DLTH - Duluth Holdings: A Lot Of Untapped Potential

2024-04-12 11:23:04 ET

Summary

• Duluth Holdings has seen a decline in share price over the past few years driven by worsening fundamental performance and internal initiatives temporarily pressuring cash flow.
• Presently, Duluth's sales and margin are still being negatively affected by macro pressures, but this will eventually subside, ultimately leading to a natural fundamental improvement.
• Looking forward, the company continues to introduce new products, expanding their women's line, and improving data and analytics capabilities, all of which I expect to drive increased cash flow.

Introduction

Duluth Holdings ( DLTH ) has clearly seen more and more pessimism from the market since reaching a share price of ~$19 in 2021. Since then, there’s been simply a linear trajectory downwards to their current share price under $5 today. And from a superficial angle, that’s understandable considering the subsequent sales declines and minimal cash flow since.

However, I think there's more to the story than what meets the eye of a casual observer. Underlying Duluth is what I think is a fairly strong brand and runway for growth. The past few years have been pressured by external competitive environment pressures, elevated capex to support their growth, and some inventory issues....

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