It has been about a month since the last earnings report for Dillard's (
DDS Quick Quote DDS - Free Report) . Shares have added about 14.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dillard's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Dillard's Q3 Earnings Beat, Posts Robust Margins
Dillard's reported third-quarter fiscal 2020 results, wherein the bottom line surpassed the Zacks Consensus Estimate while sales lagged the same. The company noted that it continues to witness adverse impacts of COVID-19 and as a result, has refrained from providing fiscal 2020 guidance.
Dillard's reported adjusted earnings of $1.49 per share against the Zacks Consensus Estimate of a loss of 86 cents. Moreover, the bottom line reflected a significant improvement from 23 cents reported in the year-ago quarter. This uptick can be attributable to improved margins and lower expenses.
Net sales of $1,052.1 million declined 26.1% from the prior-year quarter. Excluding services and other income, sales fell 35.4% year over year. The Zacks Consensus Estimate for revenues was $1,226 million. Total retail sales (excluding CDI Contractors, LLC) fell almost 25% to $994.6 million. Further, comparable store sales declined roughly 24% year over year. Solid performance in home and furniture along with ladies' accessories, lingerie and cosmetics was more than offset by weakness in ladies' apparel. Also, the Eastern region performed better than the Central and Western regions. Notably, retail gross margin improved 210 basis points (bps) from the year-ago quarter, primarily due to lower markdowns. On a consolidated basis, gross margin expanded 249 bps year over year to 35.7%. Dillard's consolidated SG&A expenses (as a percentage of sales) rose 90 bps from the prior-year quarter to 31%. In dollar terms, however, SG&A expenses (operating expenses) declined roughly 24% to $265.8 million owing to a 28% decline in payroll expenses stemming from lower store operating hours. Retail operating expenses of $316.7 million declined 24% year over year during the quarter. Meanwhile, as a percentage of sales, it expanded 70 bps to 31.9%. Looking at fiscal 2020, the company continues to expect a net operating loss. Store Update
During the quarter, Dillard’s announced plans to close its store at Paradise Valley Mall in Phoenix, AZ, by the end of fiscal 2020. The company operated 250 Dillard’s locations and 32 clearance centers, spanning 29 states, as of Oct 31, 2020.
Financial Details & Liquidity
Dillard’s ended third-quarter fiscal 2020 with cash and cash equivalents of $61.1 million, long-term debt and finance leases of $366 million, and total shareholders’ equity of $1,380.8 million.
In the first nine months of fiscal 2020, the company’s cash used for operating activities was $65.5 million. However, it remained committed to rewarding shareholders with share buybacks. During the fiscal third quarter, the company bought back 0.6 million shares for $19.5 million under its $500-million repurchase program announced in March 2018. As of Oct 31, it had $173.1 million authorization remaining to be bought back under the aforementioned program. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 62.09% due to these changes.
At this time, Dillard's has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions 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.