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Bear of the Day: Dillard's, Inc. (DDS)

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Dillard's Inc. (DDS - Free Report) is coming off a disappointing bottom-line miss last quarter and its stock price has plummeted over the last six months. Looking ahead, the fashion retailer’s holiday quarter earnings and revenue outlook appears less than inspiring.

Overview

Dillard's closed its most recent quarter with 267 official Dillard’s locations and 25 clearance centers. The Little Rock, Arkansas-based firm’s adjusted Q3 earnings plummeted roughly 34% from the year-ago quarter to hit $0.27 per share, which also fell well short of our $0.56 a share Zacks Consensus Estimate.

Meanwhile, the department store operator posted revenue of $1.46 billion. This came in above our estimate and marked a 4.2% jump from the year-ago period. “While we are encouraged by our 3% comparable sales performance, this was a disappointing quarter as markdowns weighed heavily on gross margin, particularly in the first month,” CEO William T. Dillard, II said in a company statement.

Stock Price Movement

As we mentioned at the top, shares of DDS have tumbled roughly 14% in the last six months, which is worse than its peer group’s 3% decline. We should note that this group includes JC Penney (JCP - Free Report) , Kohl’s (KSS - Free Report) , and Macy’s (M - Free Report) . Plus, we can see that the last five years have been a rollercoaster for Dillard’s.

DDS stock closed regular trading Wednesday up 2.54% to $70.53 per share. This still represented a roughly 29% downturn compared to the company’s 52-week high of $98.75 per share.

Outlook & Earnings Trends  

Looking ahead, our current Zacks Consensus Estimate is calling for Dillard’s Q4 revenues to sink by 5.4% to reach $1.99 billion. The fashion retailer’s full-year revenues are projected to slip by 0.25% to hit $6.41 billion. Plus, if we take a peek ahead to fiscal 2019, the company’s revenues are projected to drop marginally from our current year outlook.

Moving on, Dillard’s adjusted quarterly earnings are expected to fall by 7.1% to hit $2.62 per share. Investors should note that the company’s adjusted fiscal 2018 earnings are projected to surge by 19.38%. However, fiscal 2019’s earning picture is then expected to dip 5% below our 2018 estimate.  

Maybe more importantly, Dillard’s earnings picture has turned more negative over the past 30 days. DDS’ Q4 earnings estimate has slipped by $0.19 per share during this stretch. Meanwhile, the company’s full-year earnings estimate fell by $0.75 a share.

 

Bottom Line

Dillard’s is currently a Zacks Rank #5 (Strong Sell) based, in large part, on its negative earnings estimate revision trends. DDS also sports a “D” grade for Momentum in our Style Scores system. On top of that, the fact that Dillard’s quarterly revenues are projected to fall amid a holiday shopping period that is projected to break records could be a sign that the company has been unable to adapt to the new retail age.

Investors interested in regional department stores might instead consider Macy’s, which is currently a Zacks Rank #2 (Buy). Plus, Canada Goose (GOOS - Free Report) , Shoe Carnival (SCVL - Free Report) , and Fossil Group (FOSL - Free Report) are all currently Zacks Rank #1 (Strong Buy) stocks.

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