The following is excerpted from the question-and-answer section of the transcript.
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Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: Kind of continuing on some of the same vein. I guess kind of further up the P&L, you're floating around sort of peak gross margin or underlying
gross margin to kind of back out some of the artificial cost headwinds. And so I'm curious, you're speaking a lot more towards full price selling
being more efficient with your promotional cadence, which is something you've long talked about.
Is there kind of a structural level of gross margin that sort of underpins the blueprint? And is there any consideration here from a mix shift standpoint
for some of these other portfolio brands that's kind of embedded in that conversation?
Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: But as per -- I guess what I'm getting at is sort of mid-50s is where you've been looking back at least in prepandemic history, maybe a little bit above.
You're sort of floating around high 50s.
Is it crazy to think that you're growing off a high 50 kind of underlying margin from here? Or is what you're saying that sort of the core business
structurally still runs at kind of that mid-50s level?
Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: Okay. And then across the brands, I guess, where are you Duluth core, Duluth legacy versus sort of the combined portfolio brands from a revenue
penetration standpoint? And then the opportunity to kind of cross-sell amongst those brands, are you kind of early days? Are you sort of exploring
some of that opportunity?
I know the customer profiles are going to be different, but there's got to be some overlaps. I'm just kind of curious if there's any commentary there.
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JUNE 02, 2022 / 1:30PM, DLTH.OQ - Q1 2022 Duluth Holdings Inc Earnings Call
Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: Sorry. So that would mean that there is high cost over potential, right? Because if I'm buying a flannel shirt for one use case, and I'm buying a rain
jacket for another, my total basket is -- the combination of both of those and not cannibalizing each other, right?
Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: And so are you actively out there kind of marketing to those sort of distinct customers that might be a customer of one brand or not another? Is
that sort of something that's yet to come?
Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: All right. Okay. And then I'm still -- I know we've talked about it a lot on the call, I'm still a little bit lost. So the pulling back on marketing when you
didn't have the inventory makes all the sense in the world to me. But yet marketing actually delevered, if I understood it right.
And so I'm just curious, and it sounds like -- did I hear what you've gotten rid of some of the catalog as well? I'm just kind of trying to understand
the go-forward outlook for marketing. Should it sort of rest around or maintain the sort of low double-digit percent of sales level?
Question: Dylan Douglas Carden - William Blair & Company L.L.C., Research Division - Analyst
: Got you. That makes more sense. And so an ultimate kind of resting level of ad spend should be kind of high single, low double? I know I guess
you maybe you probably won't commit to that right now, but just out of curiosity, if I can get you to.
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