Duluth Trading Co. expands as many apparel chains languish

Duluth Trading Company, a retailer founded in Minnesota and known for irreverent ads featuring "Fire Hose Pants" and "No Yank Tanks," is expanding across the country at a time when many apparel retailers are shuttering stores.

"We're looking for a coast-to-coast presence from Portland, Maine, to Portland, Ore.," said Stephanie Pugliese, chief executive at Duluth Trading. "We've earmarked to get to 100 stores in five years."

To borrow Duluth Trading's cheeky vernacular, that sounds like no bull.

Its store count currently stands at 34. The company opened 15 stores last year, including in Woodbury and Red Wing, and it plans to open 15 more annually for the next five years.

On deck in 2018: stores in Alaska, North Dakota, Oregon, Oklahoma, Texas, Ohio, Maine and Colorado.

At that growth rate, it is on target to overtake L.L. Bean, which has nearly 50 U.S. stores, next year. Amid slowing sales growth, L.L. Bean plans to add four U.S. stores this year. It recently tightened its long-standing lifetime guarantee to one-year returns. Duluth Trading, meanwhile, is sticking to its unconditional no-bull guarantee.

Duluth Trading's formula is as no-nonsense as its workwear apparel. Pugliese said each new store must pass the test of high visibility, plenty of parking and easy roadway access. Even more important, the metro location must be in an area with brand recognition.

Unlike many retailers, the company is counting on bricks and mortar to fuel its growth. Each time a new store opens, nearly half of the shoppers are new to the brand. Even for stores open after a year, 25 percent of the customers are new to Duluth Trading, Pugliese said.

Minnesota, with five stores, is a top sales performer for Duluth Trading stores and in the middle of the pack for catalog and online sales. Top revenue states for the company include New York, California and Texas, three of the nation's four most populous. In 2018, Duluth Trading will expand with stores in the Texas cities of Lubbock, Denton and Arlington.

One vital part of the brand's success is daring to have a sense of humor, a rarity in retail. Consumers who are aware of the brand have likely heard or seen ads for Bullpen or Buck Naked boxer briefs that appear to have been brainstormed in a locker room. Some have called Duluth's selection the Victoria's Secret of men's underwear.

Its humorously frank ad copy custom fits the brand, said retail apparel analyst Dylan Carden of William Blair brokerage in Chicago. "They have the advantage of being the underdog from the Midwest," he said. "Honesty and irreverence work. A Gap could never do that."

Product taglines such as "crouch without ouch" may get a chuckle out of buyers, but staying true to its practical roots, the company continues to offer solution-oriented products like its first product, the Bucket Boss.

Today, customers find that same spirit of practicality in women's shirts that have an eyeglasses cleaning cloth at the bottom of some of their button-down shirts. "That functionality creates huge loyalty," analyst Carden said. "It's why they get thousands of reviews just for a pair of underwear."

Buck Naked underwear has logged 14,000 reviews on the company's website, Fire Hose work pants 9,500, and Longtail T with Pocket 9,100, averaging 4.5 to 5 stars each.

Jean and Kirk Emmen of Eagan found a product for their dog to be very functional, Scout's Seat Saver. "We hang it between the front and back seats so the dog doesn't get them dirty after a hike," said Jean. "All the others we looked at were too small."

Most retailers would never take on a sacred cow like Polo Ralph Lauren, but the company describes their three-button, short-sleeved cotton pullovers as No Polo Shirts.

"Skip the pony for a real workhorse," says the signage above the polo shirt rack. It's also made with armpit gussets, heftier pique cotton and a longer tail. The one thing missing? The emblem. No polo player and pony, or alligator sewn onto the left breast front.

Focusing ads on clothing basics also serves a functional purpose. Customers return more often to buy underwear than shirts or pants.

Richard Grones of Edina laughed as he chose a pair of underwear for $24 at the Bloomington store last week. "I used to buy a five-pack for that price in other stores," he said, "but it's rugged, sensible clothing that's classic, not fashion sensitive."

Carden sees these items as sleeper weapons because they bring in women shopping for men, who then gravitate toward the women's section. The women's line, which represents more than a quarter of total sales, grows at a faster pace than men's. In 2017, the women's business shot up 37 percent, while men's increased 22 percent.

Kelley Vanda of Richfield buys the brand because it feels very Minnesotan. "I'm picking up some gardening overalls," she said as she shopped in the Bloomington store. "The clothes seem durable for hiking or gardening and the cut and colors are flattering, too," she said.

This fall, the company will add plus sizes from 3XL to 24W in about a quarter of the women's line. "We're not just adding length or dimensions," Pugliese said. "We re-proportioned garments and did fit and wear tests."

Despite steady expansion and sales growth, the company's stock has seen only modest gains since going public in 2015. Carden attributes much of that to investing in infrastructure to support the expansion. "Retail is in a tough spot where you have seen investors hesitant to give particularly 'newer' or newer-to-market companies the benefit of the doubt," he said.

John Ewoldt • 612-673-7633