In the fourth quarter, Duluth reported a 7% increase in earnings to $0.64 per share on net sales of $251 million. The top line increased 15% year-over-year but came in below the estimates, triggering a stock selloff.
Taking a cue from the growth initiatives, analysts forecast a 14% increase in first-quarter revenues
Though the comparatively low price makes the stock a potential investment option, the fundamentals do not look very encouraging. The company’s current cash position is weak, especially when compared to the rising debt levels. On the operational front, the pressure on margins due to competition from industry rivals is expected to have impacted the bottom-line in recent months, and the trend is expected to continue during the rest of the year.
Also read: Duluth Q4 2018 Earnings Conference Call Transcript
While the company has been able to overcome the tough market conditions to some extent by expanding its store presence, that might not be enough to remain profitable in the long-term.
In May, Gap Inc. (GAP) reported a double-digit increase in first-quarter earnings, despite lower sales, as margins got a boost from better pricing. Last week, American Eagle Outfitters (AEO) said its comparable store sales grew 6% in the first quarter, marking an improvement from the prior-year period. Consequently, earnings and sales rose 4% and 8%, respectively.
Duluth shares are yet to recover from the sharp fall that followed the unimpressive fourth-quarter results. They are down 40% since the beginning of the year and 25% over the past twelve months.
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