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Dillard's (DDS) Q1 Earnings In Line, Sales Miss Estimates

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Dillard's Inc. (DDS - Free Report) reported in-line earnings in first-quarter fiscal 2019 while sales lagged estimates. Furthermore, the bottom line declined year over year due to higher markdowns, which significantly impacted margins. Meanwhile, sales were marginally up from the prior-year quarter.

The company’s shares did not react much to the earnings release. However, the stock has gained 5.1% year to date, against the industry’s decline of 12%.

Q1 Numbers

Dillard's reported adjusted earnings per share of $2.77, in line with the Zacks Consensus Estimate. However, earnings declined 4.2% from adjusted earnings of $2.89 in the prior-year quarter.

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


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

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


Net sales were $1,465 million, up 0.5% from the year-ago quarter but missed the Zacks Consensus Estimate of $1,484 million. Excluding services and other income, sales rose 0.4% to $1,497.9 million. Merchandise sales increased 0.7% to $1,421 million. Sales in comparable stores for the 13-week period (ended May 4, 2019) remained flat with the year-ago period.

During the fiscal first quarter, this Zacks Rank #4 (Sell) company witnessed robust performance in juniors' and children's apparel categories along with momentum in home and furniture, and men's apparel and accessories. However, sales remained soft for shoes and cosmetics categories. Notably, the eastern region performed exceedingly well, followed by central and western regions.

Consolidated gross margin decreased 134 basis points (bps) to 29.6%, which marked a steeper decline when compared with retail operations. Gross margin from retail operations contracted 141 bps mainly due to higher markdowns.

Dillard's SG&A expenses (as a percentage of sales) were down 20 bps from the prior-year quarter to 27.6%. In dollar terms, SG&A expenses (operating expenses) decreased 0.2% to $405.1 million.

Financial Details

Dillard’s ended the reported quarter with cash and cash equivalents of $139.8 million, long-term debt and finance leases of $367.2 million, and total shareholders’ equity of $1,736.9 million. As of May 4, 2019, merchandise inventories improved 2.9% year over year to $1,832.6 million.

In the fiscal first quarter, the company generated operating cash flow of $48.3 million. Further, it remained committed to rewarding shareholders with dividends and buybacks.

During the fiscal first quarter, the company bought back roughly 0.2 million shares for $17.4 million under its $500-million repurchase program announced in March 2018. As of May 4, 2019, it had share buyback authorization worth $389 million remaining under its program.

Store Update

As of May 4, 2019, Dillard’s had about 261 namesake outlets and 28 clearance centers, operating in 29 states alongside an online store at The company’s total square footage as of May 4 was 48.7 million.

Fiscal 2019 View

Dillard’s provided its guidance for fiscal 2019. The company expects rentals of approximately $29 million, flat with the fiscal 2018 level. Net interest and debt expenses are anticipated to be $46 million, down from $53 million in fiscal 2018. Furthermore, the company projects capital expenditure of about $140 million for fiscal 2019 compared with $137 million spent last year.

For fiscal 2019, depreciation and amortization expenses are projected to be $225 million compared with $224 million in fiscal 2018.

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