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Dillard's Inc. (DDS - Free Report) reported second-quarter fiscal 2016, wherein top and bottom lines surpassed estimates. However, the company posted revenue and earnings decline compared to the prior year mainly due to the persistent challenging trends in the apparel retail segment. In response, shares of this department store chain were down nearly 3% in yesterday’s after-hours session.
Though the company recorded earnings of 35 cents per share, a penny ahead of the Zacks Consensus Estimate of 34 cents, earnings plunged 53.3% from 75 cents in the year-ago quarter. Earnings lagged primarily due to soft sales stemming from weak traffic trends that are attributed to consumers drifting more to online shopping, as well as gross margin contraction.
Dillard's total revenue (including service charges and other income) of $1,488.7 million slipped 4% from the year-ago quarter but was ahead of the Zacks Consensus Estimate of $1,454 million.
Dillard's net sales (including CDI Contractors LLC or CDI) declined 4.1% year over year to $1,452.4 million in the reported quarter. Merchandise sales, excluding CDI, also fell 4.4% to roughly $1,403 million. Merchandise comparable-store sales for the 13-week period ended Jul 30, 2016 were down 5% from the comparable period ended Aug 1, 2015.
During the reported quarter, sales at all of the company’s categories decreased. While women’s apparel, men’s apparel and accessories were among the stronger categories, home and furniture were considerably weak. The best performing region was Eastern, trailed by the Western and Central areas, respectively.
Consolidated gross margin contracted 99 basis points (bps), while gross margin from retail operations (excluding CDI) contracted 92 bps. Inventory, rose 1.5% year over year to $1,499.3 million.
Dillard's selling, general and administrative (SG&A) expenses (as a percentage of sales) escalated 50 bps to 27.2%. In dollar terms, however, consolidated SG&A expenses declined 2.3% to $395 million. Operating expense (as a percentage of sales) for retail operations expanded 60 bps to 28.1% mainly due to lack of leverage, while in dollar terms it went down 2.3% to $393.8 million. Lower expenses were backed by a fall in advertising, services purchased, supplies and payroll expenses, offset by higher insurance expense.
Financial Details
Dillard’s ended the quarter with cash and cash equivalents of $128.3 million, long-term debt and capital leases standing (excluding current portions) at $617.7 million, and total shareholders’ equity of $1,768.7 million.
During the first half of fiscal 2016, the company generated net cash flow from operations of $86.7 million. It bought back 0.9 million shares for $54.1 million in the fiscal second quarter, repurchasing a total of 1.6 million shares worth $112.5 million year-to-date. With this, the company has authorization worth $387.5 million remaining under its $500 million share repurchase plan announced in Feb 2016.
Store Update
During the quarter, the company shut down 2 clearance centers in at South Towne Center in Sandy, Utah and Plaza Central, formerly Six Flags Mall, in Arlington, TX.
As of Jul 30, 2016, Dillard’s had about 272 namesake outlets and 22 clearance centers operating in 29 states, as well as an online store at www.dillards.com. Dillard’s total square footage, as of the end of the fiscal second quarter, was 49.6 million.
Fiscal 2016 Outlook
For fiscal 2016, Dillard’s expects rentals of approximately $27 million, while net interest and debt expenses are anticipated to be nearly $61 million, both flat with the fiscal 2015 levels.
The company projects capital expenditures of about $120 million for fiscal 2016 compared with $166 million in fiscal 2015. Depreciation and amortization expenses for fiscal 2016 are expected at $245 million compared with $250 million in the prior year.
Currently, Dillard’s carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the retail sector include American Eagle Outfitters Inc. (AEO - Free Report) , DSW Inc. and Nordstrom Inc. (JWN - Free Report) , each with a Zacks Rank #2.
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Dillard's (DDS) Stock Declines despite Q2 Earnings Beat
Dillard's Inc. (DDS - Free Report) reported second-quarter fiscal 2016, wherein top and bottom lines surpassed estimates. However, the company posted revenue and earnings decline compared to the prior year mainly due to the persistent challenging trends in the apparel retail segment. In response, shares of this department store chain were down nearly 3% in yesterday’s after-hours session.
Though the company recorded earnings of 35 cents per share, a penny ahead of the Zacks Consensus Estimate of 34 cents, earnings plunged 53.3% from 75 cents in the year-ago quarter. Earnings lagged primarily due to soft sales stemming from weak traffic trends that are attributed to consumers drifting more to online shopping, as well as gross margin contraction.
Dillard's total revenue (including service charges and other income) of $1,488.7 million slipped 4% from the year-ago quarter but was ahead of the Zacks Consensus Estimate of $1,454 million.
Dillard's net sales (including CDI Contractors LLC or CDI) declined 4.1% year over year to $1,452.4 million in the reported quarter. Merchandise sales, excluding CDI, also fell 4.4% to roughly $1,403 million. Merchandise comparable-store sales for the 13-week period ended Jul 30, 2016 were down 5% from the comparable period ended Aug 1, 2015.
During the reported quarter, sales at all of the company’s categories decreased. While women’s apparel, men’s apparel and accessories were among the stronger categories, home and furniture were considerably weak. The best performing region was Eastern, trailed by the Western and Central areas, respectively.
Consolidated gross margin contracted 99 basis points (bps), while gross margin from retail operations (excluding CDI) contracted 92 bps. Inventory, rose 1.5% year over year to $1,499.3 million.
Dillard's selling, general and administrative (SG&A) expenses (as a percentage of sales) escalated 50 bps to 27.2%. In dollar terms, however, consolidated SG&A expenses declined 2.3% to $395 million. Operating expense (as a percentage of sales) for retail operations expanded 60 bps to 28.1% mainly due to lack of leverage, while in dollar terms it went down 2.3% to $393.8 million. Lower expenses were backed by a fall in advertising, services purchased, supplies and payroll expenses, offset by higher insurance expense.
Financial Details
Dillard’s ended the quarter with cash and cash equivalents of $128.3 million, long-term debt and capital leases standing (excluding current portions) at $617.7 million, and total shareholders’ equity of $1,768.7 million.
During the first half of fiscal 2016, the company generated net cash flow from operations of $86.7 million. It bought back 0.9 million shares for $54.1 million in the fiscal second quarter, repurchasing a total of 1.6 million shares worth $112.5 million year-to-date. With this, the company has authorization worth $387.5 million remaining under its $500 million share repurchase plan announced in Feb 2016.
Store Update
During the quarter, the company shut down 2 clearance centers in at South Towne Center in Sandy, Utah and Plaza Central, formerly Six Flags Mall, in Arlington, TX.
As of Jul 30, 2016, Dillard’s had about 272 namesake outlets and 22 clearance centers operating in 29 states, as well as an online store at www.dillards.com. Dillard’s total square footage, as of the end of the fiscal second quarter, was 49.6 million.
Fiscal 2016 Outlook
For fiscal 2016, Dillard’s expects rentals of approximately $27 million, while net interest and debt expenses are anticipated to be nearly $61 million, both flat with the fiscal 2015 levels.
The company projects capital expenditures of about $120 million for fiscal 2016 compared with $166 million in fiscal 2015. Depreciation and amortization expenses for fiscal 2016 are expected at $245 million compared with $250 million in the prior year.
DILLARDS INC-A Price, Consensus and EPS Surprise
DILLARDS INC-A Price, Consensus and EPS Surprise | DILLARDS INC-A Quote
Zacks Rank
Currently, Dillard’s carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the retail sector include American Eagle Outfitters Inc. (AEO - Free Report) , DSW Inc. and Nordstrom Inc. (JWN - Free Report) , each with a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>