0.20

(0.10)

0.64

(0.02)

0.20

(0.10)

0.64

First
Quarter

% of Net
Sales

Second
Quarter

% of Net
Sales

Third
Quarter

% of Net
Sales

Fourth
Quarter

% of Net
Sales

Fiscal 2017

83,687
48,643
749

100.0% $
58.1%
0.9%

86,226
48,923
7,389

100.0% $
56.7%
8.6%

83,729
47,427
(612)

100.0% $
56.6%
-0.7%

217,805
116,026
29,546

100.0%
53.3%
13.6%

355

0.4%

4,284

5.0%

(816)

-1.0%

19,528

9.0%

0.01

0.13

(0.03)

0.61

0.13

(0.03)

0.60

Subsequent to the issuance of the October 28, 2018 interim financial statements, the Company identified an error relating

to the implementation of the new order management system that overstated inventory and gross profit within the October 28,
2018 unaudited Condensed Consolidated Balance Sheets and unaudited Condensed Consolidated Statements of Operations,
respectively. The error was corrected during the fourth quarter of 2018. The Company has assessed the error and determined it
is immaterial to all interim and year-end filings during fiscal 2018.

Additionally, the Company concluded during the fourth quarter of 2018 that it was the primary beneficiary of TRI when

the Company took occupancy of the headquarters on October 15, 2018. Therefore, the VIE was consolidated in accordance
with ASC 810, Consolidation, as of year-end. The Company assessed the impact of consolidating the VIE within the October
28, 2018 unaudited Condensed Consolidated Balance Sheets and determined it is immaterial to the interim financial statements.

15. RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Revenue from Contracts with Customers

On January 29, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from
Contracts with Customers (Topic 606) (“ASC 606”), which supersedes the revenue recognition requirements in ASC Topic
605, Revenue Recognition. ASC 606 requires revenue recognition to depict the transfer of goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC
606 also requires disclosure of the nature, timing and uncertainty of revenue and cash flows arising from contracts with
customers. The Company adopted ASC 606 utilizing the modified retrospective approach, with the cumulative effect of
initially applying the new standard recognized in retained earnings. As such, the comparative prior period information has not
been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of ASC 606
69

DULUTH HOLDINGS INC.
Notes to Consolidated Financial Statements

had the following effect beginning with the Company’s January 29, 2018 financial statements: (1) revenues on direct sales are
recognized upon shipment, which is when the customer obtains control of the product and reflects the consideration the
Company expects to be entitled to in exchange for the product; (2) catalog costs are expensed upon receipt by customers; and
(3) the estimated cost of inventory associated with sales returns reserve is presented within prepaid expense and other current
assets rather than netted in product returns reserve within accrued expenses and other current liabilities on the condensed
consolidated balance sheets. The adoption of ASC 606 did not have a material impact on the Company’s condensed
consolidated financial statements.

Statement of Cash Flows

On January 29, 2018, the Company adopted ASU No. 2016-08, Statement of Cash Flows (Topic 230): Restricted Cash

(“ASC 230”), which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in
total cash and cash equivalents on the statement of cash flows. As a result of the adoption of ASC 230, the Company no longer
discloses changes in restricted cash on the statement of cash flows and discloses a reconciliation to the total cash and restricted
cash balances on the consolidated balance sheets.

Financial Instruments

On January 29, 2018, the Company adopted ASU No. 2016-01, Financial Instruments (Subtopic 825-10) (“ASC 825-
10”), which amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments.
The most significant impact relates to the accounting for equity instruments. The adoption of ASC 825-10 did not have a
material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Leases

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”),

which requires lessees to recognize most leases on the balance sheets (right-of-use asset and lease liability) but recognize
expenses on the income statements in a manner that is similar to the current lease standard. The provisions of ASU 2016-02 are
effective for public entities with fiscal years beginning after December 15, 2018, and interim periods within those years, with
early adoption permitted. The Company will adopt ASU 2016-02 on February 4, 2019, the first day of the Company’s first
quarter for the fiscal year ending February 2, 2020, the Company’s fiscal year 2019. In July 2018, the FASB issued ASU 2018-
11, Leases (Topic 842): Targeted Improvements. Prior to ASU 2018-11, a modified retrospective transition was required for
financing or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the
financial statements. ASU 2018-11 allows entities an additional transition method to the existing requirements whereby an
entity could adopt ASU 2016-02 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in
the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company is currently
evaluating the adoption methods and has not decided on an adoption method. The Company has identified that new systems,
processes and controls are required to adopt ASU 2016-02 and is in the process of implementing a new lease management
system to assist in the application of the new standard. The Company is currently evaluating the full effect that adoption of
ASU 2016-02 will have on its financial condition, results of operations and disclosures. The Company conducts its retail
operations through leased stores and therefore, upon adoption, the Company expects to have an increase in assets and liabilities
on its consolidated financial statements, due to recording of right-to-use assets and the corresponding lease liabilities, which is
expected to be material.

16. SUBSEQUENT EVENTS

Management of the Company evaluated its February 3, 2019 consolidated financial statements for subsequent events

through April 19, 2019, the date the financial statements were available to be issued. Management is not aware of any
subsequent events which would require recognition or additional disclosure in the financial statements.

DULUTH HOLDINGS INC.

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended February 3, 2019, January 28, 2018 and January 29, 2017
(Amounts in thousands)

Beginning
Balance

Charged to
Cost and
Expenses

Charged to
Other
Accounts

Deductions

Ending
Balance

Inventory reserve

Year ended February 3, 2019
Year ended January 28, 2018
Year ended January 29, 2017

Product returns reserve

Year ended February 3, 2019
Year ended January 28, 2018
Year ended January 29, 2017

1,866 $
1,242
1,404

1,080 $
1,088
1,244

554 $
624
(162)

1,008 $
(8)
(156)

— $
—
—

2,420
1,866
1,242

2,088
1,080
1,088

See accompanying Report of Independent Registered Public Accounting Firm.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Section 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires management

of an issuer subject to the Exchange Act to evaluate, with the participation of the issuer’s principal executive and principal
financial officers, or persons performing similar functions, the effectiveness of the issuer’s disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act), as of the end of each fiscal quarter. The Company carried out an
evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures at the
reasonable assurance level pursuant to Rule 13a-15 of the Exchange Act. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that because of the material weakness in our internal controls over financial reporting
described below, our disclosure controls and procedures were not effective as of February 3, 2019.

Management performed additional analysis and other post-closing procedures as of February 3, 2019 to ensure the

consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”).

Management has concluded that, notwithstanding the material weakness described below, the Company’s consolidated
financial statements in this Form 10-K fairly present, in all material respects, our financial position, results of operations and
cash flows as of the date, and for the periods presented, in conformity with U.S. GAAP.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined

in Rules 13a-15(f) under the Exchange Act). Management assessed the effectiveness of its internal control over financial
reporting as of February 3, 2019. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in the Internal Control-Integrated Framework (2013), or the
COSO Report.

As a result of this assessment, management concluded that, as of the end of the period covered in this report, a material

weakness existed in our internal control over financial reporting. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected on a timely basis.

We determined that due to the lack of sufficient resources throughout the year, we did not design and implement effective

internal control activities to timely detect and resolve issues resulting from converting to a new order management system, nor
did we consistently execute certain account reconciliations and analyses timely during fiscal 2018.

Management’s Plan for Remediation of the Material Weakness

Management is committed to the planning and implementation of remediation efforts to address the material
weakness, as well as to foster continuous improvement in the Company’s internal controls. In response to the material
weakness described above, with the oversight of the Audit Committee of our Board of Directors, we have undertaken, and will
continue to undertake, steps to improve our internal control over financial reporting to address and remediate the material
weakness. Our primary efforts include to (i) evaluate resources throughout the organization to determine where current
resources should be reassigned and where additional resources are needed to consistently and timely execute internal control
activities, and (ii) design and implement additional application balancing control procedures to further automate and enhance
the reconciliation process. Management believes these measures, when fully implemented and operational, will remediate the
control deficiency we have identified and strengthen our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under

the Exchange Act) that occurred during our fiscal fourth quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PART III

Information required by this Item concerning our directors, audit committee, and audit committee financial experts, code
of ethics and compliance with Section 16(a) of the Exchange Act is incorporated by reference to information under the captions
“Proposal One: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy
statement for our 2019 annual meeting of shareholders to be held on May 23, 2019 (the "Proxy Statement"). It is anticipated
that our Proxy Statement will be filed with the Securities and Exchange Commission on or about April 19, 2019.

We have adopted a code of business conduct and ethics that applies to our directors, officers and employees, including

our principal executive officer, principal financial officer and principal accounting officer. We have posted the code of business
conduct and ethics on our website at http://ir.duluthtrading.com under the tab “Corporate Governance—Documents &
Charters—Code of Business Conduct and Ethics.” We intend to satisfy our disclosure requirements under Item 5.05 of Form 8-
K regarding amendments to, or waiver of, any provisions of our code of business conduct and ethics that applies to our
principal executive officer, principal financial officer and principal accounting officer and our directors by posting such
information to our website.

Our code of business conduct and ethics is available in print for any shareholder who requests it by writing to: Secretary,
Duluth Holdings Inc., 201 East Front Street, Mount Horeb, Wisconsin, 53508. We are not including the information available
on or through our website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

Pursuant to General Instruction G(3), certain information with respect to our executive officers is set forth under the

caption “Executive Officers of Duluth Holdings Inc.” as of April 18, 2019 in this Annual Report on Form 10-K.

ITEM 11.

EXECUTIVE COMPENSATION

Information required by this Item is incorporated by reference to the sections of the Proxy Statement entitled “Executive

Compensation,” “Director Compensation,” and “Compensation Committee Interlocks and Insider Participation.”

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS

Information required by this Item is incorporated by reference to the sections of the Proxy Statement entitled “Security

Ownership of Certain Beneficial Owners.”

Equity Compensation Plan Information

Plan category
Equity compensation plans approved by security
Equity compensation plans not approved
by security holders(2)

Total

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

— $

—
— $

—

—
—

Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in first column)(1)
3,987,376

—
3,987,376

_____________________________
(1) 2,542,472 shares are available under the Company’s 2015 Equity Incentive Plan and 1,444,904 shares are available under the Company’s Employee Stock
Purchase Plan.

(2) All of our existing equity compensation plans have been approved by shareholders.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information required by this Item is incorporated by reference to the sections of the Proxy Statement entitled “Certain

Relationships and Related Party Transactions” and “Proposal One: Election of Directors.”

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this Item is incorporated by reference to the section of the Proxy Statement entitled “Audit

Committee Report.”

ITEM 15.

EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE

Financial Statements and Financial Statement Schedule

PART IV

See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K. Schedule II is

included in Part II, Item 8, all other financial statement schedules have been omitted because they are not required or are not
applicable or because the information required in those schedules either is not material or is included in the consolidated
financial statements or the accompanying notes.

Exhibits

The exhibits listed in the accompanying index to exhibits are filed or incorporated as part of this Annual Report on Form

10-K.

ITEM 16.

FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly

caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Signatures

DULUTH HOLDINGS INC.

By:

/s/ Stephanie L. Pugliese
Stephanie L. Pugliese
President and Chief Executive Officer

DATE: April 19, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following

persons on behalf of the registrant and in the capacities indicated and on the dates indicated.

Name

Title

/s/ Stephanie L. Pugliese
Stephanie L. Pugliese

President and Chief Executive Officer
and a Director
(Principal Executive Officer)

/s/ David Loretta
David Loretta

Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

Date

April 19, 2019

Directors: Stephen L. Schlecht, E. David Coolidge III, Francesca M. Edwardson, Thomas G. Folliard, David C. Finch, Brenda
I. Morris and Scott K. Williams.

By:

/s/ Stephanie L. Pugliese
Stephanie L. Pugliese
Attorney-In-Fact*

April 19, 2019

*Pursuant to authority granted by powers of attorney, copies of which are filed herewith.

Exhibit No.
3.1

3.2

10.1+

10.2+

10.3+

10.4+

10.5+

10.6+

10.7+

10.8+

10.9+

10.10+

10.11+

10.12+

10.13

10.14

10.15

EXHIBIT INDEX

Amended and Restated Articles of Incorporation of Duluth Holdings Inc., incorporated by reference to
Exhibit 3.1 of Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-1
(File No. 333-207300), filed November 9, 2015.
Amended and Restated Bylaws of Duluth Holdings Inc., incorporated by reference to Exhibit 3.2 of the
Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-
207300), filed November 9, 2015.
Employment Agreement between Duluth Holdings Inc. and Stephen L. Schlecht, incorporated by
reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 (File No. 333-207300),
filed October 6, 2015.
Employment Agreement between Duluth Holdings Inc. and Stephanie Pugliese, incorporated by
reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-1 (File No. 333-207300),
filed October 6, 2015.
Employment Agreement between Duluth Holdings Inc. and Al Dittrich, incorporated by reference to
Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No. 333-207300), filed
October 6, 2015.
Restricted Stock Agreement between Duluth Holdings Inc. and Stephanie Pugliese, dated April 30,
2012, incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1
(File No. 333-207300), filed October 6, 2015.
Restricted Stock Agreement between Duluth Holdings Inc. and Stephanie Pugliese, dated April 1,
2014, incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1
(File No. 333-207300), filed October 6, 2015.
Restricted Stock Agreement between Duluth Holdings Inc. and Stephanie Pugliese, dated February 2,
2015, incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1
(File No. 333-207300), filed October 6, 2015.
Restricted Stock Agreement between Duluth Holdings Inc. and Al Dittrich, dated February 2, 2015,
incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 (File
No. 333-207300), filed October 6, 2015.
Restrictive Covenant Agreement between Duluth Holdings Inc. and Stephanie Pugliese, incorporated
by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 (File No. 333-
207300), filed October 6, 2015.
Restrictive Covenant Agreement between Duluth Holdings Inc. and Al Dittrich, incorporated by
reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-1 (File No. 333-
207300), filed October 6, 2015.
Summary of Outside Director Compensation Program.*

2015 Equity Incentive Plan of Duluth Holdings Inc., incorporated by reference to Exhibit 10.7 of the
Company’s Quarterly Report on Form 10-Q, filed December 18, 2015.
Form of Restricted Stock Agreement for non-employee directors under the 2015 Equity Incentive Plan,
incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 (File
No. 333-207300), filed October 6, 2015.
Lease between Schlecht Retail Ventures LLC and Duluth Holdings Inc., dated September 12, 2014
(100 First Street, Mt. Horeb, Wisconsin), incorporated by reference to Exhibit 10.18 of the Company’s
Registration Statement on Form S-1 (File No. 333-207300), filed October 6, 2015.
Commercial Lease between Schlecht Retail Ventures LLC and Duluth Holdings Inc., dated February
14, 2010 (100 West Main Street, Mt. Horeb, Wisconsin), incorporated by reference to Exhibit 10.19 of
the Company’s Registration Statement on Form S-1 (File No. 333-207300), filed October 6, 2015.
Retail Space Lease between LDC-728 Milwaukee, LLC and Duluth Holdings Inc., dated January 23,
2012 (108 North Franklin Street, Port Washington, Wisconsin), incorporated by reference to Exhibit
10.20 of the Company’s Registration Statement on Form S-1 (File No. 333-207300), filed October 6,
2015.

10.16

10.17

10.18

10.19+

10.20+

10.21

10.22

10.23

10.24+

10.25+

10.26

10.27

10.28

10.29

10.30+

23.1
24.1
31.1

31.2

First Amendment to Retail Lease between LDC-728 Milwaukee, LLC and Duluth Holdings Inc., dated
January 23, 2012 (108 North Franklin Street, Port Washington, Wisconsin), incorporated by reference
to Exhibit 10.21 of the Company’s Registration Statement on Form S-1 (File No. 333-207300), filed
October 6, 2015.
Second Amendment to Retail Lease between Schlecht Port Washington LLC and Duluth Holdings Inc.,
dated January 23, 2012 (108 North Franklin Street, Port Washington, Wisconsin), incorporated by
reference to Exhibit 10.22 of the Company’s Registration Statement on Form S-1 (File No. 333-
207300), filed October 6, 2015.
Form of S Corporation Termination, Tax Allocation and Indemnification Agreement among Duluth
Holdings Inc. and shareholders of Duluth Holdings Inc., incorporated by reference to Exhibit 10.23 of
Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-
207300), filed October 13, 2015.
Annual Incentive Plan, As Amended February 21, 2018.*

Form of Restricted Stock Agreement for executives under the 2015 Equity Incentive Plan, incorporated
by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q dated May 1, 2016.
Second Amended and Restated Loan Agreement, dated October 7, 2016, among BMO Harris Bank
N.A. (f/k/a Harris N.A.) and Duluth Holdings Inc., incorporated by reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K dated October 7, 2016.
Fifth Amended and Restated Revolving Note, dated October 7, 2016, among BMO Harris Bank N.A.
(f/k/a Harris N.A.) and Duluth Holdings Inc. incorporated by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K dated October 7, 2016.
Second Amended and Restated Security Agreement dated October 7, 2016, among BMO Harris Bank
N.A. (f/k/a Harris N.A.) and Duluth Holdings Inc. incorporated by reference to Exhibit 10.3 of the
Company's Current Report on Form 8-K dated October 7, 2016.
Offer Letter Dated July 14, 2017 by and between Dave Loretta and Duluth Holdings Inc., incorporated
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated July 24, 2017.
Form of Restrictive Covenant Agreement, incorporated by reference to Exhibit 10.2 of the Company’s
Current Report on Form 8-K dated July 24, 2017.
Amended and Restated Loan Agreement, dated October 7, 2016, among BMO Harris Bank N.A. (f/k/a
Harris N.A.) and Duluth Holdings Inc., as amended by the First Amendment to the Amended and
Restated Loan Agreement dated September 29, 2017, incorporated by reference to Exhibit 10.1 to the
Company’s current report on Form 8-K dated November 1, 2017.
Amended and Restated Loan Agreement, dated October 7, 2016, among BMO Harris Bank N.A. (f/k/a
Harris N.A.) and Duluth Holdings Inc., as amended by the Second Amendment to the Amended and
Restated Loan Agreement dated November 1, 2017, incorporated by reference to Exhibit 10.2 to the
Company’s current report on Form 8-K dated November 1, 2017.
Credit Agreement, dated as of May 17, 2018, among Duluth Holdings Inc., as the borrower, BMO
Harris Bank N.A., as Administrative Agent, Swingline Lender and L/C Issuer, the Other Lenders Party
Thereto, and BMO Capital Markets Corp., as Sole Lead Arranger and Sole Book Runner, incorporated
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated May 17, 2018.
General Security Agreement, dated of May 17, 2018, by and between Duluth Holdings Inc. and BMO
Harris Bank N.A., incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form
8-K dated May 17, 2018.
Form of First Amendment dated October 15, 2018 to Employment Agreement between Duluth
Holdings Inc. and Al Dittrich dated August 5, 2015, incorporated by reference to Exhibit 10.1 of the
Company’s Quarterly Report on Form 10-Q filed December 7, 2018.
Consent of Independent Registered Public Accounting Firm.*
Power of Attorney*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities and Exchange Act, as amended.*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
and Exchange Act of 1934, as amended.*

32.1

32.2

101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
XBRL Instance Document**
XBRL Taxonomy Extension Schema Document**
XBRL Taxonomy Extension Calculation Linkbase Document**
XBRL Taxonomy Extension Definition Document**
XBRL Taxonomy Extension Label Linkbase Document**
XBRL Taxonomy Extension Presentation Linkbase Document**

______________________________
+ Indicates a management contract or compensation plan or arrangement
* Filed herewith
** In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be “furnished”

and not “filed.”

BUILDING THE

EXECUTIVE MANAGEMENT

CORPORATE INFORMATION

FOR

LONG-TERM VALUE CREATION

2018 was a year of exciting and strategically important milestones at Duluth Trading Company. Major initiatives

were completed to support the company’s long-term business plans. These successes will support the competitive

growth of the Duluth Trading brand across its omnichannel platform for years to come. New Order Management

and E-commerce technology delivered an improved digital shopping experience. New customer services such

as E-gift cards and “Buy Online, Pick Up in Store” offered greater customer shopping flexibility and convenience.

These plus distribution center upgrades and strong new product offerings succeeded in driving sales and

engagement, with greater efficiency than ever, and positioned Duluth Trading for the future.

Stephen L. Schlecht
Executive Chairman of the Board and Founder

Stephanie L. Pugliese
President and Chief Executive Officer

David Loretta
Senior Vice President and Chief Financial Officer

Allen L. Dittrich
Senior Vice President and Chief Operating Officer

MAY 2018

A (cid:31)(cid:31)(cid:31)U (cid:31) U(cid:31)(cid:31)(cid:31)S(cid:31)(cid:31)(cid:31)T 2018

OCTOBER 2018

BOARD OF DIRECTORS

OMS

ORDER

MANAGEMENT

SYSTEM

• SHOP WHERE YOU WANT

• OMNICHANNEL RETURNS

• OPERATIONAL EFFICIENCY

• ELECTRONIC GIFT CARDS

NEW ORDER

MANAGEMENT SYSTEM

Better customer visibility across channels,

plus tools to manage ship-from-store, buy

online, pick-up in stores, and omnichannel

returns. Enhanced operational efficiency

and new sales opportunities.

NEW E-COMMERCE PLATFORM

State-of-the art new e-commerce platform

for a better mobile, tablet and desktop

shopping experience, more flexible content

management and personalized communica-

tion. New website design, better navigation,

improved search and more secure shopping.

BUY ONLINE,

PICK UP IN STORE

Greater

flexibility,

greater

choice

customer purchase options. Online orders

placed by 4 pm ready for pickup the next

morning tested and implemented in select

stores. Rollout to be complete mid 2019.

SEPTEMBER 2018

NOVEMBER 2018

BELLEVILLE DISTRIBUTION CENTER UPGRADES

New multi-level picking mezzanine delivers totes via conveyor to pick-

ing zones. Increased outbound order packing efficiency, increased

capacity, fewer peak hires required.

NEW HEADQUARTERS FACILITY

New four-story 108,000-square-foot corporate headquarters building

in Mount Horeb, Wisconsin. A spacious canteen with wooden tables,

lounge seating and a fourth floor outdoor deck.

Stephen L. Schlecht
Executive Chairman of the Board

Stephanie L. Pugliese
President and Chief Executive Officer

E. David Coolidge III
Vice Chairman
William Blair & Company, L.L.C.

Francesca M. Edwardson
Former Chief Executive Officer
American Red Cross of Chicago and
Northern Illinois

David C. Finch
President
Finch Grocery Company, LLC

Thomas G. Folliard
President
Corporate Development Resources, Inc.

Brenda I. Morris
Chief Financial Officer
Apex Parks Group

Scott K. Williams
Chief Executive Officer and Director
Batteries Plus Bulbs

Corporate Offices
Duluth Trading Company
201 East Front Street
P.O. Box 159
Mount Horeb, WI 53572
Tel: 608-424-1544
Web: duluthtrading.com

Independent Auditors
Grant Thornton LLP

Registrar and Transfer Agent
Computershare
P.O. Box 505000
Louisville, Kentucky 40233-5000
www.computershare.com/us
Tel: 877-736-3001

Class B Common Stock
NASDAQ Global Select Market
Symbol: DLTH

Form 10-K and Other Reports
Our Annual Report on Form 10-K, charters of the
Board’s committees and our code of ethics are made
available on our website: ir.duluthtrading.com, and
shareholders may request printed copies (which will
be provided free of charge) from Investor Relations.
Email: Duluth@finprofiles.com

The SEC also maintains a website that contains
reports, proxy information and statements, and other
information regarding registrants who file electronically
with the SEC. The website address is: www.sec.gov.

Forward-looking Statements
This Annual Report contains “forward-looking
statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All
forward-looking statements are subject to risk and
uncertainties including the risks and uncertainties
described under Part I, Item 1A “Risk Factors,” in our
Annual Report on Form 10-K for the fiscal year ended
February 3, 2019.

DULUTH HOLDINGS INC. 2018 ANNUAL REPORT

PO BOX 159 | 201 EAST FRONT STREET | MOUNT HOREB, WI 53572