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Duluth Trading: Buy The Product, Not The Stock

|Includes: Duluth Holdings Inc. (DLTH)

Duluth Trading (NASDAQ:DLTH) IPO'd last November. Being a building contractor, I've been a customer of theirs since the late 90's. I remember when they offered their first articles of clothing, mainly selling fabric construction bags and organizers at the time. Now the story is all about the clothing.

Duluth Trading has always succeeded by serving a very specific niche market that nobody else serves. And they've done well in that niche. Now the plan is to open retail stores to increase product awareness, along with increased advertising spending, including television.

Reading through Decembers conference call, CEO Pugliese throws around a lot of retailing jargon that doesn't match the company's homespun product and retailing methods of the past. I got the feeling there's a concerted push to lift Duluth Trading to the next level, even if it means abandoning some of the philosophy that got the company this far. For instance, marketing was formerly very focused and limited.

So investing in DLTH is a bet on the success of selling to a broader swath of consumers, including women. Will this work? I doubt it. I think Duluth has already found their sweet spot, and going beyond that is trying to make something out of the company that takes it away from it's core competencies. The product line just doesn't have mass market potential, in my opinion. Take a look at Duluth's website for yourself and form your own opinion.

This is not investment advice. You would have to be crazy to invest based on the opinions of a nobody like me.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This is not investment advice. You would have to be crazy to base investment decisions based on the opinions of a nobody like me.