Duluth Holdings (NASDAQ:DLTH), purveyor of casual clothing and workwear sold under the Duluth Trading Company brand, isn't getting much love from investors these days. The company has steadily grown its revenue and adjusted EBITDA at annual rates of more than 20% and believes it can sustain that kind of performance for years to come. However, the market seems to have soured on Duluth's prospects, sending the stock plummeting after it missed expectations in the third quarter of last year.

Even after a solid fourth quarter and strong guidance for 2017 that made its prior earnings miss look like a one-time event, the market remains skeptical with the stock hovering near 52-week lows. On June 6, the company will report its first quarter earnings -- here is what I'll be watching to see if the company's growth trajectory remains intact.

DLTH Chart

Data by YCharts.

Can continued sales growth change perceptions?

As an investment, Duluth appears to have been lumped in with other struggling apparel retailers who are seeing more and more customer traffic move online. However, Duluth has three important things going for it that many apparel companies lack. First, the majority of its sales are already online. Second, its "solution-based" clothing and products have a loyal following and aren't as easily replicated by competitors. Third, Duluth owns all of its distribution, so you won't find its products in any other company's stores or on other websites.

The interior of a Duluth Holdings store

Image source: Duluth Holdings.

Although the company's top-line growth is naturally slowing a bit as the company becomes larger, it still managed to increase net sales by 23.6% in 2016 to $376.1 million. For 2017, the company has guided for sales of $455 million to $465 million, representing 22.3% annual growth at the midpoint. The consensus analyst estimate is even a little more optimistic, coming in just under the high end of guidance at $464.7 million.

For the first quarter, analysts expect sales of $82.9 million, which represents 21% year-over-year growth.

What to watch: Although it's an arbitrary benchmark for any particular quarter, the company's long-term 20% top-line growth target represents a sort of "magic number" to clear, especially given analyst estimates. Continued growth at that rate should begin to dispel the notion that Duluth belongs in the bargain bin of other retailers being crushed by the likes of Amazon.

Accelerating retail performance

Duluth started out selling its products in catalogs and online and didn't open its first physical location until 2010. But while online sales continue to grow at double-digit annual rates, retail sales are now the much larger growth opportunity. In the fourth quarter of 2016, direct sales (online and catalog) grew by 14.5%, while retail sales increased 105.6%.

A chart showing Duluth Holdings' direct sales vs. retail sales from 2013 to 2016. Over this time period, direct sales (as a percentage of net sales) decreased from 93.8% to 82.3%. Retail sales (as a percentage of net sales) increased from 6.2% to 17.7%.

Data source: Duluth Holdings 10-Ks. Chart by author.

In 2015, retail represented 12.4% of net sales, and by the next year, that figure grew to 17.7%. Long term, management believes retail operations can contribute 30% to 35% of the top line.

What to watch: Since Duluth isn't yet releasing store-level sales data, simply keep an eye on the direct vs. retail sales mix and corresponding rates of growth.

Keeping the pedal to the metal on new stores

Duluth is still in the very early stages of an aggressive expansion, ending 2016 with just 16 retail stores.

In 2017, Duluth is planning to open 10 to 12 new locations, which represents 69% growth at the midpoint, and the company has repeatedly stated that it intends to accelerate the pace of new store openings in the years to come. The company has major ambitions and has identified a total of 100 locations where it believes it has high enough customer concentrations to open retail stores.

What to watch: Investors will want to see Duluth commit to the higher end of its guidance, which may be unlikely given this is just the first quarter. However, management has a track record of increasing its planned new store openings, and I wouldn't be surprised to see this guidance raised at some point during the course of the year.

Will Duluth get the credit it deserves?

Duluth is trading at a forward P/E ratio of around 28 times as of this writing. If the company puts together another solid quarter, shares may finally bounce back as investors realize this baby doesn't deserve to be thrown out with the retail bathwater.

On its last earnings call, the company noted that its near-term profitability will be reduced in 2017 due to the significant investments it's making in its retail operations. However, Duluth's long-term business goals -- 20% top-line growth, along with 25% adjusted EBITDA and net income growth -- haven't changed. If management continues to deliver, and can show a path back to its bottom-line targets, today's prices may turn out to be a very attractive entry point.