Duluth Holdings reported QQ1 2026 results with a notable top-line decline and pronounced profitability headwinds. Revenue reached $102.7 million, down 11.98% year over year and 57.43% quarter over quarter, while gross margin remained healthy at approximately 51.95%. The business posted an operating loss of $12.35 million and a net loss of $15.29 million, driving a negative EPS of $0.45. EBITDA was negative at $5.764 million, underscoring that the negative operating leverage persisted even as gross margin held up. A material working-capital drain contributed to negative cash flow: cash provided by operating activities was −$56.46 million, with free cash flow of −$57.80 million. The balance sheet shows a leveraged position with total debt of $223.9 million and net debt of $215.3 million, alongside a modest cash balance of $8.58 million and inventory elevated at $177.84 million. The current ratio sits around 1.34x, and the quick ratio is markedly weak, highlighting liquidity pressure despite a financing cash inflow of about $63.0 million in the quarter. While the gross margin suggests pricing power and product mix resilience, the combination of subdued revenue, elevated operating expenses (SG&A of $65.71 million), and heavy working-capital consumption point to a required strategic reset focused on cost containment, working-capital efficiency, and debt-financing flexibility. Absent meaningful improvements in operating leverage and cash generation, the near-term risk remains elevated for DLTH.