Dive Brief:
- Duluth Trading Co.’s automated fulfillment center in Adairsville, Georgia, is taking on a larger share of volume as it looks to reduce expenses, President and CEO Sam Sato said on the workwear retailer's Dec. 5 earnings call.
- The facility, which launched last year, is on pace to process the majority of the company's online orders and store replenishment volume during the peak holiday selling season, according to Sato.
- "In fact, over the Thanksgiving weekend through Tuesday, Adairsville processed 64% more units compared to last year with a significant reduction in our click-to-delivery time," Sato said.
Dive Insight:
Sato has called the Adairsville location Duluth Trading's largest and most efficient facility. Its opening has also allowed Duluth Trading to smoothly transition volume out of a legacy fulfillment center in Dubuque, Iowa, into the remainder of its network for more efficient processing.
The company closed the Dubuque facility at the end of October, Senior VP and CFO Heena Agrawal said, which resulted in $7.7 million in restructuring expenses. Despite the upfront cost, Duluth Trading expects $5 million in annualized run rate savings by cutting fixed costs tied to the operation.
"Leveraging our most efficient and cost-effective Adairsville fulfillment center, we are now evaluating the next phase to continue to maximize network capacity and cost," Agrawal said.
The company's Q3 report said the Adairsville facility processed over 65% of total network volume at a cost per unit 73% lower than its three older fulfillment centers. Besides Adairsville and the now-closed Dubuque location, Duluth Trading operates facilities in Belleville, Wisconsin, and Salt Lake City, Utah, per its annual financial report.
Despite efforts to trim fulfillment costs, Duluth Trading posted a net loss of $28.5 million in Q3 and saw net sales decrease 8.1% year over year. The company blamed its performance on macroeconomic factors and unseasonably warm weather.
