Use Duluth's Lumpy Near-Term Results To Look For Buying Opportunities

Duluth Holdings IncDLTHfirst-quarter earnings report

Wunderlich: 'Compelling Opportunity'

Wunderlich's Eric Beder maintains a Buy rating on Duluth's stock with an unchanged $36 price target as the company's earnings report represents the "lumpiness" nature of the business but not reflective of the long-term story.

Baird: 'Buying Opportunity'

Also, Duluth's retail strategy reflects what the analyst described as a "true omni-channel approach" and the accelerated retail expansion reflects the company's efforts to capitalize on strong financial ROI prospects and to satisfy consumers desires to shop across multiple channels. Related Links: Mid-Morning Market Update: Markets Open Higher; Brown-Forman Reports Weak Q4 Results The Market In 5 Minutes

Duluth's Retail segment sales more than doubled on a year-over-year basis in the quarter, and the company opened four new locations. In fact, the pace of new store selling trends are coming in ahead of the company's own expectations, and an expansion into new markets resulted in similar sales to legacy locations.

Meanwhile, the online channel is also showing encouraging metrics, the analyst added (check out Eric Beder's track record). While direct sales rose just 5.7 percent in the quarter (the first time since its IPO when sales didn't grow 10 percent-plus) this was attributed to limited clearance inventory for low return February sales, reduced shipping revenue and a negative impact of weaker online sales in markets where stores opened within the past year.

However, the company said that online trends have consistently accelerated in markets following store openings older than one year.

Given these positive and encouraging trends, investors should have confidence in Duluth's ability to maintain substantial top-line trends, generate considerable margin expansion versus current levels and oversee a considerable brand expansion.

Baird's Jonathan Komp maintains an Outperform rating on Duluth's stock with a price target lowered from $30 to $25 despite a "soft" first-quarter report, which will merely fuel ongoing concerns about the potential for earnings improvements.

But at the same time the report showed that the company's brand metrics remains "strong" and Duluth has a path toward revenue and earnings per share growth in late fiscal 2017 and into 2018.

Looking forward, the analyst expects a rebound in margin and earnings per share growth once store openings normalize on a year-over-year basis.

Finally, a $25 price target reflects a target PEG of 1.1x, which is below the 1.5x valuation, representing a historical norm for growth peers.