Actions of the outdoor lifestyle brand Duluth Holdings (NASDAQ: DLTH) caught fire on Tuesday, the same day its CFO, Dave Loretta, gave a fireside chat at the Stifel 2020 virtual conference on cross-industry perspectives. As of 3:00 p.m. EDT, the stock had climbed 29% higher for the session.
While it’s tempting to attribute today’s gains to something juicy that Loretta shared in her presentation, it’s more likely that stocks are still on the upswing after the release of Q1 earnings. last week.
Duluth Holdings stock was in fact down strongly at the start of the session. Her first big comeback happened around 12:30 p.m., an hour before Loretta’s scheduled presentation. This is why today’s rally is probably unrelated.
All Duluth stores were closed from March 20 to May 3. For the context, its fiscal quarter took place from February 2 to May 3. As a result, all stores were closed for most of the quarter, pushing Wall Street expectations very low.
Duluth released its first quarter results last week and net sales were only 4% year-over-year. Unsurprisingly, in-store sales fell 52%. But quarterly net sales of its catalog and website increased 32%. Maintaining these sales has come at a cost. It has reduced merchandise to move some inventory and increased its digital advertising, among other moves that have hurt profitability. As a result, his net loss increased to $ 15 million.
Still, Duluth’s Q1 could have been a lot worse. Now most of her stores have reopened, giving her hope to get back to normal soon. This is not what short sellers expected. Only about 10% of stocks are sold short, which is not that high. But it’s a small cap stocks with a low volume of transactions. Based on data from Nasdaq, it currently takes almost nine days to cover it. This is meaningful and helps explain why stocks nearly doubled in a week. Shorts probably want to hang out, but it takes time.
Duluth Trading Company has long resonated with men. However, the company intentionally paid attention to the female side of the business. Notably, first quarter net sales of its womenswear were up 10% from the first quarter of 2019, showing that the effort is paying off. This is an encouraging sign if you are a long term shareholder and something to watch out for in the future.
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