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Dillard's (DDS) to Report Q3 Earnings: What's in the Offing?

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Dillard’s, Inc. (DDS - Free Report) is expected to register a year-over-year decline in the top line when it reports third-quarter fiscal 2020 numbers. The company has been witnessing soft sales trends and retail traffic in the past few months due to the COVID-19 pandemic. Although it has been witnessing improved sales trends at the reopened stores, recovering lost sales seems difficult. Between Jun 2 and Aug 1, the reopened stores generated about 72% of the prior-year quarter’s sales. The Zacks Consensus Estimate for revenues of $1.24 billion indicates a 12.5% decline from the year-ago figure.

Moreover, we note that in the trailing four quarters, the company’s bottom line underperformed the Zacks Consensus Estimate by 22%, on average. The Zacks Consensus Estimate for fiscal third-quarter loss is 86 cents per share. Earnings of 23 cents per share were recorded in the prior-year quarter. Moreover, the loss estimate has been unchanged in the past 30 days.

Key Factors to Note

Although all of Dillard’s stores have reopened since second-quarter fiscal 2020, these stores have been operating with reduced hours, and witnessing soft retail traffic as well as sales trends owing to slow movement due to the COVID-19 pandemic. The continuation of these trends is likely to have partly affected sales in the fiscal third quarter.

Dillards, Inc. Price and EPS Surprise

Dillards, Inc. Price and EPS Surprise

Dillards, Inc. price-eps-surprise | Dillards, Inc. Quote

Notably, payroll expense declined 38% for the first half of fiscal 2020 mainly due to employee furloughs on the pandemic-related store closures. However, the return of furloughed employees to stores is likely to have resulted in a rise in payroll expenses during the fiscal third quarter. This is likely to have impacted the bottom line in the fiscal third quarter.

Nonetheless, the company is likely to have benefited from strong e-commerce sales trends in the to-be-reported quarter owing to its ship-from-store capability. Though gains from the re-opening of stores and e-commerce business are expected to get reflected in the results, we note that growth is likely to have been slow-paced due to limited resources with consumers and the continuity of the stay-at-home trend.

Meanwhile, the company’s aggressive measures to reduce inventory and costs through extension of vendor payment terms; cancellation, suspension and delaying of shipments; merchandise purchases reduction; and lowering of discretionary and capital expenditures are likely to have aided margins.

What the Zacks Model Suggests

Our proven model does not conclusively predict an earnings beat for Dillard’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dillard’s currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%.

3 Stocks With Favorable Combination

Here are three companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Target Corporation (TGT - Free Report) presently has an Earnings ESP of +11.29% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lowe's Companies, Inc. (LOW - Free Report) currently has an Earnings ESP of +1.05% and a Zacks Rank #2.

Central Garden Pet Company (CENT - Free Report) currently has an Earnings ESP of +57.14% and a Zacks Rank #2.

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