Why Duluth Holdings Stock Just Popped 33%

What happened

Shares of clothier Duluth Holdings (NASDAQ: DLTH) jumped after management reported a surprise profit this morning. Expected by analysts to report a $0.04-per-share loss for its fiscal third quarter 2019, Duluth instead reported a $0.01-per-share profit. Quarterly sales of $119.8 million likewise exceeded estimates for $115 million.

As of 11:10 a.m. EST, Duluth Holdings shares are trading 33.2% higher.

Image source: Getty Images.

So what

Duluth’s $0.01-per-share profit (and this was a GAAP profit, by the way) showed significant improvement over last year’s results — a $0.10-per-share loss in Q3 2018. The company turned the corner to profitability by sacrificing a bit on profit margin (down 250 basis points year over year), limiting the growth of selling, general, and administrative expenses to less than 1%, and growing sales 12% year over year.

The result was an operating profit — and a profit on the bottom line as well.

Now what

Looking ahead to the close of this year, Duluth Holdings continues to believe it will end fiscal 2019 with full-year sales of about $615 million, in line with Wall Street estimates, and profits of between $0.60 and $0.66 per share. Given that Wall Street analysts are only looking for $0.60, this appears to open the possibility of significant profit upside, and investors really like the sound of that.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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