Shares of Dillard's Inc. (DDS - Free Report) slipped 1.3% on Feb 25, after reporting lower-than-expected earnings and sales in fourth-quarter fiscal 2019. Moreover, its comparable store sales (comps) declined, while retail gross margin remained flat. However, lower inventory levels aided results.
In the past three months, shares of the Zacks Rank #1 (Strong Buy) company have slumped 21.6% compared with the industry’s decline of 9.2%.
Dillard's reported adjusted earnings of $2.75 per share, which missed the Zacks Consensus Estimate of $3.01. Moreover, the bottom line declined 14.6% from the year-ago quarter’s earnings of $3.22 per share. The earnings decline in the quarter was mainly due to the soft top line.
Net sales of $1,967.5 million declined 4.3% from the year-ago quarter. Excluding services and other income, sales fell 4.4% to $1,922.9 million. Merchandise sales (excluding CDI Contractors, LLC) dipped 4.1% to $1,879 million. The Zacks Consensus Estimate for sales was $2,000 million.
Comparable store sales (comps) for the 13 weeks (ended Feb 1, 2020) were down 3%. Notably, the eastern and western regions performed exceedingly well, while the central region remained weak. By category, the company’s comps benefited from strength in ladies' apparel and cosmetics, more than offset by soft performances in ladies' accessories and lingerie as well as home and furniture.
Both consolidated gross margin and gross margin from retail operations remained flat in the fiscal fourth quarter.
Dillard's SG&A expenses (as a percentage of sales) rose 100 bps from the prior-year quarter to 23.8%. In dollar terms, SG&A expenses (operating expenses) rose 0.1% to $458.6 million. Meanwhile, retail operating expenses (as a percentage of sales) for the quarter under review increased 110 bps to 24.3%. In dollar terms, retail operating expenses increased 0.4% to $456.7 million.
The company ended fiscal 2019 with cash and cash equivalents of $277.1 million, long-term debt and finance leases of $366.4 million, and total shareholders’ equity of $1,623.3 million. As of Feb 1, 2020, merchandise inventories declined 4.2% to $1,465 million.
In fiscal 2019, the company generated operating cash flow of $365.1 million. Moreover, it remained committed to rewarding shareholders with dividends and buybacks.
During the fiscal fourth quarter, the company bought back 0.5 million shares for $36.7 million under its $500-million repurchase program announced in March 2018. In fiscal 2019, it repurchased 2.2 million shares for 138.3 million. Further, the company repurchased 0.8 million shares for $52.8 million in the period between Feb 1 and Feb 24. As of Feb 24, 2020, it had share buyback authorization worth $215.9 million remaining under its program.
As of Feb 1, 2020, Dillard’s had about 257 namesake outlets and 28 clearance centers, operating in 29 states, alongside an online store at www.dillards.com. The company’s total square footage as of Feb 1 was 48.4 million.
Further, it announced plans to open a store in the third quarter of fiscal 2020 at Mesa Mall in Grand Junction, CO. It also plans to open a store in the spring of 2021 at University Place in Orem, UT. These stores will replace closed peer stores in these locations.
Fiscal 2020 View
For fiscal 2020, Dillard’s expects rentals of $24 million, whereas it reported $26 million in fiscal 2019. It anticipates net interest and debt expenses of $43 million, suggesting a decline from $46 million reported in fiscal 2019. Furthermore, the company projects capital expenditure of $130 million for fiscal 2020, whereas it reported $103 million in fiscal 2019.
For fiscal 2020, it projects depreciation and amortization expenses of $220 million, suggesting a decline from $222 million incurred in fiscal 2019.
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