As part of the Company’s in-depth review of the retail portfolio strategy, fulfillment center network, and benchmarking to identify structural opportunities to improve operating margin, working capital, and asset efficiency, the Company began phase two of its fulfillment center network plan to maximize productivity and capacity. This was initiated in the second quarter of 2024 and is expected to continue beyond this fiscal year as we implement further structural changes.

On July 12, 2024, as a result of the phase two analysis of the fulfillment center network, the Company voluntarily entered into a lease amendment for one of its legacy fulfillment center leases in Dubuque, Iowa. The amended lease accelerated the lease expiration date from September 30, 2030 to October 27, 2024. The amended lease requires Duluth to pay an aggregate of $3.7 million (the “Termination Penalty”) in consideration of accelerating the lease termination date, which will be paid in four equal quarterly installments from October 2024 through August 2025. The Company amortized the loss from the Termination Penalty, as well as the net loss from writing off the right-of-use asset and lease liability over the modified remaining lease term. In addition, the Company accelerated the depreciation of the non-transferrable fixed assets to have no remaining net book value as of the modified lease expiration date.

During the three and nine months ended October 27, 2024, the Company recognized restructuring charges of $6.2 million and $7.7 million, respectively.


	Three Months Ended		Nine Months Ended
	October 27, 2024		October 27, 2024
(in thousands)
Early contract termination expense	$	2,759	$	3,679
Lease remeasurement expense		1,596		1,889
Accelerated depreciation expense		766		1,149
Employee termination benefit expense		370		370
Other restructuring expense		661		661
Total restructuring expenses	$	6,152	$	7,748