Duluth Holdings (NASDAQ: DLTH) - Buy Recommendation - $16.75 PT

The 25-day quiet period on underwriter analyses that began with the November 20, 2015 IPO of DLTH will come to an end on December 15, giving the company's IPO underwriters the ability to publish recommendations and analyses of the company on December 16.

Duluth Holdings markets rugged clothing, accessories and tools under the Duluth Trading brand name via catalogs and the Internet.

Duluth Holdings' share prices will likely see a temporary increase as a result of the release of underwriter reports, opening a new buying opportunity for investors.

Early Market Performance: A Steady Climb

DLTH's IPO was priced at $12, below its expected price range of $14 to $16. The stock opened at $13, higher than its initial price. The stock has gained steadily in price, and it currently trades around $16.

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(Nasdaq.com)

Business Overview: Retailer of Rugged Clothing that Reflect the Modern, Self-reliant American Lifestyle

Duluth Holdings markets apparel, accessories and tools that are branded as rugged, durable and appropriate for robust physical work while being stylish enough for casual wear. The company markets its products primarily through its catalogs and website, and its brands include Alaskan Hardgear, Armachillo, Ballroom, Bucket Master, Buck Naked, Cab Commander, Crouch Gusset, Dry on the Fly, Duluth Trading Company, Duluthflex, Fire Hose, Longtail T, No Polo Shirt, and Wild Boar Mocs.

Their apparel includes shirts, workwear, pants, footwear, casual wear, outerwear, underwear and accessories. The company also sells an array of tools.

Although Duluth markets its products mostly through its website and catalogs, it maintains six retail stores and one outlet store in Wisconsin, Minnesota, and Iowa. They have approximately 1,300 employees.

Duluth believes it has a strong track record of growth and profitability with CAGRs for net sales and operating income ranging from 28 percent in 2009 and 51 percent in 2014. Selected financial highlights include:

• 22 consecutive quarters of net sales growth through August 2015
• A 51.3% increase in adjusted EBITDA in FY 2014 over the prior year to $26.7 million
• Retail stores achieving an average payback of less than two years.

Management Team Facing Competition From Eddie Bauer, LL Bean, Sierra Trading Post, Bass Pro Shops

Ms. Stephanie Pugliese has been President of Duluth Holdings since February 2012 and CEO since February 2015. Ms. Pugliese has also served as Chief Merchandising Officer and Senior Vice President of Product Development and Marketing. Ms. Pugliese has been Director at Duluth Holdings Inc since September 2015.

Mr. Steve Schlecht is a Founder of Duluth Holdings, and he served as its Chief Executive Officer until February 2015. Mr. Schlecht served as Chief Executive Officer and President of Gempler's Inc. He has been the Executive Chairman and Director of Duluth Holdings, Inc. since February 2012 and since 2012 respectively.

Duluth Holdings' "Urban Woodsman" casual clothing faces competition from a variety of sources. These include Eddie Bauer, Bass Pro Shops, Sierra Trading Post, LL Bean, Buffalo Jackson, Orvis, Carhartt, and online retailers such as Amazon (NASDAQ:AMZN).

Conclusion: Weak IPO Pricing, But Strong Performance in Secondary Leads To a New Buying Opportunity

Although Duluth Holdings got off to a weak start, it has climbed steadily since.

Investors seeking to buy into Duluth Holdings may wish to take advantage of the strong buying opportunity presented by the upcoming quiet period expiration, and the fact of it being backed by very powerful underwriters (BMO Capital Markets, Raymond James & Associates, Robert W. Baird, and William Blair and Co).

Current research now indicates that a stock may produce above-market returns of ~3% in anticipation of the conclusion of the quiet period.