Duluth Is One Of The Best Unit Growth Stories In Specialty Retail

Duluth Holdings Inc DLTH's second-quarter earnings report prompted analyst at FBR Capital Markets to reiterate a bullish stance on the stock.

Analyst Eric Beder maintains a Buy rating on Duluth Holdings' stock with an unchanged $26 price target after the company's earnings not only contained a top and bottom-line beat, but showed the retailer is seeing strength. Retail sales during the quarter rose 138 percent year-over-year due to the company's aggressive expansion of its store base.

Retail segmented operating income tripled in the quarter to $4.3 million and retail segment operating margins rose 320 basis points year-over-year to 14.9 percent, the analyst added. As such, the strong results may signal the company is "one of the best unit growth stories" inside the specialty retailing segment.

Duluth Holdings' direct segment was also encouraging during the quarter and rose 7.1 percent. This did come against a 24.1 percent comparison and direct operating margins fell 310 basis points to 5.4 percent amid competitive pressures and a shift to higher levels of free shipping.

Finally, Duluth Holdings is looking to continue expanding its store count, especially in New York, Texas and California, which happens to be the company's biggest online markets. These new store opens are a key growth driver that may be "the way to go."

"With inventories in solid shape, store opening comparisons easing and Duluth continuing to leverage growth levers for the near and medium term, we believe DLTH remains worthy of a multiple befitting one of the best unit growth stories in the specialty retailing segment," the analyst concluded.

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