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Dillard's (DDS) Down 15% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Dillard's, Inc. (DDS - Free Report) . Shares have lost about 15% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dillard's Q4 Earnings and Sales Miss
Dillard's reported a dismal fourth-quarter fiscal 2016, wherein both sales and earnings lagged estimates and plunged year over year. Results were primarily hurt by the persistently challenging trends in the apparel retail segment.
The company posted adjusted earnings of $1.85 per share, which lagged the Zacks Consensus Estimate of $2.34 and plunged nearly 17.8% from $2.25 in the year-ago quarter. Earnings lagged primarily due to soft sales stemming from weak traffic trends attributed to industry challenges, mainly owing to change in consumer preference from offline to online shopping.
Including one-time items, the company reported earnings per share of $1.72, down 25.5% from $2.31 earned in the prior-year quarter.
Dillard's total revenue (including service charges and other income) of $1,983.9 million dropped 6.3% from the year-ago quarter and missed the Zacks Consensus Estimate of $1,999 million.
Dillard's net sales (including CDI Contractors LLC or CDI) declined 6.7% year over year to $1,935.6 million in the reported quarter. Merchandise sales, excluding CDI, fell 6.2% to roughly $1,896 million. Merchandise comparable-store sales for the 13-week period ended Jan 28, 2017 were down 6% from the comparable period ended Jan 30, 2016.
During the reported quarter, sales at all of the company’s categories decreased. While ladies’ apparel, men’s apparel and accessories were among the relatively stronger categories, home & furniture, and shoes remained considerably weak. The best performing region was Eastern, trailed by the Western and Central regions, respectively.
Consolidated gross margin expanded 24 basis points (bps), while gross margin from retail operations (excluding CDI) rose 8 bps.
Dillard's selling, general and administrative (SG&A) expenses (as a percentage of sales) escalated 160 bps to 23.3%. In dollar terms, consolidated SG&A expenses reflected a marginal 0.5% growth to $451.6 million. Higher SG&A expenses in the quarter were due to a rise in selling payroll and services purchased expenses, partly neutralized by savings in several expense categories.
Financial Details
Dillard’s ended fiscal 2016 with cash and cash equivalents of $347 million, long-term debt and capital leases (excluding current portions) of $530.1 million and total shareholders’ equity of $1,717.4 million. Inventory improved 2.3% year over year to $1,406.4 million.
In fiscal 2016, the company generated net cash flow from operations of $517.2 million. It bought back 1.3 million shares for $80.6 million in the fiscal fourth quarter, bringing the fiscal year repurchases to 3.8 million shares for $246.2 million. With this, the company has authorization worth $253.8 million remaining as of Jan 28, 2017, under its $500 million share repurchase plan announced in Feb 2016.
Store Update
As of Jan 28, 2017, Dillard’s had about 268 namesake outlets and 25 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 fiscal 2016, was 49.2 million.
Fiscal 2017 Outlook
For fiscal 2017, Dillard’s expects rentals of approximately $25 million compared with $26 million in fiscal 2016. Further, net interest and debt expenses are anticipated to be nearly $63 million, flat with fiscal 2016 level.
The company projects capital expenditures of about $125 million for fiscal 2017 compared with $105 million in fiscal 2016. Depreciation and amortization expenses for fiscal 2017 are expected at $240 million compared with $244 million in the prior year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
At this time, Dillard's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with an 'A'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision has been net zero. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.
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Dillard's (DDS) Down 15% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Dillard's, Inc. (DDS - Free Report) . Shares have lost about 15% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dillard's Q4 Earnings and Sales Miss
Dillard's reported a dismal fourth-quarter fiscal 2016, wherein both sales and earnings lagged estimates and plunged year over year. Results were primarily hurt by the persistently challenging trends in the apparel retail segment.
The company posted adjusted earnings of $1.85 per share, which lagged the Zacks Consensus Estimate of $2.34 and plunged nearly 17.8% from $2.25 in the year-ago quarter. Earnings lagged primarily due to soft sales stemming from weak traffic trends attributed to industry challenges, mainly owing to change in consumer preference from offline to online shopping.
Including one-time items, the company reported earnings per share of $1.72, down 25.5% from $2.31 earned in the prior-year quarter.
Dillard's total revenue (including service charges and other income) of $1,983.9 million dropped 6.3% from the year-ago quarter and missed the Zacks Consensus Estimate of $1,999 million.
Dillard's net sales (including CDI Contractors LLC or CDI) declined 6.7% year over year to $1,935.6 million in the reported quarter. Merchandise sales, excluding CDI, fell 6.2% to roughly $1,896 million. Merchandise comparable-store sales for the 13-week period ended Jan 28, 2017 were down 6% from the comparable period ended Jan 30, 2016.
During the reported quarter, sales at all of the company’s categories decreased. While ladies’ apparel, men’s apparel and accessories were among the relatively stronger categories, home & furniture, and shoes remained considerably weak. The best performing region was Eastern, trailed by the Western and Central regions, respectively.
Consolidated gross margin expanded 24 basis points (bps), while gross margin from retail operations (excluding CDI) rose 8 bps.
Dillard's selling, general and administrative (SG&A) expenses (as a percentage of sales) escalated 160 bps to 23.3%. In dollar terms, consolidated SG&A expenses reflected a marginal 0.5% growth to $451.6 million. Higher SG&A expenses in the quarter were due to a rise in selling payroll and services purchased expenses, partly neutralized by savings in several expense categories.
Financial Details
Dillard’s ended fiscal 2016 with cash and cash equivalents of $347 million, long-term debt and capital leases (excluding current portions) of $530.1 million and total shareholders’ equity of $1,717.4 million. Inventory improved 2.3% year over year to $1,406.4 million.
In fiscal 2016, the company generated net cash flow from operations of $517.2 million. It bought back 1.3 million shares for $80.6 million in the fiscal fourth quarter, bringing the fiscal year repurchases to 3.8 million shares for $246.2 million. With this, the company has authorization worth $253.8 million remaining as of Jan 28, 2017, under its $500 million share repurchase plan announced in Feb 2016.
Store Update
As of Jan 28, 2017, Dillard’s had about 268 namesake outlets and 25 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 fiscal 2016, was 49.2 million.
Fiscal 2017 Outlook
For fiscal 2017, Dillard’s expects rentals of approximately $25 million compared with $26 million in fiscal 2016. Further, net interest and debt expenses are anticipated to be nearly $63 million, flat with fiscal 2016 level.
The company projects capital expenditures of about $125 million for fiscal 2017 compared with $105 million in fiscal 2016. Depreciation and amortization expenses for fiscal 2017 are expected at $240 million compared with $244 million in the prior year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
Dillard's, Inc. Price and Consensus
Dillard's, Inc. Price and Consensus | Dillard's, Inc. Quote
VGM Scores
At this time, Dillard's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with an 'A'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision has been net zero. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.