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Factors Impacting Duluth Holdings (DLTH) This Earnings Season

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Duluth Holdings Inc. DLTH is slated to release first-quarter fiscal 2018 results on Jun 5, before the opening bell. We note that the apparel retailer has mixed record of earnings surprises in the trailing four quarters. Considering this, let’s see how things are shaping up prior to the upcoming results.

Initiatives to Drive Sales Bode Well

Duluth Holdings resorts to frequent store openings to fortify its retail footprint and expand customer base. Moreover, strength in the direct and retail business channels combined with sturdy brand performance has been motivating management to constantly enhance store count.  For 2018, the company plans to open about 15 stores across some major market locations. We expect Duluth Holdings’ first-quarter performance to benefit from the store-expansion initiatives.

Apart from this, Duluth Holdings also gains from its efforts to expand in the omnichannel space. In this respect, the company has been on-track to bolster its ‘buy online pick up in-store’ facility by upgrading distribution networks and augmenting shipping capabilities. Further, management also undertakes marketing initiatives through a variety of mediums to enhance brand awareness and augment sales. These measures have been particularly useful in driving the company’s women’s brands.

Well, the company’s staregic endeavors to drive sales have been yielding, evident from year-over-year top-line growth for 32 straight quarters. We expect this positive sales trend to continue in the first quarter as well. Encouragingly, analysts polled by Zacks expect sales of $101.4 million in the impending quarter, depicting a rise of almost 21% from the prior-year quarter’s tally.

 

Duluth Holdings Inc. Price, Consensus and EPS Surprise

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

 

Rising Expenses a Worry

Duluth Holdings’ gross margins have been dismal lately, thanks to declining shipping revenues and higher promotional spending. Moreover, the company has been incurring higher SG&A expenses for a while. Incidentally, SG&A expenses rose 17%, 26.7%, 26.1% and 39.4% year on year during the fourth, third, second and first quarter of fiscal 2017, respectively.

Although the company’s top-line picture looks bright, rising expenses and weak gross margin are likely to eclipse the bottom-line performance in the to-be-reported quarter. Incidentally, the Zacks Consensus Estimate for the first quarter is currently pegged at a loss of 5 cents, reflecting a fall from earnings of 1 cent in the prior-year quarter.

All said, let’s take a look at what the Zacks Model reveals regarding Duluth Holdings upcoming earnings release.

Zacks Model

Our proven model shows that Duluth Holdings is likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Duluth Holdings’ Earnings ESP of +42.86% combined with the company’s Zacks Rank #3 make us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

More Stocks Poised to Beat Earnings Estimates

Here are other companies you may want to consider as our model shows that they also have the right combination of elements to post an earnings beat:

Callaway Golf Company ELY has an Earnings ESP of +0.59% and a Zacks Rank #2.

G-III Apparel Group, LTD. GIII has an Earnings ESP of +11.11% and a Zacks Rank #3.

Rent-A-Center, Inc RCII has an Earnings ESP of +9.57% and a Zacks Rank #3.

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