Dillard's Inc. (DDS Quick QuoteDDS - Free Report) posted third-quarter fiscal 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Meanwhile, the company’s sales and earnings declined year over year. A tough consumer landscape adversely impacted sales and comparable store sales (comps). However, DDS maintained a strong gross margin rate and delivered lower operating expenses, driven by stringent expense-control initiatives.

Earnings per share of $7.73 surpassed the Zacks Consensus Estimate of $6.47. However, the bottom line declined 16.9% from adjusted earnings of $9.30 in the year-ago quarter.

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Net sales of $1.427 billion fell 3.3% from the prior-year quarter but beat the Zacks Consensus Estimate of $1.420 billion. Including service charges and other income, the company reported sales of $1.451 million, down 3.5% year over year.

Dillard’s shares rallied 11.5% on Nov. 14, 2024, following the better-than-expected third-quarter fiscal 2024 results and optimism around lower operating expenses on disciplined expense control. Shares of the Zacks Rank #3 (Hold) company have advanced 22.6% in the past three months against the industry's 3.4% decline.

Dillard's, Inc. Price, Consensus and EPS Surprise

 

Dillard's, Inc. price-consensus-eps-surprise-chart | Dillard's, Inc. Quote

Detailed Analysis of DDS’s Q3 Performance

Total retail sales (excluding CDI Contractors, LLC) dropped 3.8% year over year to $1.356 billion. Comps declined 4% year over year. Retail sales were affected by the challenging sales environment. Our model had predicted a comps decline of 2.4% for the fiscal third quarter.

The company witnessed robust sales in the cosmetics category. On the flip side, men’s apparel and accessories, and juniors’ and children’s apparel were the weakest categories.

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The consolidated gross margin contracted 90 basis points (bps) year over year to 42.6%. The retail gross margin of 44.5% reflected a year-over-year decrease of 80 bps due to moderate gross margin declines in shoes, juniors’ and children’s apparel, home and furniture, and ladies’ apparel. The metric fell slightly in cosmetics and juniors’ and children’s apparel. However, this was partly negated by gross margin growth in ladies’ accessories and lingerie categories, with flat margins in men’s apparel and accessories, and cosmetics.

Dillard's consolidated SG&A expenses (as a percentage of sales) expanded 80 bps to 29.4% from the prior-year quarter. In dollar terms, SG&A expenses (operating expenses) declined 0.7% year over year to $418.9 million. The decrease in operating expenses is mainly attributed to stringent expense control measures, which resulted in flat payroll expenses. However, the company experienced an increase in insurance benefit expenses in the fiscal third quarter.

Our model had predicted SG&A expense growth (as a percentage of sales) to be 240 bps. In dollar terms, we expected SG&A expenses to rise 5.3% year over year to $444.3 million.

Dillard’s Other Financial Details

DDS ended the fiscal third quarter with cash and cash equivalents of $980.4 million, a long-term debt of $321.6 million, and a total shareholders' equity of $1.963 billion. The company provided $349.4 million of net cash from operating activities as of Nov. 2, 2024. Ending inventory increased 3% year over year as of Nov. 2, 2024.

In third-quarter fiscal 2024, the company repurchased 294,000 shares for $107 million, reflecting an average price of $364.43 per share. As of Nov. 2, 2024, the company had $287 million remaining under its current share repurchase authorization announced in May 2023.

The company expects capital expenditure of $110 million for fiscal 2024 compared with the $120 million mentioned earlier. The anticipated figure suggests a decline from the $133 million reported in fiscal 2023.

As of Nov. 2, 2024, DDS operated 273 Dillard’s stores, including 28 clearance stores across 30 states, and an online store at dillards.com.

What Dillard’s Expects for FY24?

For fiscal 2024, Dillard’s expects depreciation and amortization expenses of $180 million, flat with that reported in fiscal 2023. The company projects net interest and debt income expenses of $13 million against an income of $5 million in fiscal 2023. It anticipates rentals of $22 million, in line with the fiscal 2023 reported figure.

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Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. GAP currently carries a Zacks Rank of 2.

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