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Dillard's (DDS) Tops Q3 Earnings & Sales, Stock Jumps 12%

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Shares of Dillard's Inc. (DDS - Free Report) surged a solid 12.2% yesterday, following the company’s robust third-quarter fiscal 2017 performance. Notably, the company surpassed both sales and earnings estimates for the quarter, while both the top and bottom lines dropped year over year.  This marked the company’s second earnings beat in five quarters, while sales beat estimates for the third time in a row.

Overall, this Zacks Rank #4 (Sell) stock has jumped 8.6% in the past month, against the industry’s 4.5% slump.



Q3 Numbers

The company reported adjusted earnings per share of 41 cents per share, which compares unfavorably with the year-ago period earnings of 67 cents. However, bottom-line results considerably surpassed the Zacks Consensus Estimate of 19 cents.

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

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

Dillard's total revenues (including service charges and other income) of $1,396.8 million dropped 0.7% from the year-ago quarter, while it topped the Zacks Consensus Estimate of $1,338.1 million.

Dillard's net sales (including CDI Contractors LLC or CDI) dipped 0.8% year over year to $1,354.9 million in the reported quarter. Merchandise sales, excluding CDI, slipped 1% to roughly $1,385 million. Merchandise comparable-store sales for the 13-week period ended Oct 28, 2017 were also down 0.8% from the year-ago period to $1,313 million. Sales in comparable stores dipped 1%.

While ladies’ apparel category displayed an above-average performance in the quarter, sales at the ladies’ accessories and lingerie as well as juniors’ and children’s apparel also surpassed the company’s trend. Further, Dillard’s performance was noteworthy across men’s apparel and accessories, and home and furniture. However, this was offset by softness in shoes and cosmetics categories. The Western and Eastern regions were the best performers, trailed by the Central region.

Consolidated gross margin contracted 133 basis points (bps), while gross margin from retail operations (excluding CDI) fell 137 bps due to higher markdowns.

Dillard's SG&A expenses (as a percentage of sales) escalated 20 bps to 30.3%. In dollar terms, SG&A expenses inched up 0.1% to $411.1 million.

Financial Details

Dillard’s ended the quarter with cash and cash equivalents of $114.9 million, long-term debt and capital leases (excluding current portions) of $368.6 million and total shareholders’ equity of $1,590.6 million. Merchandise inventories improved 2.9% year over year to $1,957.2 million.

During the nine months of the fiscal, the company generated net cash flow from operations of $55.5 million and incurred $6.5 million in dividends. It bought back 0.4 million shares for $23.7 million in the third quarter. As of Oct 28, 2017, Dillard’s had an authorization worth $69.5 million remaining under its $500 million buyback program.

Store Update

As of Oct 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 Oct 28 was 49.1 million.

Fiscal 2017 View Reaffirmed

Dillard’s retained fiscal 2017 forecasts. The company expects rentals of approximately $28 million. In fiscal 2016, the company’s rentals amounted to $26 million. Net interest and debt expenses are anticipated to be nearly $63 million, flat with fiscal 2016 level. Further, 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 $230 million compared with $244 million in the prior year.

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