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Duluth Holding's (DLTH) Stock Up on Q4 Earnings, Sales Beat

Zacks Equity Research

Shares of Duluth Holdings Inc. DLTH gained almost 15% on Mar 22, a day after the company posted higher-than-expected earnings in fourth-quarter fiscal 2016. The company also reported higher-than-expected revenues and also recorded the 28th consecutive quarter of higher year-over-year sales.

Quarter in Detail

After marginally surpassing Zacks Consensus Estimate in third-quarter fiscal 2016, the company’s fourth-quarter earnings of 43 cents beat Zacks Consensus Estimate by 30.3%. However, earnings went 25.9% year over year. After adjusting for income taxes expenses of $11.3 million for the prior year figure, earnings slipped 16% year over year.

Revenue and Margins

Net sales gained 24.4% year over year to $174.7 million during the fourth quarter. The robust performance of the company is reflected in the price movement. Shares of this apparel retailer gained 13% in the past one year, outperforming the Zacks categorized Textile-Apparel Manufacturing industry’s decline of 25.3%.

Moreover, revenues beat the consensus mark of $163.0 million by 7%. Although unusually warm weather during the onset of winter marred sales, the mercury drop in the latter part of December revitalized sales in the cold weather product category which aided the sales gain during the quarter.

Gross profit increased 23% to $96.8 million on the back of higher year-over-year sales. Gross margin shrank 70 basis points (bps) to 55.4% in both direct and retail segments due to a highly promotional retail environment during the fourth quarter.

Operating income gained 20.3% to $22.9 million during the quarter due to lower selling, general and administrative expenses.

Duluth Holdings Inc. Price, Consensus and EPS Surprise

Duluth Holdings Inc. Price, Consensus and EPS Surprise | Duluth Holdings Inc. Quote

Store Update

During the quarter, Duluth opened two new retail stores in Manassas, VA and Independence, MO.

Fiscal 2016 Results

Earnings of 66 cents declined 38% year over year and was in line with the Zacks Consensus Estimate. Further, it increased 23.7% to $376.1 million compared with $304.2 million in the prior year.

Fiscal 2017 View

Duluth Holdings expects net sales in the range of $455–$465 million for fiscal 2017. It anticipates earnings to be in the range of 66–71 cents per share compared with 66 cents in fiscal 2016. Earnings excluding interest, tax, depreciation and amortization (EBITDA) are estimated to be in the range of $47.0–$49.5 million. The company anticipates incurring capital expenditures of $31.0–$35.0 million.

Other Financial Details

The company ended the quarter with a cash balance of approximately $24 million compared with $0.2 million in the previous quarter. Long-term debt less current maturities amounted to $35 million compared with $7.31 million in the previous quarter.

Better-ranked stocks in the broader consumer discretionary sector include:

Hasbro Inc. HAS has an earnings growth rate of 13.6% in the trailing four quarters.

While DeVry Education Group Inc. DV has an expected earnings growth of 9.2%, GoPro Inc. GPRO has an expected earnings growth of 15%.

All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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