Shares of Duluth Holdings (NASDAQ:DLTH), a purveyor of clothing and gear targeted at tradespeople, rose as much as 10% in early morning trading before moderating to a 3% gain as of 10:50 a.m. EDT on Wednesday. Investors can thank better-than-expected second-quarter results for the boost.
Here's a review of the key headlines from the quarter that caused Wall Street to cheer:
- Total revenue grew 31% to $86.2 million. This represents the company's 30th consecutive quarter of increased year-over-year sales. It also came in far higher than the $82.5 million in revenue that analysts had predicted.
- Gross margins declined by 240 basis points because of higher levels of free shipping promotions.
- Adjusted EBITDA increased 27% year over year to $9.5 million.
- Earnings per share of $0.13 grew 18% when compared to the year-ago period. This figure was well ahead of the $0.10 in EPS that market watchers had expected.
- Three new stores were opened during the period. Management also announced that six more stores will open before the end of the year. That's two more than previously communicated.
- Full-year guidance was reaffirmed.
When these expectations-topping results were combined with the company's weak stock price, today's bullish share price move seems appropriate.
Duluth CEO Stephanie Pugliese shared some good news with investors related to introducing new customers to the brand:
We drove a 35% increase in new customer acquisition year-over-year, as we continue to invest in our omnichannel model and in growing our brand awareness with our direct marketing efforts and with geographical expansion of our retail stores
Investors also got a sneak peek of what to expect from the company in 2018. Management stated on the conference call that it expects the number of new store openings in 2018 to be "comparable" to this year's results. That should go a long way toward helping the company reach its goal of 100 retail stores in the U.S.
Overall, Duluth's second-quarter results clearly show that the company is successfully executing its growth strategy and that its brand continues to bring in new customers. With shares still trading within a few dollars off their 52-week low, this bull thinks that right now is a fine time to buy into this growth stock.