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Store Expansions to Aid Duluth Holdings (DLTH) in Q2 Earnings

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Store Expansions to Aid Duluth Holdings (DLTH) in Q2 Earnings

Duluth Holdings (DLTH) gains from persistent store openings as well as efforts to augment brands and omni-channel presence.

Duluth Holdings Inc. DLTH is slated to release second-quarter fiscal 2018 results on Sep 5, before the opening bell. This apparel retailer’s bottom-line surpassed the Zacks Consensus Estimate in three out of the trailing four quarters. Let’s see how things are shaping up prior to the upcoming results.

Store & Omni-Channel Expansion to Drive Sales

Duluth Holdings’ focus on frequent store openings has been driving top-line performance. Retail store openings have also been aiding the company to attract new customers. We note that during the first quarter of fiscal 2018, retail net sales increased primarily owing to improved store count. Moreover, strength in the direct and retail business channels combined with sturdy brand performances has been motivating management to constantly enhance stores.  For 2018, the company plans to open about 15 stores across some major market locations. We expect the company’s second-quarter performance to benefit from such store-expansion initiatives.

Duluth Holdings also gains from its commitment to augment omni-channel capabilities. In this respect, the company has been on track to bolster the ‘buy online pick up in-store’ facility by upgrading distribution networks, augmenting shipping capabilities and making greater investments in technology. Further, management undertakes marketing initiatives through a variety of mediums to enhance brand awareness and augment sales. These measures have been useful in driving the company’s women’s and men’s brands. Speaking of women’s brands, the company plans to tap in the constantly evolving growth opportunities in this space through innovation, especially in comfort and functional wear.  

Buoyed by such effective strategies, the company has been delivering year-over-year top-line growth for 33 straight quarters. Going ahead, we expect such robust endeavors to continue aiding the company’s performance. Encouragingly, the Zacks Consensus Estimate for sales for the second-quarter is pegged at $106.6 million, depicting a rise of almost 23.6% from the prior-year quarter’s figure.

Duluth Holdings Inc. Price, Consensus and EPS Surprise

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

Will Strategies Pare Cost Woes?

Duluth Holdings’ gross margins have been dismal lately. During the first quarter, gross margin fell 230 basis points, thanks to lower product margins, increase in inventory reserves, higher shipping costs and decline in shipping revenues. To top this, the company has been incurring higher SG&A expenses for a while, due to enhanced marketing and advertising costs.

Nevertheless, we expect the company’s efforts to drive sales will mitigate the impacts of rising costs and boost bottom-line performance. Incidentally, the Zacks Consensus Estimate for earnings for the second quarter is pegged at 14 cents, reflecting an improvement of 7.7% from the prior-year quarter’s level.

Zacks Model

To top it, our proven model shows that Duluth Holdings is likely to beat 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 +0.69% combined with the company’s Zacks Rank #3 make us confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other 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:

Michael Kors Holdings Limited KORS has an Earnings ESP of +0.31% and a Zacks Rank #1.

Rent-A-Center, Inc. RCII has an Earnings ESP of +20.76% and a Zacks Rank #1.

lululemon athletica inc. LULU has an Earnings ESP of +1.53% and a Zacks Rank #3.

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