What happened

Shares of Duluth Holdings (DLTH -3.60%) were down 14% as of 9:44 a.m. on Thursday after reporting financial results for the third quarter ending Oct. 30.

Sales were up last quarter, but they didn't meet analysts' expectations, which sent the stock tumbling. The company has struggled to deliver the growth investors expect amid a challenging economy backdrop. Year to date, the stock has fallen hard as investors weigh the near-term uncertainty with consumer spending.

So what

Duluth reported sales of $147 million for the quarter. While that represented a small increase of 1.3% year over year, it was below expectations of $157 million. Investors were also disappointed that the company reported a loss per share of $0.19, which missed the consensus estimate calling for a profit of $0.02 per share.

Duluth has delivered choppy results over the last year as inflation takes it toll on consumers. However, management pointed out that inventory levels are in a healthy position heading into the holiday season. Management also credited its new brand positioning for last quarter's sales increase. 

Now what

The market was probably most disappointed that the softening consumer spending environment led management to lower full-year guidance. The company now expects sales for fiscal 2022 to be between $650 million to $680 million, slightly down from $705 million at the high end of the range. 

Making matters worse was the lower earnings guidance. Management expects to report earnings per share between $0.05 to $0.20, down from the previous estimate of $0.61 to $0.71.

Duluth is clearly struggling to hold the line on profitability as consumer spending weakens in the near term. With management expecting the headwinds to continue into calendar 2023, investors should be careful before calling this cheap-looking apparel stock a bargain right now.