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Dillard's (DDS) Down 11% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Dillard's (DDS - Free Report) . Shares have lost about 11% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Dillard's 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 drivers.
Dillard's Q3 Earnings Beat Estimates
Dillard's reported better-than-expected earnings in third-quarter fiscal 2019. Moreover, its comparable store sales (comps) and retail gross margin marked a significant improvement sequentially. Further, significantly lower inventory levels aided results.
Q3 Numbers
Dillard's reported adjusted earnings of 23 cents, significantly beating the Zacks Consensus Estimate of a loss of 29 cents. However, the bottom line declined 14.8% from the year-ago quarter’s earnings of 27 cents per share.
Net sales of $1,423.6 million declined 2.2% from the year-ago quarter. Excluding services and other income, sales fell 2.2% to $1,388.3 million. Merchandise sales (excluding CDI Contractors, LLC) dipped 0.6% to $1,334 million. The Zacks Consensus Estimate for sales was $1,404 million.
Comparable store sales (comps) for 13 weeks (ended Nov 2, 2019) remained flat compared with a 3% increase in the year-ago quarter. However, comps for the quarter under review reflected an improvement on a sequential basis from a 2% decline reported in second-quarter fiscal 2019. Notably, the eastern region performed exceedingly well, followed by western and central regions.
Consolidated gross margin expanded 53 basis points (bps) in the fiscal third quarter. Gross margin from retail operations improved 13 bps mainly due to lower inventory levels. Notably, gross margin from retail stores reflected significant gain on a sequential basis from a decline of 319 bps reported in second-quarter fiscal 2019.
Dillard's SG&A expenses (as a percentage of sales) rose 60 bps from the prior-year quarter to 30.1%. In dollar terms, SG&A expenses (operating expenses) dipped 0.2% to $418.1 million. Meanwhile, retail operating expenses (as a percentage of sales) for the quarter under review increased 10 bps to 31.2%. In dollar terms, retail operating expenses were nearly flat at $416.6 million.
Financial Details
The company ended the fiscal third quarter with cash and cash equivalents of $79.1 million, long-term debt and finance leases of $366.7 million, and total shareholders’ equity of $1,612.4 million. As of Nov 2, 2019, merchandise inventories declined nearly 4% to $1,970 million. This compared favorably with flat inventories at the end of second-quarter fiscal 2019.
In the first nine months of fiscal 2019, the company generated operating cash flow of $23 million. Moreover, it remained committed to rewarding shareholders with dividends and buybacks.
During the fiscal third quarter, the company bought back 0.6 million shares for $35.2 million under its $500-million repurchase program announced in March 2018. As of Nov 2, 2019, it had share buyback authorization worth $305.4 million remaining under its program.
Store Update
As of Nov 2, 2019, Dillard’s had about 259 namesake outlets and 30 clearance centers, operating in 29 states, alongside an online store at www.dillards.com. The company’s total square footage as of Nov 2 was 48.9 million.
Further, it announced plans to open three stores by the end of fiscal 2019 and in the first quarter of fiscal 2020. Notably, the company plans to open expanded stores at Killeen Mall in Killeen, TX; Columbia Mall in Columbia, MO; and Richland Fashion Mall in Waco, TX. All these facilities will be dual-anchored locations, with two company-owned stores replacing existing leased stores. The company expects to open the Killeen-based store by the end of fiscal 2019, Columbia-based store in the first quarter of fiscal 2020 and the Waco-based store by early 2020.
Additionally, Dillard’s announced planned closure of the Fiesta Mall Clearance Center in Mesa, AR, by January 2020.
Fiscal 2019 View
For fiscal 2019, Dillard’s expects rentals of $27 million compared with $29 million in fiscal 2018. It anticipates net interest and debt expenses of $46 million, suggesting a decline from $53 million in fiscal 2018. Furthermore, the company now projects capital expenditure of $115 million for fiscal 2019 compared with $125 million stated earlier. Notably, it spent $137 million in fiscal 2018.
For fiscal 2019, the company projects depreciation and amortization expenses of $224 million, suggesting no change from the fiscal 2018 level.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.48% due to these changes.
VGM Scores
Currently, Dillard's has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Dillard's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Dillard's (DDS) Down 11% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Dillard's (DDS - Free Report) . Shares have lost about 11% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Dillard's 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 drivers.
Dillard's Q3 Earnings Beat Estimates
Dillard's reported better-than-expected earnings in third-quarter fiscal 2019. Moreover, its comparable store sales (comps) and retail gross margin marked a significant improvement sequentially. Further, significantly lower inventory levels aided results.
Q3 Numbers
Dillard's reported adjusted earnings of 23 cents, significantly beating the Zacks Consensus Estimate of a loss of 29 cents. However, the bottom line declined 14.8% from the year-ago quarter’s earnings of 27 cents per share.
Net sales of $1,423.6 million declined 2.2% from the year-ago quarter. Excluding services and other income, sales fell 2.2% to $1,388.3 million. Merchandise sales (excluding CDI Contractors, LLC) dipped 0.6% to $1,334 million. The Zacks Consensus Estimate for sales was $1,404 million.
Comparable store sales (comps) for 13 weeks (ended Nov 2, 2019) remained flat compared with a 3% increase in the year-ago quarter. However, comps for the quarter under review reflected an improvement on a sequential basis from a 2% decline reported in second-quarter fiscal 2019. Notably, the eastern region performed exceedingly well, followed by western and central regions.
Consolidated gross margin expanded 53 basis points (bps) in the fiscal third quarter. Gross margin from retail operations improved 13 bps mainly due to lower inventory levels. Notably, gross margin from retail stores reflected significant gain on a sequential basis from a decline of 319 bps reported in second-quarter fiscal 2019.
Dillard's SG&A expenses (as a percentage of sales) rose 60 bps from the prior-year quarter to 30.1%. In dollar terms, SG&A expenses (operating expenses) dipped 0.2% to $418.1 million. Meanwhile, retail operating expenses (as a percentage of sales) for the quarter under review increased 10 bps to 31.2%. In dollar terms, retail operating expenses were nearly flat at $416.6 million.
Financial Details
The company ended the fiscal third quarter with cash and cash equivalents of $79.1 million, long-term debt and finance leases of $366.7 million, and total shareholders’ equity of $1,612.4 million. As of Nov 2, 2019, merchandise inventories declined nearly 4% to $1,970 million. This compared favorably with flat inventories at the end of second-quarter fiscal 2019.
In the first nine months of fiscal 2019, the company generated operating cash flow of $23 million. Moreover, it remained committed to rewarding shareholders with dividends and buybacks.
During the fiscal third quarter, the company bought back 0.6 million shares for $35.2 million under its $500-million repurchase program announced in March 2018. As of Nov 2, 2019, it had share buyback authorization worth $305.4 million remaining under its program.
Store Update
As of Nov 2, 2019, Dillard’s had about 259 namesake outlets and 30 clearance centers, operating in 29 states, alongside an online store at www.dillards.com. The company’s total square footage as of Nov 2 was 48.9 million.
Further, it announced plans to open three stores by the end of fiscal 2019 and in the first quarter of fiscal 2020. Notably, the company plans to open expanded stores at Killeen Mall in Killeen, TX; Columbia Mall in Columbia, MO; and Richland Fashion Mall in Waco, TX. All these facilities will be dual-anchored locations, with two company-owned stores replacing existing leased stores. The company expects to open the Killeen-based store by the end of fiscal 2019, Columbia-based store in the first quarter of fiscal 2020 and the Waco-based store by early 2020.
Additionally, Dillard’s announced planned closure of the Fiesta Mall Clearance Center in Mesa, AR, by January 2020.
Fiscal 2019 View
For fiscal 2019, Dillard’s expects rentals of $27 million compared with $29 million in fiscal 2018. It anticipates net interest and debt expenses of $46 million, suggesting a decline from $53 million in fiscal 2018. Furthermore, the company now projects capital expenditure of $115 million for fiscal 2019 compared with $125 million stated earlier. Notably, it spent $137 million in fiscal 2018.
For fiscal 2019, the company projects depreciation and amortization expenses of $224 million, suggesting no change from the fiscal 2018 level.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.48% due to these changes.
VGM Scores
Currently, Dillard's has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Dillard's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.