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Dillard's (DDS) Q4 Earnings & Sales Beat Estimates, Stock Up

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Shares of Dillard's Inc. (DDS - Free Report) rose 1.4% yesterday, after reporting better-than-expected earnings and sales in fourth-quarter fiscal 2018. However, the top and bottom lines declined year over year. Earnings were impacted by higher markdowns, which significantly impacted margins.

Q4 Numbers

Dillard's reported earnings per share of $3.22, down 42% from adjusted earnings of $5.55 in the prior-year quarter. However, the figure exceeded the Zacks Consensus Estimate of $2.77.

Net sales were $2,056.3 million, which declined 2.5% from the year-ago quarter but surpassed the Zacks Consensus Estimate of $2,023 million. Excluding services and other income, sales dipped 2.4% to $2,010.6 million. Merchandise sales decreased 3.2% to $1,959 million. Sales in comparable stores for the 13-week period (ended Feb 2, 2019) increased 2% from the year-ago period.

During the fiscal fourth quarter, this Zacks Rank #3 (Hold) company witnessed robust performance in home and furniture categories along with momentum in cosmetics, and men's clothing and accessories. Notably, the eastern region performed exceedingly well, followed by the western and central regions.

Consolidated gross margin decreased 90 basis points (bps) to 29.6%, which marked a greater decline compared with retail operations. Gross margin from retail operations contracted 69 bps, mainly due to higher markdowns.

Dillard's SG&A expenses (as a percentage of sales) were down 40 bps from prior-year quarter to 22.8%. In dollar terms, the SG&A expenses decreased 4.4% to $458 million.

Financial Details

Dillard’s ended fiscal 2018 with cash and cash equivalents of $123.5 million, long-term debt and capital leases of $367.2 million, and total shareholders’ equity of $1,678.4 million. As of Feb 2, 2019, merchandise inventories improved 4.4% year over year to $1,528.4 million.

In fiscal 2018, the company generated operating cash flow of $367.2 million. Further, it remained committed to rewarding shareholders with dividends and buybacks. The company paid $139 million to shareholders in fiscal 2018, including cash dividends of $11.1 million and $127.9 million for share repurchases.

During the fiscal fourth quarter, the company bought back roughly 0.6 million shares for $36 million under its $500-million repurchase program announced in March 2018. As of Feb 2, 2019, the company had share buyback authorization worth $406.9 million remaining under its program.

Store Update

As of Feb 2, 2019, Dillard’s had about 265 namesake outlets and 26 clearance centers, operating in 29 states alongside an online store at www.dillards.com. The company’s total square footage as of Feb 2 was 49 million.

The company closed its 115,000 square feet clearance store at West Town Center in Cincinnati, OH, during the fiscal fourth quarter. Further, the company plans to close its store in Southern Park Mall in Boardman, OH, in the first quarter of fiscal 2019. The store encloses an area of 186,000 square feet.

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

Fiscal 2019 View

Dillard’s provided its guidance for fiscal 2019. The company expects rentals of approximately $28 million compared with $29 million in fiscal 2018. Net interest and debt expenses are anticipated to be $46 million, down from $53 million in fiscal 2018. Furthermore, the company projects capital expenditure of about $140 million for fiscal 2018 compared with $137 million spent last year.

For fiscal 2019, depreciation and amortization expenses are projected to be $225 million compared with $224 million in fiscal 2018.

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