Duluth Holdings Inc (DLTH) 2015 Q3 法說會逐字稿

Good afternoon, and welcome to the Duluth Holdings third-quarter 2015 earnings conference call.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to [Donnie Case], Investor Relations, Duluth Holdings. Please go ahead.

Thank you, Laura, and welcome to today's call to discuss Duluth Holdings third quarter 2015 financial results. Our earnings release which we issued this afternoon is available on our Investor Relations website at ir.duluthtrading.com under press releases. I am here today with Steve Schlect, Chairman of the Board, Stephanie Pugliese, Chief Executive Officer, and Mark DeOrio, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we will open the call to your questions.

Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements. Forward-looking statements can be identified by the use of such words as estimate, anticipate, expect, believe, intend, may, will, should, seek, approximate or plan, or the negative of these words and phrases and similar words and phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts and assumptions, and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

These forward-looking statements speak only as of the date of this conference call, and should not be relied upon as predictions of future events. Duluth Holdings expressly disclaims any obligation or undertaking to update or revise any forward-looking statements made today to reflect any change in Duluth Holdings' expectations, with regard thereto, or any other changes in the events, conditions or circumstances on which any such statement is based, except as required by law. Please refer to our SEC filings and our Investor Relations website for additional information. And with that, I would like to turn the call over to Steve Schlect, Chairman of Duluth Holdings. Steve?

Thank you everyone for joining our first conference call as a public company. Before turning the call over to our CEO, Stephanie Pugliese, and our CFO, Mark DeOrio, who will review our third-quarter 2015 results, I want to take this opportunity to welcome our new shareholders, and to thank all those involved in making our initial public offering possible. Our successful offering led by William Blair & Company, Robert W. Baird, Raymond James, and BMO Capital Markets netted the Company $83.7 million, including the full exercise of the overallotment option.

On a personal note, I am very proud of Stephanie and Mark who took the Duluth story on the road to 12 cities, making over 140 presentations to investors. Becoming a public company is a major milestone in our 25 year history, and we are committed to poking average in the eye, for new and potential investors. Our culture was built on collaboration, transparency, and a no bull guarantee, and that will not change now that we are playing on the public stage. So now, I would like to turn the call over to our CEO, Stephanie Pugliese.

Thank you, Steve, and let me add my welcome to our new investors, and express our gratitude to our analysts, investment bankers, and Board of Directors who guided us through this IPO process. Moving on to our third-quarter 2015 highlights, I am pleased to report that our results reflected strong execution by our team. Our net sales were up nearly 30% to $55.3 million, and our gross margin expanded 100 basis points to 57.2%. This was our 23rd consecutive quarter of year-over-year net sales increases, and it was achieved against the backdrop of unseasonably warm weather, and a later than normal start to the selling of fall product.

Regarding SG&A expense, it was impacted by two initiatives. First, earlier this year we made a strategic decision to implement a new warehouse management system, and to bolster our third-party logistics infrastructure to support our rapid growth and enhance our customer experience. Both of these decisions were implemented in the second and third quarters of this year. Our two 3PL distribution centers give us expanded coverage in both the West and East coast markets, which will help us reduce shipping times in those important regions where we have a high concentration of customers.

And second, our marketing expense as a percentage of sales also increased this quarter, largely due to advertising campaigns that we tested in advance of the critical holiday selling period, including digital advertising and our new women's campaign. These two carefully planned measures lowered our adjusted EBITDA to $2.7 million, compared to $3.6 million last year. The additional expenses incurred this quarter are aligned with our future growth strategies. In a few minutes, Mark DeOrio, our Chief Financial Officer, will cover our financial results in more detail.

Now for those new to the Duluth story, I would like to briefly share why we believe our long-term goals of 20% net sales growth, and 25% adjusted EBITDA and net income growth are achievable. First, we have developed a distinct brand that represents the modern self-reliant American lifestyle. Our brand speaks to a growing number of people who want high quality, highly functional clothing and gear that reflects their can-do hands-on lifestyle. Our customer base is extremely desirable, in terms of household income, demographics and loyalty, and they are attracted to the quality and independent nature of the Duluth brand.

We believe that our total addressable market is around $260 billion], and that it is largely underserved. Second, we are creating space, not stealing market share within this fast market, by successfully executing on three brand pillars, the first being solution-based design. We are driven by innovation, and by finding new ways to engage our customers. We do this by creating merchandise that solves problems, looks great, and yet is not driven by fashion trends. In fact, approximately 70% to 75% of our products are carried forward to the next season, which greatly reduces inventory risk and markdowns.

Second, our humorous and distinctive marketing is the hallmark of our advertising strategy. For example, many people told us that our ads on the Thanksgiving Day Packers Bears game were fun and memorable. And finally, our commitment to an outstanding customer experience drives everything that we do. Our approach not only creates competitive advantage, but also builds the foundation for greater brand awareness. From independent studies, we know that Duluth ranks highest in customer satisfaction, even against some established brands in the casual, workwear and outdoor markets, yet we have lowered consumer awareness than these well-known brands. We aim to change that.

One way to build brand awareness is to accelerate our retail store expansion. We know that customer purchasing decisions are highly influenced by the ability to see, touch, and try on clothing, and this has been validated with our two Minneapolis-St. Paul stores. Since opening those stores over the past two years, total volume which includes both direct and retail, has tripled in that market.

Moving on to new store openings. During the quarter, we opened an outlet store in Oshkosh, Wisconsin, and we opened our newest retail store in Sioux Falls, South Dakota on November 5, bringing our total store count to nine. We have identified over 100 potential sites for new locations, and we will continue to be very deliberate in our roll out, to ensure a consistently high-quality customer experience. For 2016, we are planning to open three to five stores, with payback periods of two years or less.

As I mentioned earlier, we are creating space in a huge market through our omni-channel presence, and one of the most distinguishing features of our strategy is that we have total control over our distribution. Online, catalog and retail stores, the only place to get Duluth product is through us. This strategy allows us to capture the full margin on our products, and gives us complete control over the relationship with our customers, and the expression of our brand.

The final two initiatives of our growth strategy are creating deeper relationships with our customers, through broadening assortments in select men's categories, and expanding our fast-growing women's business. When you put all of these together, building brand awareness, expanding retail stores, and growing our men's and women's lines, we have a very strong platform for profitable growth. And they are all proven strategies. In the coming quarters, I look forward to updating you on our progress in executing against our growth initiatives.

Now no doubt, you were all wondering about how the all-important fourth quarter is going. Broadly speaking this holiday, retail is being impacted by two factors. First, parts of the US are experiencing unusually warm weather, which unfavorably impact sales of winter goods. Second, retailers across the industry are offering very aggressive holiday price promotions.

In response; we're keeping a very close eye on these trends, and have slightly increased our promotional activity compared to last year. That said, we currently expect our fourth-quarter gross margins to be in line with last year's fourth-quarter. Most importantly, our brand integrity is strong. And we aim to keep it that way, through measured promotions, focusing on the quality and value of our product, and continuing to create an outstanding customer experience for every customer every time. Now I'll turn the call over to Mark. Go ahead, Mark.

Thank you, Stephanie. We reported strong third quarter net sales of $55.3 million, up 29.9%, compared to $42.6 million in the third quarter of last year. The increase in net sales was driven by 26.9% growth in direct net sales, and 48.5% growth in the retail segment across all product categories. The direct net sales gains were largely attributable to our marketing efforts, which drove greater eCommerce traffic to our website, as measured by a 39% increase in site visits year-over-year, and more sales through our call center. As Stephanie mentioned, our direct business which includes catalog and online sales, currently accounts for 90% of total sales.

As we continue to execute on our retail store growth strategy, we expect retail sales to increase as a percentage of total sales over time. Retail sales growth this quarter was driven primarily by contributions from new store openings in Fridley, Minnesota, Ankeny, Iowa, and our Oshkosh, Wisconsin outlet store. Together, they accounted for an increase of $2.4 million in net sales, compared to the third quarter a year ago. We're very pleased with the performance of our new retail locations. The average payback on our stores is less than 24 months, and we continue to improve and refine our store opening process with each new location.

Gross profit increased 32% to $31.6 million or 57.2% of net sales, compared to $23.9 million or 56.2% of sales last year. The $7.7 million increase in gross profit was primarily a result of increased net sales in the third quarter. The 100 basis point increase in gross margin rate reflected a strong product mix, and an increase in full price sales as a percentage of overall net sales.

Turning to SG&A, selling, general and administrative expenses increased 43.8% to $30 million, compared to $20.8 million in the same period a year ago. This included an increase of $4.1 million in advertising and marketing expenses, $2.5 million in general and administrative expenses, and $2.5 million in selling expenses. As Stephanie mentioned, the increase in advertising and marketing costs was due to increased sales, and the testing of new advertisements leading up to the important holiday season. The increase in selling expenses was primarily due to increased sales.

Additional expenses were incurred due to the implementation of our warehouse management system, and third-party logistics infrastructure which will position us for continued growth. In addition, the increase in general and administrative expenses reflected increased professional fees associated with us becoming a public company, as well as increased depreciation expense related to investments in retail stores, information technology, and infrastructure.

Adjusted EBITDA was $2.7 million or 4.8% of net sales, compared to $3.6 million or 8.5% of net sales in the prior year period. We define adjusted EBITDA as consolidated net income before depreciation and amortization, interest expense and income taxes, adjusted for the impact of certain items including stock compensation expense. We reported net income of $1.5 million or $0.06 per diluted share, compared to $3 million or $0.13 per diluted share in the prior year period. Our pro forma net income, which includes an adjustment for income tax expense, at an assumed combined federal, state, and local effective tax rate of 40% was $900,000 or $0.04 per diluted share, compared to $1.8 million or $0.08 per diluted share in the prior year period.

Turning now to the balance sheet and liquidity, we ended the third quarter with a cash balance of approximately $200,000, and $9.7 million available on our $40 million revolving line of credit. On November 25, we closed our Initial Public Offering of roughly 7.7 million shares of Class B common stock at $12 per share, which included the full exercise of the underwriters option to purchase 1 million additional shares. The Company received approximately $83.7 million in proceeds from the offering, net of underwriting fees and offering expenses.

We used $46.3 million of the net proceeds to pay in full a short-term note that was used to pay a portion of the undistributed taxable income to our S Corporation shareholders. As a result, we netted approximately $37.4 million in proceeds to fund our growth initiatives, such as retail store expansion and infrastructure enhancements, and for other general corporate purposes.

Regarding capital expenditures, starting in the fourth quarter of FY15 and continuing through all of FY16, we expect to spend approximately $13 million to $14 million, including a total of approximately $8 million to $9 million for new retail store expansion. We expect to spend $2 million to $2.6 million in capital expenditures and starting inventory on each new store, and we plan to open three to five new stores in 2016.

In closing, we delivered strong top line growth and gross margin expansion this quarter. We incurred expenses related to strategic investments in our warehouse management system and third-party logistics infrastructure that we expect will support the continuing growth of the business. We believe that the net proceeds from the offering, coupled with our cash flow generation and line of credit will give us the financial flexibility to support our growth in the coming years. With that, I will open the call for questions. Operator?

(Operator Instructions)

Amy Noblin, William Blair.

Thanks, and congratulations to the team for a great third quarter. I had a few questions. Let me start first, can you elaborate a little bit on the trends you are seeing in the fourth quarter? Obviously, weather has been an issue for many apparel retailers. I think I saw this morning, the entire eastern half of the US is going to be 20 to 25 degrees warmer than usual over the next week. Obviously, you alluded to some weakness in cold weather, [ex] those categories. But with 70% to 75% of your product carrying forward season to season, how is that part of your business holding up?

Sure. Hi, Amy.

Hi.

The -- so when we're looking at fourth-quarter, certainly, we are following very closely what's going on in the industry, and retail is in a very challenging environment right now. We all know that. That said, the business model that we have built, primarily around controlling our own distribution channel, and the reliance and dependence that we have on core product that is seasonless and perennial, has built some level of protection for us, and for our business in times like these.

So when we speak about specifically cold-weather product, we have -- less than 10% of our assortment overall is in outerwear. And within that, less than 10%, the majority of our outerwear is more temperate type of outerwear. So we're not beholden to heavy down parkas as an example, which gives us some layer of protection. In addition, we are not concerned about inventory levels in those areas, and the need to have to mark down perishable goods at the end of the season.

All of that said, we know that this is an extraordinary retail environment that we are in, not only with weather, but also in response to weather, a lot of heavily, heavy promotional activities, and we're not completely immune to that. That's why as I mentioned earlier, we have taken a little bit of additional promotional activity, and that is primarily to convert new customers into our brand. One of our big strategic initiatives and our big goals is to continue to build brand awareness, and continue to build growth through bringing new customers into the brand. We have to do that, by creating awareness, through our marketing campaigns. And then, as people become aware of us, it's important for us particularly in this heavy part of the year to convert people to customers.

Great, thanks. That's very helpful. Along those lines, Stephanie, can you talk a little bit about what your typical promotional cadence would be around the holiday? I know that we have discussed, you typically run higher promotions in the fourth quarter. It just tends to be more competitive generally then. But what types of promotions do you usually run around the holiday, just as we are benchmarking against what we are seeing in the stores? And then, I have just one more question after that. Thank you

Sure. So fourth quarter, we use more assertively, our global promotions. Those are the take 20% off of your entire order. This year to give you an idea around the promotions, we have had a couple of additional days of those take 20% off of your order, in response to some of this highly competitive environment. More importantly though, one of the decisions that we made coming into this quarter is to be more omni-channel with those global promotions. And where in prior seasons and prior years, we have been only in one channel with a promotion, say, an email promotion. For example, we've actually utilized our promotions more across email, our website, and stores. And that really plays into our goal to be more consistent, as an omni-channel retailer for our customers.

Okay.

And the other thing I would mention, is we do use shipping promotions quite aggressively in the fourth quarter.

Okay, thanks. And then my final one is just, I was hoping maybe you could give us a little bit of insight into the ad spend, just given the investment there? Where you are distorting you're advertising dollars, where you seen the best return for prospecting? I feel like we've noticed more prominent TV ads around football season. You obviously, alluded to some of that in your prepared remarks, but just curious where you're distorting the advertising dollars these days? Thank you.

Sure. So we -- first of all, we put our advertising plans in place months ago. Some of them started a year ago now, in creating the base of our marketing campaigns. And the way that we're looking at advertising is really it's a very holistic approach. As we continue to grow the business, and as you know a 30% increase in third-quarter, that had an increase in advertising as well, in order to drive, not only the brand awareness, but the conversion of customers.

As we go forward, we know that TV advertising is important to us. But that doesn't in any way negate the importance that we still have in our catalog advertising, and in our -- increasing retail presence, to bring new customers into the brand. And we are constantly evolving and learning about what channels our customers are responding to, the types of advertising. And we will continue to evolve that as we go forward.

Okay. Thanks so much, and I wish you all the best for the holiday

Thanks, Amy. Same to you.

Thank you.

Jonathan Komp, Robert W. Baird.

Yes, hi. Great, thank you. Stephanie, if I could maybe stay more short-term focused for just a minute. If you would maybe be willing to provide a bit more texture to your comments about not being entirely immune to some of the external headwinds? Maybe the way I'd pose the question is, I know your long-term growth rate target is 20% annually. Do you see any risk in the short-term of any quarters falling below that growth level, or do you think given some of the defensive nature of your business, that you can stay comfortably above that level?

Jon, to your point, the 20% is our long-term goal for the sales growth. We feel that that's a good goal for us, and a good target. And I think that the response to the competitive environment, and the challenges that retail is facing right now. So far in our quarter now, that's really been reflected in what I mentioned around a few extra days of promotions, going more omni-channel with our promotions to embrace our customers more fully.

And we do have bigger advertising out there right now. That was part of the original plan for the year, and we're seeing that that is an important part of how we are building the brand awareness. But at this point, the 20% is our target. And we know we're in a tough environment, but that's the target we are shooting for.

Okay, great. And maybe just one more, on some of the trends in the recent months, have you noticed any major divergence across geographies? In thinking specifically about maybe some divergences driven by weather and the external factors, are you seeing different trends in areas that are not as impacted by weather?

Yes. First and foremost, let me say that all of our regions are growing year-over-year. That said, in terms of the level of growth, we definitely are seeing that the Northeast in particular, an area of the country that people expect to be cold right now, and it's not. That the growth in the Northeast is not quite as strong as the other areas of the country, particularly the West.

Okay, great. Thanks for that color. And then if I could, maybe following up on the strategic investments that you made in the second and third quarter, with the warehouse management system and the new 3PL that you brought online, any updates on the progress you are seeing there, both on the overall results, and the cost trend, and how everything is faring relative to your plans?

Yes. So in terms of the overall results and the progress that we have made on both of those, they are both in line to do what we expected them to do, in terms of what we are shipping from our different distribution centers. As well as the warehouse management system is up and running, has been since late July. In terms of the cost structure, it's in line with the expectations that we had for the quarter.

Okay, great. And maybe one last one, if I could, just on the retail pipeline. Any thoughts or kind of color on how the current pipeline for next year is shaping up? I know you gave the range of three to five, in terms of the targeted openings. If you had additional color on the status of some of those planned openings? And then, maybe as you look beyond into 2017, any plans on newer markets that you might be looking at?

Sure. So in terms of 2016, we have three signed leases at this point, two of which are in the Chicago metro market. Those stores we are anticipating to be opened in the fall of next year. And then the third lease, that we've just most recently signed is in Omaha, Nebraska, and that store we are expecting to open in second quarter. We are -- we're working obviously on a couple of other things going on. So we're expecting that one to two of those three to five stores will be open in the first half of the year, and the balance, of course, in the second half.

From the standpoint of 2017, the goal in 2017 is to start expanding our reach a little bit further. One of the things that we talked about is we know that we've got a heavy concentration of customers on the East Coast, and that is something that we'll be looking at for 2017. And what we'll be working on quite diligently over the next 6 to 12 months, not only in terms of -- not only in looking for locations and nailing those locations down, but also continuing to build out the infrastructure that we need to ensure that we can have a high touch management in those stores, and continue the customer experience that we hold very dear, but also that we have the logistics in place to be able to furnish those stores with goods well and accurately.

Okay, great. Thank you very much.

Sure.

Dan Wewer, Raymond James.

Thanks. Stephanie, can you talk about how much of your distribution is going through 3PL in 2015, and how this will accelerate next year? And if you can give us some insight as to the incremental cost when you are using third-party logistics, as opposed to processing an order through Belleville?

Yes, Dan, this is Mark. So approximately 40% to 50% of our distribution goes through the two 3PL partners at this point in time. In terms of cost, the variable cost differential for the 3PLs is approximately 15% versus our internal warehouse cost.

15% higher?

Yes.

Okay.

And one of the things, Dan, that we are working through right now is -- just to add to what Mark said, as we look out towards 2016, we are working through the appropriate allocation of goods across the three distribution centers. Because the factors that we are considering are not only the costs, but some of those variable labor costs are offset by freight charges. Because, of course, with the 3PLs, we're closer to the customer, so we have some offset there. But the other thing too is, as we build out our retail strategy, our Belleville distribution center currently furnishes all of our retail stores. And so, we want to make sure that we are balancing out the need to give the appropriate resources and space to the retail expansion, as well as understanding how much Belleville should be continuing to ship directly to the customers. So that something we're working through in the next couple of months.

Okay. And we would expect the 3PL usage to increase next year, is that?

Yes, right, and to what degree is what we are working through right now.

Okay. Second, Mark, I couldn't find an inventory number for third quarter FY14. Would you have that handy?

Yes, inventories as of the end of the quarter were approximately $57 million. And what we saw was that the year-over-year change at that point in time, was commensurate with the growth in sales. So we felt very good about the quantity of inventory on hand at the end of third quarter, and also the character of the inventory. I would also just comment that, end of third quarter is obviously a critical period of time for us, to make sure that we're ready to successfully fulfill all of our customers' orders during the critical peak season, and we feel that we accomplished that.

How are you thinking about targeted inventory levels at the end of the fourth quarter of 2015? Would it be closer to a 20% growth rate year-over-year? Or do you still think it will be more like in the high 20%?

I believe we should expect more toward the higher number, Dan. Again, I would just comment that we are fully anticipating wanting to get off to a very strong start to another successful year. And so, as we end this year, we will be positioned with inventory to fully support our customers, as we continue to grow in the new year.

And then also if I could ask -- (multiple speakers) go ahead, I'm sorry

Dan, just to add to that, when we look at inventory levels, first and foremost, our goal is to continue to fuel the growth for -- not only our direct channels, but our retail channels. And remember that three-quarters of our inventory is not perishable, it goes forward season after season, year after year. So when given the choice, we choose to make sure we are in stock position, particularly in those core products to satisfy the customers.

Stephanie, you talked about testing the marketing for the new women's campaign. We certainly have been seeing a lot of their TV ads. Could you talk about the respective revenue growth for the women's category compared to the men's category in the third quarter, and what you learned from those new marketing tests?

Yes. So our women's revenue growth continues to outpace the men's growth, and of course, the total company growth, which is right in line with what we've seen in the past, as well as our goals for the future on women's. And what we've seen is, in the advertising campaign, we feel like we've gotten some good traction so far. It's still a very young campaign for us. And that said, in venues like social media, feedback in from our retail stores, feedback directly from our customers, we're getting a lot of great feedback on that, and we're expecting that that campaign will continue and will continue to help fuel growth.

Among other things, we are still mailing catalogs in women's. Retail is still an important channel for women's business, email, et cetera. So again, it's a holistic approach, but the initial results on that new ad campaign are positive.

And then, the last question I'll ask for now, relating to the gross margin rate. One of the catalysts for the improvement you called out was mix. Could you talk about the relative gross margin rate in the different product categories, so that we can understand what mix changes are favorable, and which ones could be unfavorable?

So overall, what I would say, Dan, is on a global scale, as we've mentioned in the past, our women's gross margin -- initial gross margin is still a little bit below our men's gross -- initial margin overall. And that has a lot to do with just the size of the business and the scale of the orders that we're placing. And that number, as our women's business has continued to grow, that delta between women's and men's has gotten smaller and smaller. And we anticipate that that's going to continue to get better as we go forward.

From a category perspective, we are overall, we're actually quite similar in our category margins. And so, we are not anticipating that with any mix changes, there is any dramatically big effect, either both positive or negative. In fact, one of the bigger drivers of our gross margin from the past quarter really was the mix change to being -- to selling more at full price, and selling more at shorter discounts.

Okay. So it was the fact you had more revenues generated at full price, as opposed to mark downs, that was -- what was the most important driver?

Right. More so than a category mix change.

Got you. Thank you very much.

Thank you. Dan.

(Operator Instructions)

John Morris, BMO Capital Markets.

Thanks. My congratulations to everybody on a great start here, and a really good quarter in a pretty tough environment.

Thank you.

Thanks, John.

Yes, a couple questions. The first one, we talked a little bit about your performance in normal weather markets. I assume, that's primarily the Western half of the US. Maybe give us a little bit more of a flavor for the performance there, relative to your original expectations or plan? I assume the performance there was above total company, but how was it relative to your plan? And if you could tell us -- anything you can share with us, in terms of performance by average transaction value, or the year-over-year change in transactions in those markets as well? So we get a feel for those trends?

Sure. Well, in terms of average order value, that has remained pretty consistent year-over-year, and that's true across the different regions of the country. What we've found, John, is that again, all the regions of the country are up to last year. I don't want anyone to misinterpret and think that there's a particular region that's actually negative to prior year.

That said, we had planned the regions to be -- to fall out pretty similar to what -- similarly to what they had -- how they had performed last year, because we haven't seen dramatic shifts over the past several seasons. But what we found is that, as you've mentioned, in the western part of the United States where the weather is unseasonably bad, or unusually bad in many cases, our business has is -- there is a higher proportion of the business being done there. And in the Northeast, where people are used to cold weather, and not getting it, our business isn't growing at quite the same rate.

All of that said though, one thing that I think is important to remember, is that we have an advantage being 90% direct-to-consumer, in that we are not worried about having inventory in the wrong places. The majority of our inventory is sitting in our distribution centers, ready to deploy -- not only to the regions that they normally serve, but if we need to cross regions with those distribution centers, we can do that, and balance out inventory that way.

Great, Stephanie. That's helpful. And then, my second question is, a little bit more about product category performance that you saw? Maybe pick some of the categories and their classifications, I mean, that where you saw strength or weakness? I assume some was in outerwear, by both the men's side and also the women's side? Just give us a little bit more color and context there?

Sure. Both men's and women's, from a category perspective were pretty similar. Outerwear was certainly our weaker category in both of those areas. Outerwear was still up to last year, but just not nearly to the same rate as the rest of the categories.

And the cold weather accessories, we did have some success in those, but our basic cold weather accessories were not as strong, as they have been in prior years. Nothing that would surprise you, quite frankly. In terms of the categories that have performed very well for us, the categories and products are again, probably the usual suspects, those items and those categories that you see being advertised. Things like Ballroom Jeans, Fire Hose pants, flannel shirts, Longtail Ts, Buck Naked Underwear, all of those products continue to perform incredibly well for us.

We added a new Shirt Jac, flannel Shirt Jac to our national advertising. That has been a strong product for us as well. So the good news is, that the products that are our brand ambassadors, those products that we are reaching out, not only to existing customers, but to new potential customers with, those products continue to perform very well for us. It's the seasonal products, that if anything I would say, they have shown some weakness. And again, I don't think that would be any surprise to anyone.

And as part of that, how is footwear for men's and women's relative to overall performance?

Footwear was good. It wasn't extremely -- not an extremely high growth rate or a drag on the business. Right in the middle.

And the -- okay, perfect. And then my last question. The store base is obviously still pretty young, and you gave a good example of what you've seen with the direct business, when you opened the stores in a Minneapolis market. Wondering, you've got a couple of new stores that just recently opened. And so, look -- have you seen a similar trend there, in terms of the overall market in that region -- market growth in that region? Or in those regions where you've opened the stores?

Yes, it's a little too early to tell, in terms of the total market that's going on, because remember, two of those stores just opened within the past couple of months. And one of them is an outlet store, so a little bit of a different beast. What I can tell you, is that particularly the stores that we've opened this fall, being the Oshkosh outlet and the Sioux Falls stores, both of those stores are above our expectations, and doing very well.

And remember too, that our Oshkosh outlet is a little bit of a different format for us, in that, it's an outlet store with seconds in it, but it's also got about 30% of its square footage is devoted to our core product and our bestsellers. And that also has gotten a good response from customers.

Perfect, thanks. Good luck for the rest of the holiday.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Stephanie Pugliese for closing remarks.

Well, thank you everybody for joining our first earnings conference call today. We look forward to talking to you again in the new year, when we report our fourth-quarter and full-year results. Until then, may you all have a wonderful, safe, and very prosperous holiday season. Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.