Duluth Holdings Stock is Providing Opportunity

Casual and workwear maker Duluth Holdings NASDAQ: DLTH stock has sold off despite strong earnings momentum is providing an opportunity for prudent investors. The denim and workwear company sells its products through retail and outlet locations as well as online and through catalogs. The Company was hurt during the pandemic but the rapid migration to bolster its direct-to-consumer (DTC) ecommerce channel has proven to be successful during the reopening trend. With the acceleration of COVID vaccinations, the Company should continue to see improvement in foot traffic with its brick and mortar locations. The Company also has a new CEO who was the former CEO of Finish Line. Prudent investors can look for opportunistic pullback entries while shares are depressed.

Q1 2021 Earnings Results

On June 3, 2021, Duluth reported its fiscal Q1 2021 earnings results for the quarter ending on May 2, 2021. The Company reported EPS of $0.02 on profits of $0.05 million compared to a loss of (-$0.47) per share on net losses of (-$15 million). Net revenues grew 21.4% year-over-year (YoY) to $133.4 million compared to $109.9 million in the year ago period. Gross margins rose to 49.9% compared to 47.6% prior year. Duluth Chairman Steve L. Schlecht stated, “We are pleased to report a solid first quarter with net sales growing more than 21% to $133 million year-over-year. Operating income was positive at $2 million and adjusted EBITDA was $10 million. We also reduced inventory by $31 million compared to the prior-year period. In addition, our balance sheet is as strong as it has been in recent years, which positions us well to execute our strategic initiatives. Direct channel sales increased almost 2% against tough direct channel comps in the first quarter last year. Retail store sales were up 93%, a significant increase from the comparable period when all stores were closed for roughly half of the quarter.” He concluded, “Having completed my last quarter as Non-Executive Chairman and CEO on May 2^nd, I am pleased to introduce Sam Sato, our new President and Chief Executive Officer, who is a 30-year retail industry veteran with a proven track record in omnichannel growth and expertise across retail operations and product categories. Prior to joining Duluth Trading, Sam was CEO of Finish Line, a specialty retailer that operated over 900 U.S. branded locations and achieved $1.8 billion in net sales under his leadership. I am very confident that we have a new leader in Sam who will help us write our next chapter of growth and profitability”

Conference Call Takeaways

Duluth CEO Same Sato himself, “From my early observations, there has already been a lot of heavy lifting and the building blocks are in place, strong omni-channel position, a deep and engaging relationship with our customers, a commitment to new product innovation and a customer centric culture that informs and drives our decision. What I’m thinking about now is how to leverage assets, how to broaden the brand reach, while maintaining its integrity and how to enable a digital forward business to meet the evolving needs of our customers. While all retail CEOs are thinking about many of the same things, I want to engage our team to think holistically about the enterprise and how their contributions can make one plus one equal three. To me, that’s how we create long-term value. Over the next 90 days, we plan to dig in deep and evolve our long-term strategic plan and I look forward to sharing our thoughts on the next conference call.”

DLTH Opportunistic Pullback Levels

Using the rifle charts on a weekly time and daily time frames provides a precision view of the landscape for DLTH stock. The weekly rifle chart is attempting to breakdown as the falling 5-period moving average (MA) at $16.90 attempts to crossover down through the flat 15-period MA at $16.74. Shares peaked near the $20.84 Fibonacci (fib) level. The weekly lower Bollinger Bands (BBs) sit at $13.68 as the stochastic has a bearish mini inverse pup. The weekly market structure high (MSH) sell triggers below $15.07 while the weekly market structure low (MSL) buy triggers on a breakout through the $16.65 level. The daily rifle chart is attempting a make or break set-up. The bull scenario would have the daily stochastic mini pup continue to rise until the daily 5-period MA at $15.87 crosses over the daily 15-period MA at $16.48 triggering a breakout towards the $19.83 daily upper BBs. The bear case calls for the stochastic to fall back down as the 5-period MA slopes back down forming an inverse pup breakdown towards the daily lower BBs at the $13.97 fib. Prudent investors can monitor for opportunistic pullback levels at the $15.39 fib, $15.06 fib, $14.50, $13.97 fib, $13.30 fib, and the $12.62 fib. Upside trajectories range from the $18.47 fib up to the $25.78 fib level.