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Dillard's Slides to 52-Week Low: Is DDS Losing Sheen?

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Dillard's Inc. (DDS - Free Report) touched a 52-week low of $65.63 yesterday as investors appear to be gradually losing confidence in the stock. Shares of the company have plunged 15% since its dismal third-quarter fiscal 2015 results, released on Nov 16. Additionally, year-to-date, the stock has nosedived 45.8%.

This departmental store chain, featuring fashion apparel and home furnishings posted quarterly adjusted earnings of $1.03 per share that missed the Zacks Consensus Estimate of $1.15 and plunged 14.9% on a year-over-year basis.

Further, this Zacks Rank #4 (Sell) company’s total revenue (including service charges and other income) slipped 1.8% from the year-ago quarter figure to $1,472.9 million, and came in below the Zacks Consensus Estimate of $1,487 million.

Also, we note that Dillard’s bottom-line has underperformed the Zacks Consensus Estimate by an average of 3.4% over the past 4 quarters, delivering a miss in 3 of these. Moreover, management’s guidance for fiscal 2015 indicates significant cost pressures, raising concerns about the company’s prospects.

We believe that these factors led to downward revisions in Dillard’s earnings estimates as analysts have become less constructive on the stock’s future performance. The Zacks Consensus Estimate declined 10.8% to $7.05 per share for fiscal 2015 and 19.6% to $2.62 per share for the fourth quarter, over the past 60 days.

Another factor posing a threat for Dillard’s is that the company operates in the highly competitive retail merchandise industry. Although it is a large regional department store, the company has many rivals at the national level competing with its individual stores, including specialty, off-price, discount, Internet and mail-order retailers. Hence, on losing its competitive position, the company might face downward pricing pressure, lower demand for its products as well as waning margins.

However, we expect the company’s focus on increasing productivity, developing a leading omni-channel platform and enhancing its domestic operations to support future results.

Stocks to Consider

A better-ranked stock in the same industry is J. C. Penney Company, Inc. (JCP - Free Report) , with a Zacks Rank #2 (Buy). Other favorably ranked retail stocks are Casey's General Stores, Inc. (CASY - Free Report) , with a Zacks Rank #1 (Strong Buy) and Ross Stores Inc. (ROST - Free Report) , with a Zacks Rank #2. 

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