Author Topic: DLTH - Duluth Holdings Inc.  (Read 3229 times)

spartansaver

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Re: DLTH - Duluth Holdings Inc.
« Reply #20 on: December 05, 2019, 12:43:38 PM »
Worth noting that the write up posted by roark33 (which is from July) forecasts "~$66MM in EBITDA" for 2019, but the company's current guidance is "Adjusted EBITDA in the range of $51.0 million to $55.0 million."

Agree with all the above comments about discounting. To a certain extent Duluth has already played the discounting game, with gross margin falling from ~57% in FY 2015 to something like ~54%

The leverage means this is almost certainly a pass for me. I have a hard time getting excited about a leveraged clothing retailer. That said, I am going to be driving right past one of their stores later today and might stop in and have a look.

Finally, does anyone have any thoughts about where Ebay sellers are sourcing Duluth stuff? A single seller has sold 800+ Duluth Trading Men's Longtail T-Shirts. Another seller has sold almost 100 Buck Naked Performance Boxer Briefs.

Management revised guidance in Sept. He was likely using previous management guidance.

I'd say the biggest reason for decline in gross margins is the large decrease in shipping revenues. DLTH recognizes shipping revenues at the top-line, but puts the expenses within SG&A (shipping revenue gross margin = 100%). Over the past several years, shipping revenues have dramatically fallen. The company doesn't break it out, but has frequently attributed the majority of gross margin decline to this reason. In the most recent nine months promotions seem to have had more of an impact on gross margins. While I don't like seeing discounts, it seems this is the world we live in. There are plenty of higher-end comps (Columbia Sportswear, North Face, LL Bean, etc.), that use discounting to drive sales. I wouldn't say a brand is dead simply because they use discounts to drive sales.


spartansaver

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Re: DLTH - Duluth Holdings Inc.
« Reply #21 on: February 20, 2020, 09:29:37 PM »
I think I'm selling and chalking up as a mistake to ever invest. The balance sheet was subpar from the start, and as the share price has declined I haven't been able to pull the trigger in buying more. Who knows what will happen with the coronavirus, but when you source nearly all your product from Asia, it can't be a good thing. In a worst case scenario, the brand can survive, but the equity won't. I should have paid more attention to The North Face.

kab60

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Re: DLTH - Duluth Holdings Inc.
« Reply #22 on: February 20, 2020, 09:56:01 PM »
What is your diagnosis of their problems, Spartan?

I probably still think LE looks more interesting either way. If you can survive Sears, chances are you can survive most. LE's ecommerce focus plus starting retail from scratch in this new retail world seems like a great opportunity. Seems like DLTH botched it with their physical stores or what?

BG2008

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Re: DLTH - Duluth Holdings Inc.
« Reply #23 on: February 20, 2020, 10:26:16 PM »
I have never made money buying a "value retail" name and I doubt I ever will

spartansaver

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Re: DLTH - Duluth Holdings Inc.
« Reply #24 on: February 21, 2020, 08:57:34 AM »
What is your diagnosis of their problems, Spartan?

I probably still think LE looks more interesting either way. If you can survive Sears, chances are you can survive most. LE's ecommerce focus plus starting retail from scratch in this new retail world seems like a great opportunity. Seems like DLTH botched it with their physical stores or what?

I love the brand and think it will survive. I let this blind me from other issues. The biggest problem for me is the balance sheet. It's awful for an apparel retailer. I knew that going in, but I've been thinking hard about it. I haven't been able to average down as the share price has fallen, and I think its a sign that I'm not confident in the investment. I think The North Face is a great example of a poor balance sheet combined with a great brand. In the late 90s the company ran into some issues and the equity essentially got wiped out. VF Corp. bought the brand and made a killing. I was looking at DLTH similar to Timberland. The biggest difference is that Timberland had a great brand and a great balance sheet. Some black swan event could wipe out DLTH (perhaps its Coronavirus hitting DLTH's supply chain in Asia or maybe it hurts consumer purchases if it spreads to the US). I think the equity could do very well from these prices, and understand why others may continue to hold, but its my two cents.