A nearly 30% year-over-year increase in online traffic helped newly public outdoor apparel manufacturer and retailer Duluth Trading Co. grow its direct-to-consumer business in 2015.
Parent company Duluth Holdings Inc., No. 175 in the 2016 Internet Retailer Top 500 Guide, does not break out online sales in its earnings reports. However, in its Q4 2015 earnings filing Thursday, the retailer reported direct sales, which include sales from the company’s website and catalog, of $125.1 million for the fourth quarter ended Jan. 31, up 24.6% from $100.4 million during the same time last year.
For fiscal 2015, which ended Jan. 31, Duluth Trading reported direct sales of $266.3 million, up 27.5% from $208.9 million last year. Internet Retailer estimates the company’s 2015 online sales at $186.6 million, up 15% from $162.3 million in 2014.
Duluth Trading went public in October, filing for a $115 million public offering. In its IPO, the company wrote that online sales accounted for 70% of revenue in fiscal 2014.
Chief financial officer Mark DeOrio told analysts on the retailer’s Q4 2015 earnings call that online traffic grew 28.1% year over year in 2015, growth he attributed to effective marketing.
CEO Stephanie Pugliese said with direct-to-consumer sales growing, the company upgraded its fulfillment capacity by adding a third-party logistics service, which helped the Wisconsin-based retailer get its orders to shoppers on both coasts more quickly.
While the external logistics company helped reduce delivery time, the expense contributed to a 35% spike in selling and administrative expenses to $144.4 million in 2015 from $107.0 million in 2014.
“What we learned in 2015 was that our 3PL (third-party logistics) labor costs were higher than anticipated, which more than offset freight savings,” Pugliese told analysts on the call, according to a transcript from Seeking Alpha.
To lower those labor costs, the company will expand its Belleville, Wis. distribution center to increase storage capacity while adding another facility in Madison, Wis. by the end of 2016, Pugliese said. “With this expansion in place by the end of 2016, we expect our 3PL partners will focus solely on shipping to our direct customers and that our distribution model will become more cost-effective and efficient as a result of these changes,” she said.
For the fourth quarter ended Jan. 31, Duluth Trading reported:
- Net revenue of $140.4 million, up 27.5% from $110.1 million a year ago.
- Direct sales accounted for 89.1% of total revenue, compared to 91.2%.
- Net income of $17.6 million, up 23.9% from $14.2 million.
- Retail sales, which consist of sales at the company’s nine retail locations, of $15.3 million, up 57.7% from $9.7 million.
For fiscal 2015, Duluth Trading reported:
- Net revenue of $304.2 million, up 31.2% from $231.9 million in fiscal 2014.
- Direct sales accounted for 87.6% of total revenues, compared to 90.1%.
- Net income of $27.7 million, up 14.9% from $24.1 million.
- Retail sales of $37.8 million, up 64.3% from $23.0 million.