Duluth Holdings reported a Q2 2025 performance that signals meaningful progress on its turnaround plan, albeit with near-term topline headwinds. Management executed a disciplined promotional reset, initiated tariff mitigation, and advanced inventory optimization, culminating in a 54.7% gross margin and a $12 million adjusted EBITDA, or 9.1% of sales, despite a 7% year-over-year decline in net sales.
Key operational indicators point to a durable margin upcycle: inventory ended down 12% YoY at $148.1 million, store in-stock levels rose 200 basis points, and year-to-date cost reductions are on track to deliver roughly $10 million of annualized savings. Management reiterated a commitment to right-size promotions, reduce SKU count (targeting a >20% SKU reduction in 2026), and selectively raise prices to offset tariff costs, with price increases implemented in July–August 2025 showing elasticity to date. The company reaffirmed full-year adjusted EBITDA guidance of $20–$25 million, while acknowledging an approximate $15 million tariff impact for the year and a plan to further optimize SG&A and inventory receipts.
Taken together, the QQ2 2025 results position Duluth as a turnaround story with a tangible margin restoration trajectory, a strengthened balance sheet, and a roadmap to higher cash conversion and profitability in 2026 and beyond. Investors should monitor the sustainability of topline momentum, the pace of SKU rationalization, the execution of price actions amid tariff headwinds, and the impact of new store openings on overall mix and margins.