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Here's Why You Must Add Dillard's (DDS) to Your Portfolio
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Dillard’s Inc. (DDS - Free Report) is worth giving a shot right now as its sound fundamentals and growth efforts look impressive. The stock has outperformed the industry and the overall Retail Wholesale in the past three months. DDS has skyrocketed 87.8% compared with the industry and the sector’s growth of 30.3% and 2.7%, respectively.
The company’s earnings estimates for the fiscal third quarter and 2021 have moved up 110% and 20%, respectively, in the past 30 days. This positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating further outperformance in the near term.
That said, let’s delve into the factors that make Dillard’s a promising bet.
What’s Driving the Stock?
Dillard's has been witnessing an uptrend owing to its robust surprise trend, which continued in third-quarter fiscal 2021. The top and bottom lines surpassed the Zacks Consensus Estimate as well as advanced year over year. This marked the sixth straight quarter of earnings beat. The results gained from continued momentum in consumer demand, which somewhat offset global supply-chain issues, including shipping delays and disruptions in the transportation network.
Net sales advanced 44.5% from the prior-year quarter, with total retail sales (excluding CDI Contractors, LLC) improving 47%. Total retail sales also increased 9% from the third quarter of fiscal 2019. Comparable store sales grew 48% year over year and 12% from the third quarter of fiscal 2019. The solid performance in children's and men's apparel as well as accessories contributed to quarterly growth. Adjusted earnings of $9.81 per share surged more than six-fold from the year-ago figure of $1.49. The uptick can be attributed to robust sales, improved margins and lower expenses.
The company’s aggressive measures to lower excess inventory have been resulting in lower markdowns, thereby boosting gross margin. Retail gross margin improved significantly to 46.7% for the fiscal third quarter from 36.6% in the year-ago period and expanded 1,221 basis points (bps) from 34.5% in third-quarter fiscal 2019. On a consolidated basis, gross margin of 46.2% reflects a sharp improvement from 35.7% in the prior-year quarter.
Dillard's has been undertaking several steps to reduce costs starting first-quarter fiscal 2020. Some of these are extension of vendor payment terms, reduction of discretionary and capital expenditures as well as payroll reduction. As a result, fiscal third-quarter consolidated SG&A expenses (as a percentage of sales) contracted 450 bps to 26.5% from the prior-year quarter's 31%.
Image Source: Zacks Investment Research
Wrapping Up
All said, we believe that solid demand, improved inventory management and cost-cutting efforts are likely to keep up Dillard’s stellar show. Also, a VGM Score of A and long-term earnings growth rate of 14.6% drive optimism on the stock.
Here's How Other Stocks Fared
We have highlighted three top-ranked stocks in the Retail - Wholesale sector, namely, Boot Barn Holdings (BOOT - Free Report) , Tractor Supply Company (TSCO - Free Report) and Costco (COST - Free Report) .
Boot Barn Holdings — the lifestyle retailer of western and work-related footwear, apparel, and accessories — currently sports a Zacks Rank #1. Shares of the company have rallied 44% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn Holdings’ sales and earnings per share (EPS) for the current financial year suggests growth of 54.4% and 183.3%, respectively, from the year-ago period. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.
Tractor Supply Company, a rural lifestyle retailer in the United States, presently carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of the company have gained 17.6% in the past three months.
The Zacks Consensus Estimate for Tractor Supply Company’s sales and EPS for the current financial year suggests growth of 19% and 23.9%, respectively, from the year-ago period. TSCO has an expected EPS growth rate of 9.6% for three-five years.
Costco, which operates membership warehouses, carries a Zacks Rank #3 (Hold) at present. The company has a trailing four-quarter earnings surprise of 7.7%, on average. Shares of Costco have gained 22.2% in the past three months.
The Zacks Consensus Estimate for Costco’s sales and EPS for the current financial year suggests 9.6% and 9.7% growth, respectively, from the year-ago period. COST has an expected EPS growth rate of 8.7% for three-five years.
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Here's Why You Must Add Dillard's (DDS) to Your Portfolio
Dillard’s Inc. (DDS - Free Report) is worth giving a shot right now as its sound fundamentals and growth efforts look impressive. The stock has outperformed the industry and the overall Retail Wholesale in the past three months. DDS has skyrocketed 87.8% compared with the industry and the sector’s growth of 30.3% and 2.7%, respectively.
The company’s earnings estimates for the fiscal third quarter and 2021 have moved up 110% and 20%, respectively, in the past 30 days. This positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating further outperformance in the near term.
That said, let’s delve into the factors that make Dillard’s a promising bet.
What’s Driving the Stock?
Dillard's has been witnessing an uptrend owing to its robust surprise trend, which continued in third-quarter fiscal 2021. The top and bottom lines surpassed the Zacks Consensus Estimate as well as advanced year over year. This marked the sixth straight quarter of earnings beat. The results gained from continued momentum in consumer demand, which somewhat offset global supply-chain issues, including shipping delays and disruptions in the transportation network.
Net sales advanced 44.5% from the prior-year quarter, with total retail sales (excluding CDI Contractors, LLC) improving 47%. Total retail sales also increased 9% from the third quarter of fiscal 2019. Comparable store sales grew 48% year over year and 12% from the third quarter of fiscal 2019. The solid performance in children's and men's apparel as well as accessories contributed to quarterly growth. Adjusted earnings of $9.81 per share surged more than six-fold from the year-ago figure of $1.49. The uptick can be attributed to robust sales, improved margins and lower expenses.
The company’s aggressive measures to lower excess inventory have been resulting in lower markdowns, thereby boosting gross margin. Retail gross margin improved significantly to 46.7% for the fiscal third quarter from 36.6% in the year-ago period and expanded 1,221 basis points (bps) from 34.5% in third-quarter fiscal 2019. On a consolidated basis, gross margin of 46.2% reflects a sharp improvement from 35.7% in the prior-year quarter.
Dillard's has been undertaking several steps to reduce costs starting first-quarter fiscal 2020. Some of these are extension of vendor payment terms, reduction of discretionary and capital expenditures as well as payroll reduction. As a result, fiscal third-quarter consolidated SG&A expenses (as a percentage of sales) contracted 450 bps to 26.5% from the prior-year quarter's 31%.
Wrapping Up
All said, we believe that solid demand, improved inventory management and cost-cutting efforts are likely to keep up Dillard’s stellar show. Also, a VGM Score of A and long-term earnings growth rate of 14.6% drive optimism on the stock.
Here's How Other Stocks Fared
We have highlighted three top-ranked stocks in the Retail - Wholesale sector, namely, Boot Barn Holdings (BOOT - Free Report) , Tractor Supply Company (TSCO - Free Report) and Costco (COST - Free Report) .
Boot Barn Holdings — the lifestyle retailer of western and work-related footwear, apparel, and accessories — currently sports a Zacks Rank #1. Shares of the company have rallied 44% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn Holdings’ sales and earnings per share (EPS) for the current financial year suggests growth of 54.4% and 183.3%, respectively, from the year-ago period. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.
Tractor Supply Company, a rural lifestyle retailer in the United States, presently carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of the company have gained 17.6% in the past three months.
The Zacks Consensus Estimate for Tractor Supply Company’s sales and EPS for the current financial year suggests growth of 19% and 23.9%, respectively, from the year-ago period. TSCO has an expected EPS growth rate of 9.6% for three-five years.
Costco, which operates membership warehouses, carries a Zacks Rank #3 (Hold) at present. The company has a trailing four-quarter earnings surprise of 7.7%, on average. Shares of Costco have gained 22.2% in the past three months.
The Zacks Consensus Estimate for Costco’s sales and EPS for the current financial year suggests 9.6% and 9.7% growth, respectively, from the year-ago period. COST has an expected EPS growth rate of 8.7% for three-five years.