Duluth Holdings (DLTH) To Post Q1 Earnings: What's In Store?
Zacks Investment Research | May 31, 2017 09:45PM ET
Duluth Holdings, Inc. (NASDAQ:DLTH) is set to report first-quarter fiscal 2017 results on Jun 6. The question lingering in investors’ minds is whether this clothing and accessories company will be able to post a positive earnings surprise in the to-be-reported quarter. The company posted an average earnings beat of 43.7%.
However, a glimpse of Duluth Holdings’ stock performance shows that its shares have been underperforming the Zacks categorized Textile-Apparel Manufacturing industry and the broader Consumer Discretionary sector for the past six months. The stock plunged 40.6% in comparison to the above mentioned industry, which declined 12.0%, and the sector’s growth of 12.7%. Notably, the industry is part of the top 35% of the Zacks classified industries (93 out of the 265). On the other hand, the sector is part of the top 44% of the Zacks classified sectors (7 out of 16).
Let us see how things are shaping up for this announcement.
Which Way are Estimates Treading?
Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate for first-quarter and fiscal 2017 (ending Jan 2018) remained unchanged, over the last 30 days. However, the Zacks Consensus Estimate of 6 cents for the fiscal first quarter reflects a year-over-year decline of 40.0%. The Zacks Consensus Estimate of 70 cents for fiscal 2017 is up 6.4%. Further, analysts polled by Zacks expect revenues of 82.9 million for the said quarter and $462.8 million for the fiscal year, up 20.8% and 23.1%, respectively, from the year-ago period.
What Does the Zacks Model Unveil?
Our proven model does not conclusively show that Duluth Holdings will beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), and a positive Earnings ESP Filter .
Duluth Holdings has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 6 cents. Although the company’s Zacks Rank #3 increases the predictive power of ESP, we need a positive Earnings ESP in order to be confident about an earnings surprise.
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Factors Influencing the Quarter
Duluth Holdings, a Belleville, WI-based company, specializes in casual wear, work wear and accessories for both men and women.
Duluth Holdings has been delivering higher year-over-year net sales for the last 28 consecutive quarters, backed by strong sales in both the direct and retail segments. The direct net sales gains reflect positive customer response to the company’s national advertising and digital marketing campaigns, which stemmed an increase in website visits. The rise in retail net sales was driven by the opening of retail stores, along with growth in comparable store sales.
However, the company is also incurring huge operating expenses due to the implementation of a new warehouse management system and advertising campaigns. In addition, a highly promotional retail environment is putting pressure on margins.
Stocks to Consider
Here are some companies in the consumer discretionary sector that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
NutriSystem, Inc. (NASDAQ:NTRI) , with an Earnings ESP of +1.64% and a Zacks Rank #1 (Strong Buy).
Gildan Activewear, Inc. (TO:GIL) , with an Earnings ESP of +2.08% and a Zacks Rank #2.
Columbia Sportswear Company (NASDAQ:COLM) , with an Earnings ESP of +5.00% and a Zacks Rank #3.
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