On Friday, Baird adjusted its outlook on Duluth Holdings (NASDAQ:DLTH), dropping the price target to $4.50 from the previous $5.00 while maintaining a Neutral rating on the stock. This revision follows the company's first-quarter earnings per share (EPS) falling short of the consensus by $0.09, a result that was also accompanied by a slight revenue miss of over 1% and margins that were lower than expected.
The shortfall in performance was partly attributed by management to lower in-stock inventory levels. Moreover, Dulith Holdings' gross margin was below Baird's estimate by 48 basis points. Furthermore, both in-store and online traffic showed signs of weakness. In light of these results, the company has revised its full-year 2024 earnings guidance to the lower end of the previously stated range.
Despite the challenges faced in the first quarter, there is an expectation of improvement in the second half of the year, as the company should benefit from better product costs. However, Baird remains cautious in its revenue projections for Duluth Holdings moving forward, taking into account the recent difficulties encountered by the retailer.
The updated guidance and Baird's revised stock price target reflect the immediate challenges Duluth Holdings is navigating, including softer in-store and online traffic, as well as inventory and margin pressures. The company's efforts to improve product costs in the latter half of the year are noted, but Baird's conservative stance indicates a watchful approach to Duluth Holdings' performance trajectory in the near term.
InvestingPro Insights
As Duluth Holdings (NASDAQ:DLTH) navigates a challenging period, real-time data and expert analysis can offer investors a clearer picture of the company's financial health. According to InvestingPro data, Duluth Holdings currently has a market capitalization of $136.27 million and is operating with a negative P/E ratio of -13.87, reflecting concerns about profitability.
The company's revenue for the last twelve months as of Q4 2024 stands at $646.68 million, with a gross profit margin of 50.25%, indicating that while the company is able to maintain a substantial markup on its goods, it is struggling with bottom-line profitability, as evidenced by an operating income margin of -1.37%.
InvestingPro Tips highlight several critical points for investors to consider. Duluth Holdings operates with a significant debt burden, and analysts have recently revised their earnings expectations downwards for the upcoming period.
Moreover, the stock has taken a significant hit over the last week, with a price total return of -11.8%. It is also worth noting that the company does not pay a dividend to shareholders, which can be a factor for income-focused investors. On a positive note, Dulith's liquid assets exceed its short-term obligations, which may provide some financial flexibility in the near term.
For those interested in a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/DLTH, which can provide further insights into Duluth Holdings' financials and market performance. Investors can also take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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