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Dillard's (DDS) Rallies 17% on Q4 Earnings & Sales Beat

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Shares of Dillard's Inc. (DDS - Free Report) surged a solid 16.8% yesterday, following the company’s robust fourth-quarter fiscal 2017 performance. Notably, the company’s sales and earnings topped estimates for the quarter and also improved year over year. This marked the company’s third earnings beat in trailing four quarters. Moreover, sales surpassed estimates for the third consecutive quarter.

Overall, this Zacks Rank #1 (Strong Buy) stock has jumped 20% in the past month, against the industry’s 0.2% growth.



Q4 Numbers

The company reported adjusted earnings per share of $2.82 per share, marking a 52.4% increase from $1.85 per share in the prior-year quarter. Moreover, bottom-line results significantly beat the Zacks Consensus Estimate of $1.82 per share.

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

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

Results mainly gained from the continuation of the positive trends witnessed in the third quarter into the fourth quarter. The earnings growth came on the back of solid comparable store sales (comps) increase, along with higher gross margins and relative expense management.

Dillard's total revenues (including service charges and other income) of $2,109.2 million improved 6.3% from the year-ago quarter and also topped the Zacks Consensus Estimate of $2,041.1 million.

Dillard's net sales (including CDI Contractors LLC or CDI) rose 6.5% year over year to $2,061.3 million in the reported quarter. Merchandise sales, excluding CDI, increased 6.8% to roughly $2,025 million. Sales in comparable stores for the 13-week period ended Jan 27, 2018, jumped 3% from the year-ago period.

During the quarter, ladies’ apparel, juniors' and children's apparel, and men's apparel and accessories categories displayed above-average performance. However, this was offset by softness in categories like cosmetics, ladies’ accessories and lingerie, home and furniture, and shoes. The Western and Eastern regions were the best performers, trailed by the Central region.

Consolidated gross margin expanded 53 basis points (bps), while gross margin from retail operations (excluding CDI) improved 48 bps due to higher markups.

Dillard's SG&A expenses (as a percentage of sales) remained flat with last year at 23.3%. In dollar terms, SG&A expenses rose 6.5% to $480.8 million driven by increased payroll, supplies and utilities. Further, an additional week of operations in fourth-quarter fiscal 2017 led to the increase in operating expenses.

Financial Details

Dillard’s ended the quarter with cash and cash equivalents of $187 million, long-term debt and capital leases (excluding current portions) of $368.3 million and total shareholders’ equity of $3,673.1 million. Merchandise inventories improved 4.1% year over year to $1,463.6 million.

In fiscal 2017, the company generated net cash flow from operations of $274.2 million and incurred $9.4 million in dividends.

Moreover, the company bought back 0.6 million shares for $34.6 million in the fourth quarter. This brings the total repurchases made during the fiscal year to 4.1 million shares for about $219 million. As of Feb 3, 2018, Dillard’s had an authorization worth $34.8 million remaining under its $500 million buyback program.

Store Update

As of Feb 3, 2018, Dillard’s had about 268 namesake outlets and 24 clearance centers operating in 29 states, as well as an online store at www.dillards.com. Dillard’s total square footage, as of Feb 3, was 49.2 million.

Fiscal 2018 View

Following the solid quarter, Dillard’s provided its costs guidance for fiscal 2018. The company expects rentals of approximately $27 million compared with $28 million in fiscal 2017. Net interest and debt expenses are anticipated to be nearly $50 million versus $63 million in fiscal 2017. Further, the company projects capital expenditures of about $140 million for fiscal 2018 against $131 million spent in fiscal 2017.

Depreciation and amortization expenses for fiscal 2018 are expected at $230 million compared with $232 million in the prior year.

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