Duluth Holdings (DLTH) risk factors, FY2025 10-K

Strategic Risks

1. 01If we fail to offer products that customers want to purchase, our business and results of operations could be adversely affected
2. 02There 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. These risks could have a material adverse effect on our brand as well as our results of operations and financial condition
3. 03We may face risks and challenges if we pursue further geographic expansion
4. 04If 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
5. 05as expected, we have suffered a decline in customer growth and net sales. A continued decrease in the level of usage or customer growth may have a material adverse effect on our business, financial condition and operating results
6. 06If we cannot compete effectively in the apparel, footwear and accessories industry, our business and results of operations may be adversely affected
7. 07We may engage in strategic transactions that could negatively impact our liquidity, increase our expenses and present significant distractions to management
8. 08If we fail to achieve our growth strategy, our business, financial condition and operating results could be harmed

Operational Risks

1. 09The ongoing economic uncertainty continues to affect our business operations and it is impossible to predict the effect and ultimate impact of ongoing economic uncertainties
2. 10Business activities continue to face economic uncertainties, including but not limited to increased inflation and interest rates, tariffs and global supply chain constraints. The economic uncertainties may continue for an extended period and have adversely impacted, and may continue to impact, our business
3. 11We 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
4. 12The occurrence of one or more of these events could result in disruptions to our operations, which in turn could increase our cost of goods sold, decrease our gross profit, or impact our ability to deliver to our customers
5. 13If 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
6. 14Competitive pricing pressures with respect to shipping our products to our customers may harm our business and results of operations
7. 15We rely on third-party service providers to deliver products purchased through our direct-to-consumer channel to our customers and our business could be negatively impacted by disruptions in the operations of these third-party service providers
8. 16Dependence 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
9. 17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
10. 18Increases in the price of raw materials, fuel and labor, or their reduced availability, could increase our cost of goods and cause delays
11. 19If our key suppliers or service providers were unable or unwilling to provide the products and services we require, our business could be adversely affected
12. 20We 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
13. 21Inventory shrinkage could have a material adverse effect on our business, financial condition and results of operations
14. 22We are subject to data security and privacy risks that could negatively affect our results, operations or reputation
15. 23We 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
16. 24Our failure to retain our executive management team and to attract qualified new personnel could adversely affect our business and results of operations
17. 25An inability to attract and retain qualified employees to meet our staffing needs in our corporate office, stores, fulfillment centers or call center could result in higher payroll costs and adversely affect our operating results
18. 26Our business is subject to seasonal influences, with increased net sales and net income realized during the fourth quarter of our fiscal year, which includes the holiday season

Financial Risks

1. 27We are subject to payment-related risks
2. 28We depend on cash generated from our operations to support our growth, which could strain our growth
3. 29We may be unable to accurately forecast our operating results
4. 30Our failure to comply with restrictive covenants under our revolving credit facility and other debt instruments could trigger prepayment obligations

Legal, Tax, Compliance, Reputation and Other Risks

1. 31We 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
2. 32Unseasonal or severe weather conditions may adversely affect our merchandise sales
3. 33Our product designs are not protected by substantial intellectual property rights
4. 34If we are unable to protect or preserve our brand image and our proprietary rights, our business may be adversely affected
5. 35We may be subject to liability if we infringe upon the intellectual property rights of third parties
6. 36If our independent suppliers do not use ethical business practices or comply with applicable regulations and laws, our reputation could be materially harmed and our business and results of operations may be adversely affected
7. 37We may be subject to assessments for additional taxes, including sales taxes, which could adversely affect our business
8. 38We 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
9. 39Changes to accounting rules or regulations could significantly affect our financial results

Risks Related to Ownership of our Class B Common Stock

1. 40We 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
2. 41that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities
3. 42Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors
4. 43other events or factors, including those resulting from pandemics, war, incidents of terrorism or responses to these events
5. 44If 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
6. 45The 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
7. 46Anti-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
8. 47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