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Dillard's (DDS) Stock Gains on Q1 Earnings and Sales Beat

Shares of Dillard's Inc. DDS gained 6.3% yesterday after the company reported robust first-quarter fiscal 2018 results. The company’s top and bottom line outpaced the Zacks Consensus Estimate and improved year over year. In fact, this marked its third straight quarter of positive earnings surprise with fourth consecutive sales beat.

Moreover, Dillard's constant efforts to capitalize on growth opportunities in its brick-and-mortar stores and e-commerce business remain encouraging. Its focus on increasing productivity, enhancing domestic operations and developing omni-channel platform are also likely to strengthen customer base. These robust strategic actions coupled with impressive surprise history have aided this Zacks Rank #3 (Hold) stock to outperform the industry in a year’s time. While shares of the company have surged a whopping 58%, the industry rallied 48.4%.


Q1 Numbers

Dillard's reported earnings of $2.89 per share, marking a 36.3% increase from $2.12 per share in the prior-year quarter. The bottom-line also surpassed the Zacks Consensus Estimate of $2.73 per share.

Results in first-quarter fiscal 2018 mainly gained from the continuation of positive trends witnessed in the fourth quarter of fiscal 2017. Also, bottom-line growth was aided by higher sales and comparable store sales (comps).

Total revenues (including service charges and other income) came in at $1,490.7 million, which improved 2.6% from the year-ago quarter and exceeded the Zacks Consensus Estimate of $1,453 million.

Dillard's net sales (including CDI Contractors LLC or CDI) rose 2.7% year over year to $1,456.3 million in the reported quarter. Merchandise sales, excluding CDI, increased roughly 2% to $1,409 million. Sales in comparable stores for the 13-week period (ended May 5, 2018), were up 2% from the year-ago period.

Furthermore, ladies' accessories and lingerie, home and furniture as well as juniors' and children's apparel categories displayed above-average performance. While men's apparel and accessories sales were marginally above trend, ladies' apparel was in-line with the trend. However, this was offset by softness across cosmetics and shoes. Notably, the western region was the best performer, followed by the eastern and central regions.

Dillard's, Inc. Price, Consensus and EPS Surprise

Dillard's, Inc. Price, Consensus and EPS Surprise | Dillard's, Inc. Quote


Consolidated gross margin contracted 66 basis points (bps), while gross margin from retail operations (excluding CDI) decreased 31 bps. Nonetheless, inventory grew 4% in the period.

Dillard's SG&A expenses (as a percentage of sales) were down 10 bps from last year to 27.9%. In dollar terms, the metric rose 2.4% to $406 million driven by higher selling payroll and services bought.

Financial Details

Dillard’s ended the quarter with cash and cash equivalents of $164.1 million, long-term debt and capital leases of $368 million and total shareholders’ equity of $1,682.1 million. Merchandise inventories improved 3.9% year over year to $1,780.8 million.

In the reported quarter, the company generated net cash flow of $55.4 million from operations and paid $2.8 million in dividends.

Moreover, the company bought back roughly 0.5 million shares for $34.8 million. This completes the total authorized repurchases under the $500 million program in February 2016.

Dillard's also announced a new authorization of $500 million share buyback program in March this year. As of May 5, 2018, the company had outstanding shares worth 27.6 million.

Store Update

As of May 5, 2018, Dillard’s had about 267 namesake outlets and 25 clearance centers operating in 29 states, alongside an online store at www.dillards.com. Its total square footage, as of May 5, was 49.1 million.

Fiscal 2018 View

Following the impressive quarterly performance, Dillard’s updated its guidance for fiscal 2018. The company expects rentals of approximately $29 million compared with $27 million guided earlier. Rentals came in at $28 million in fiscal 2017. Net interest and debt expenses are still anticipated to be $50 million versus $63 million in fiscal 2017. Furthermore, it continues to project capital expenditures of about $140 million for fiscal 2018 compared with $130 million spent last year.

For fiscal 2018, depreciation and amortization expenses are projected to be $225 million, down from the previous guidance of $230 million. Dillard’s incurred depreciation and amortization expenses of $232 million in fiscal 2017.

Looking For Top-Ranked Retail Stocks? Check These

The Buckle, Inc. BKE has delivered an average positive earnings surprise of 9.1% in the trailing four quarters. Also, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has a Zacks Rank #2 (Buy) and long-term earnings growth rate of 14.6%.

Nordstrom, Inc. JWN, also a Zacks Rank #2 stock, has a long-term earnings growth rate of 6%. Further, the company pulled off an average positive earnings surprise of 16.8% in the last four quarters.

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