DLTH

We rate DULUTH HOLDINGS INC. (DLTH) as a Hold with a composite score of 53.1/100 at a current price of $2.32. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in value (80th percentile) and investment (54th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (29th percentile) and momentum (40th percentile) tempers our overall conviction. We assign a No Moat rating (20/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

DULUTH HOLDINGS INC. holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 53.1/100 places it at rank #1516 in our full 7,333-stock universe. At $79M in market capitalization, DULUTH HOLDINGS INC. is a small-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -10% combined with momentum at the 40th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 54% (+17.6pp vs sector) narrow to operating margins of -4% (-7.9pp vs sector) and net margins of -5.4%, yielding a gross-to-net conversion rate of -10%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $2.32, DULUTH HOLDINGS INC. appears undervalued relative to its fundamentals. Our value factor score of 80/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 8.0x (near the sector median), P/B of 0.6x, P/S of 0.2x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Very High uncertainty rating to DULUTH HOLDINGS INC.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.58), significant leverage (197% debt-to-equity), current negative profitability (net margin -5.4%). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.58); significant leverage (197% debt-to-equity); current negative profitability (net margin -5.4%); below-average price stability (29th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 29th percentile and quality factor at the 52th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 54% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate DULUTH HOLDINGS INC.'s capital allocation as Poor. Key concerns include low returns on equity (-16.5%), elevated leverage (197% D/E), negative profitability, weak asset returns (ROA -5.6%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — DULUTH HOLDINGS INC. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, DULUTH HOLDINGS INC. receives a Hold rating with a composite score of 53.1/100 (rank #1516 of 7,333). Our quantitative framework assigns a No Moat (20/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 51/100.

Our analysis supports a neutral stance on DULUTH HOLDINGS INC.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.