Back to top

Analyst Blog

Zacks Equity Research

Dillard's Hurt by Weak Traffic Trends: Time to Sell the Stock?

ZUMZ JWN DDS BOOT

Trades from $3

The apparel retail segment is currently plagued with macro challenges that relate to higher currency fluctuations, weak traffic trends and others. One stock that has recently fallen prey to these challenging trends is the department store chain, Dillard’s Inc. (DDS - Free Report) .

Though the stock price of Dillard’s has grown 11.9% year to date, it is underperforming the Zacks categorized Retail-regional department stores market that has recorded growth of 17.5%. Falling about 2% to $73.55 on Nov 25, 2016, the stock is trading below its 52-week high mark of $88.58.



Evidently, the company reported dismal results for third-quarter 2016 earlier this month. Earnings of 67 cents per share lagged the Zacks Consensus Estimate of 77 cents and plunged nearly 35% on a year-over-year basis. The fall was primarily due to soft sales stemming from weak traffic trends that can be attributed to consumer preference shifting toward online shopping as well as gross margin contraction. Total revenue (including service charges and other income) of $1,406.5 million slipped 4.5% from the year-ago quarter.

This fashion apparel, cosmetics and home furnishing retailer has underperformed the Zacks Consensus Estimate by an average 9.3% in the trailing four quarters, recording a negative earnings surprise thrice.

DILLARDS INC-A Price, Consensus and EPS Surprise

 

DILLARDS INC-A Price, Consensus and EPS Surprise | DILLARDS INC-A Quote

Following the miserable performance, the Zacks Consensus Estimate of $5.59 and $5.46 for fiscal 2016 and fiscal 2017 has declined 23 cents and 19 cents, respectively, in the past 30 days.

Further, soft economic recovery and stiff competition in the retail merchandise space may prove to be hurdles for the company. Additionally, its fiscal 2016 outlook indicates significant cost pressures, which is likely to hurt both margins and the bottom line.

However, Dillard’s constant efforts to capitalize on growth opportunities in its brick-and-mortar stores and eCommerce business position it well, as it is likely to help it retain existing customers and attract new ones. Further, the company’s focus on increasing productivity, developing a leading omni-channel platform and enhancing its domestic operations is expected to support future results. Moreover, the company’s strong financial status provides the flexibility to make shareholder-friendly moves and pursue business expansion.

Zacks Rank & Key Picks

Currently, Dillard’s carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the retail sector include Boot Barn Holdings Inc. (BOOT - Free Report) , Nordstrom Inc. (JWN - Free Report) and Zumiez Inc. (ZUMZ - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boot Barn Holdings, with a long-term earnings growth rate of 14.5%, has surged nearly 36.2% year to date.

Gap has gained nearly 16.1% year to date. Moreover, it has a long-term earnings growth rate of 9.7%.

Zumiez has jumped 65.7% year to date. The stock has a long-term earnings growth rate of 15%.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>