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Why Dillard's (DDS) Looks Poised for Growth After Q1 Results
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Dillard’s Inc. (DDS - Free Report) is worth giving a shot right now, as its sound fundamentals and growth efforts look impressive. Continued consumer demand, and focus on inventory and expense management bode well.
The company boasts a robust earnings surprise trend, which continued in first-quarter fiscal 2022. Both top and bottom lines beat the Zacks Consensus Estimate and rose year over year in the fiscal first quarter. This marked the eighth straight quarter of an earnings beat for DDS.
Backed by the robust earnings trend, the stock has outperformed the industry and the overall Retail Wholesale in the past year. DDS has skyrocketed 86.6% compared with the industry’s growth of 10.8% and against the sector’s decline of 30.1%. The stock also compares favorably with the S&P 500’s decline of 2% in the same period.
The company’s earnings estimates for the second quarter and fiscal 2022 have moved up 21.3% and 47.5%, respectively, in the past 30 days. The positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating further outperformance in the near term.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Dillard’s top line has been gaining from robust consumer demand, which resulted in growth across categories. Total revenues advanced 21.3% year over year in the fiscal first quarter, while total retail sales (excluding CDI Contractors, LLC) grew 22%. Comparable store sales increased 23% year over year. The company witnessed robust sales in men’s apparel and accessories, ladies, and children’s apparel.
This, along with improved margins and lower operating expenses as a percentage of sales, led to bottom-line growth. In first-quarter fiscal 2022, the company’s adjusted earnings surged more than two-fold from the year-ago quarter's $6.37 per share. The uptick can be attributed to robust sales, improved margins and lower operating expenses as a percentage of sales.
The company’s aggressive measures to lower excess inventory have been resulting in lower markdowns, thereby boosting the gross margin. Notably, Dillard’s retail gross margin expanded 470 basis points (bps) to 47.3% in first-quarter fiscal 2022, driven by improved consumer demand and better inventory management.
On a consolidated basis, the gross margin of 46.5% reflects a 480-bps improvement from 41.7% in the prior-year quarter. Prior to this, the metric improved 480 bps, 1,050 bps, 1,060 bps and 2,920 bps in the fourth, third, second and first quarters of fiscal 2021, respectively. The persistence of the trend may aid the company’s bottom line in the near term.
Dillard's has been undertaking several steps to reduce costs starting first-quarter fiscal 2020. Some of these are the extension of vendor payment terms, the decline of discretionary and capital expenditure, and payroll deduction. As a result, fiscal first-quarter consolidated SG&A expenses (as a percentage of sales) contracted 40 bps to 24.9%. The retail operating expense rate (SG&A) contracted 60 bps to 25.2%.
Here's How Other Stocks Fared
We highlighted three other top-ranked stocks in the Retail - Wholesale sector, namely Boot Barn (BOOT - Free Report) , Designer Brands (DBI - Free Report) and Levi Strauss & Co. (LEVI - Free Report) .
Boot Barn, the lifestyle retailer of western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #2 (Buy). BOOT has an expected EPS growth rate of 20% for three-five years. Shares of BOOT have increased 5.5% in the past year.
The Zacks Consensus Estimate for Boot Barn’s current-year sales and earnings per share (EPS) suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has a trailing four-quarter earnings surprise of 25.2%, on average.
Designer Brands, which designs, manufactures, and retails footwear and accessories in North America, has a Zacks Rank of 2 at present. DBI has a trailing four-quarter earnings surprise of 112.8%, on average. The stock has dipped 9% in the past year.
The Zacks Consensus Estimate for Designer Brands’ current-year sales and EPS suggests growth of 6.5% and 8.5%, respectively, from the year-ago period’s reported numbers.
Levi, which operates as an apparel company, presently carries a Zacks Rank #2. LEVI has a trailing four-quarter earnings surprise of 48.5%, on average. Shares of the company have declined 32.6% in the past year.
The Zacks Consensus Estimate for Levi’s current-year sales and EPS suggests growth of 12.2% and 5.3%, respectively, from the year-ago period’s reported numbers.
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Why Dillard's (DDS) Looks Poised for Growth After Q1 Results
Dillard’s Inc. (DDS - Free Report) is worth giving a shot right now, as its sound fundamentals and growth efforts look impressive. Continued consumer demand, and focus on inventory and expense management bode well.
The company boasts a robust earnings surprise trend, which continued in first-quarter fiscal 2022. Both top and bottom lines beat the Zacks Consensus Estimate and rose year over year in the fiscal first quarter. This marked the eighth straight quarter of an earnings beat for DDS.
Backed by the robust earnings trend, the stock has outperformed the industry and the overall Retail Wholesale in the past year. DDS has skyrocketed 86.6% compared with the industry’s growth of 10.8% and against the sector’s decline of 30.1%. The stock also compares favorably with the S&P 500’s decline of 2% in the same period.
The company’s earnings estimates for the second quarter and fiscal 2022 have moved up 21.3% and 47.5%, respectively, in the past 30 days. The positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating further outperformance in the near term.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Dillard’s top line has been gaining from robust consumer demand, which resulted in growth across categories. Total revenues advanced 21.3% year over year in the fiscal first quarter, while total retail sales (excluding CDI Contractors, LLC) grew 22%. Comparable store sales increased 23% year over year. The company witnessed robust sales in men’s apparel and accessories, ladies, and children’s apparel.
This, along with improved margins and lower operating expenses as a percentage of sales, led to bottom-line growth. In first-quarter fiscal 2022, the company’s adjusted earnings surged more than two-fold from the year-ago quarter's $6.37 per share. The uptick can be attributed to robust sales, improved margins and lower operating expenses as a percentage of sales.
The company’s aggressive measures to lower excess inventory have been resulting in lower markdowns, thereby boosting the gross margin. Notably, Dillard’s retail gross margin expanded 470 basis points (bps) to 47.3% in first-quarter fiscal 2022, driven by improved consumer demand and better inventory management.
On a consolidated basis, the gross margin of 46.5% reflects a 480-bps improvement from 41.7% in the prior-year quarter. Prior to this, the metric improved 480 bps, 1,050 bps, 1,060 bps and 2,920 bps in the fourth, third, second and first quarters of fiscal 2021, respectively. The persistence of the trend may aid the company’s bottom line in the near term.
Dillard's has been undertaking several steps to reduce costs starting first-quarter fiscal 2020. Some of these are the extension of vendor payment terms, the decline of discretionary and capital expenditure, and payroll deduction. As a result, fiscal first-quarter consolidated SG&A expenses (as a percentage of sales) contracted 40 bps to 24.9%. The retail operating expense rate (SG&A) contracted 60 bps to 25.2%.
Here's How Other Stocks Fared
We highlighted three other top-ranked stocks in the Retail - Wholesale sector, namely Boot Barn (BOOT - Free Report) , Designer Brands (DBI - Free Report) and Levi Strauss & Co. (LEVI - Free Report) .
Boot Barn, the lifestyle retailer of western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #2 (Buy). BOOT has an expected EPS growth rate of 20% for three-five years. Shares of BOOT have increased 5.5% in the past year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s current-year sales and earnings per share (EPS) suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has a trailing four-quarter earnings surprise of 25.2%, on average.
Designer Brands, which designs, manufactures, and retails footwear and accessories in North America, has a Zacks Rank of 2 at present. DBI has a trailing four-quarter earnings surprise of 112.8%, on average. The stock has dipped 9% in the past year.
The Zacks Consensus Estimate for Designer Brands’ current-year sales and EPS suggests growth of 6.5% and 8.5%, respectively, from the year-ago period’s reported numbers.
Levi, which operates as an apparel company, presently carries a Zacks Rank #2. LEVI has a trailing four-quarter earnings surprise of 48.5%, on average. Shares of the company have declined 32.6% in the past year.
The Zacks Consensus Estimate for Levi’s current-year sales and EPS suggests growth of 12.2% and 5.3%, respectively, from the year-ago period’s reported numbers.