Duluth Shares Tumble on Soft Guidance

Duluth Holdings Inc. (NASDAQ: DLTH) fiscal third-quarter earnings report showed $0.01 in earnings per share (EPS) and $67 million in revenue. The consensus estimates had called for a breakeven on earnings and revenue of $69 million. The same period from last year had $0.04 in EPS and $55.3 million in revenue.

In terms of the outlook for this fiscal year, the company expects to see net sales of between $360 million and $370 million and GAAP-EPS in the range of $0.52 to $0.60. The consensus estimates are $0.70 in EPS and $380.13 million in revenue.

In the third quarter, Duluth opened three new stores, and it opened two more during the fourth quarter, one in Manassas, Virginia, a suburb of Washington, D.C., and the other in Independence, Missouri, a suburb of Kansas City. That brings the total store count to 16. Retail expansion is one of the key drivers of this company’s growth strategy, and this year it has successfully expanded its retail presence into large metro markets, as well as establishing a foothold in the eastern U.S. market, where it has a sizable concentration of Duluth customers.

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On the books, Duluth cash totaled $173,000 at the end of the quarter, down from $37.87 million at the end of the previous fiscal year.

Stephanie Pugliese, CEO of Duluth Trading, commented:

While we have achieved 27 consecutive quarters of increased net sales year-over-year, third-quarter net sales fell short of our expectations. In the latter part of September and through the quarter end in October, we experienced unusually warm weather that extended across the country and this had an impact on our total net sales for the third quarter. This unseasonable weather, coupled with a highly promotional environment, continued into early fourth quarter. As a result, we are revising our 2016 fiscal full-year guidance and now expect net sales in the range of $360 million to $370 million, with corresponding revisions to our EPS and Adjusted EBITDA.

Shares of Duluth were down about 23% at $28.57 on Friday, with a consensus analyst price target of $36.00 and a 52-week trading range of $13.52 to $38.19.

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