On Friday, Baird, a financial services firm, adjusted its outlook on shares of Duluth Holdings (NASDAQ:DLTH), a lifestyle brand of men's and women's casual wear, workwear, and accessories. The firm's analyst lowered the price target on the company's shares to $3.50 from the previous $4.00, while maintaining a Neutral rating on the stock.
The adjustment comes as the stock has declined nearly 11% in the past week, with shares currently trading at $3.41. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics.
The revised price target represents a valuation of approximately 9 times the company's expected enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio for the fiscal years 2024 and 2025.
The adjustment follows Duluth Holdings' third fiscal quarter results, which showed an 8.1% decrease in revenue and a $1.8 million shortfall in adjusted EBIT compared to expectations. InvestingPro data reveals the company's current EV/EBITDA stands at 13.1x, with revenue declining 1.48% over the last twelve months.
Duluth's management attributed the third-quarter performance largely to external factors, such as a challenging market environment and weather conditions, rather than issues with the brand itself.
Despite this, the analyst expressed concern over the company's significant year-over-year inventory increase of 33%, which has led to a substantial reduction in the gross margin forecast for the fourth fiscal quarter. The company maintains a gross profit margin of 50.37%, though InvestingPro shows three analysts have recently revised their earnings expectations downward.
The company is actively pursuing productivity initiatives, which include the potential closure of some retail locations. However, the analyst noted that the high levels of discounting currently being employed by Duluth could amplify risks. While the company maintains healthy liquidity with a current ratio of 1.63, the path to improvement remains challenging.
The report concluded with a sentiment that a change in direction might be necessary, as the path to improvement for Duluth Holdings seems unclear at this time. For deeper insights into Duluth Holdings' financial health and future prospects, access the comprehensive Pro Research Report available on InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.