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For Duluth, Risks May Be Growing Faster Than Earnings

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For Duluth, Risks May Be Growing Faster Than Earnings
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BMO Capital Markets downgraded shares of Duluth Holdings Inc (NASDAQ: DLTH), blaming the action on risks to growth. The firm said the company may experience near-term growing pains, disappointing investors.

As such, the firm downgraded shares of the company from Outperform to Market Perform and lowered its price target to $20.

At the time of writing, shares of Duluth were down 4.45 percent at $19.74.

Analyst John Morris said channel checks showed increased promotions into the fall and early holiday season by brands he considers to be peers to Duluth. The analyst pointed out that competitors have notably increased markdown SKUs in the third quarter, with promotional momentum continuing into the fourth quarter, and reduced the average price for product in the third quarter.

See also: Vetr Upgrades Walmart After Brief Retail Scare

The analyst expects these trends to continue through the holiday, which he feels could clip the third quarter along with the fourth quarter's outlook. Also, the analyst believes there is the risk of the management signaling a cautious fourth-quarter outlook on the third-quarter earnings report.

BMO Capital Markets trimmed its third-quarter bottom-line forecast from earnings of 1 cent per share to a loss of 2 cents per share, citing weather impacting key markets. The weather events, namely the central U.S. and west coast wildfires and an active Hurricane season, according to the firm, were untimely, delaying the potential near-term recovery for Duluth.

The firm also said the new stores the company has opened in the northeast will likely dampen revenue growth from the direct business for a period before recovering. Accordingly, the firm trimmed its direct revenue growth forecast for the third quarter from 5 percent to 1 percent and that for the fourth quarter from 5 percent to 4 percent.

Latest Ratings for DLTH

DateFirmActionFromTo
Sep 2018Stifel NicolausMaintainsHoldHold
Aug 2018BairdDowngradesOutperformNeutral
Jun 2018William BlairUpgradesMarket PerformOutperform

View More Analyst Ratings for DLTH
View the Latest Analyst Ratings

Posted-In: BMO Capital MarketsAnalyst Color Earnings Guidance Downgrades Price Target Analyst Ratings Tech Best of Benzinga

 

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