Yahoo Finance Dillard's (DDS) Up 1.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Dillard's (DDS). Shares have added about 1.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dillard's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dillard's Q4 Earnings & Sales Beat Estimates
Dillard's posted fourth-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. This marked the company’s 12th straight quarter of a bottom-line beat. However, DDS sales and earnings declined year over year. The declines can be attributed to the challenging retail environment, which impacted sales and comps, as well as higher operating expenses.
Adjusted earnings of $13.69 per share surpassed the Zacks Consensus Estimate of $11.59. However, the bottom line declined 5.7% from the year-ago quarter's $14.51 per share.
Net sales of $2,124.4 million dipped 0.1% from the prior-year quarter but beat the Zacks Consensus Estimate of $2,080 million. Including service charges and other income, the company reported sales of $2,158.9 million, down 0.2% year over year.
Q4 Details
Total retail sales (excluding CDI Contractors, LLC) fell 5% year over year to $2,057 million. Comparable store sales also declined 5% year over year. Retail sales were affected by the challenging sales environment in the quarter.
Our model had predicted a comps decline of 3.5% for the fiscal fourth quarter. The adverse performance compared with our estimate can be attributed to the tough retail environment in the quarter.
The company witnessed robust sales in cosmetics, and home and furniture categories in the quarter. On the flip side, juniors’ and children’s apparel, ladies’ accessories and lingerie, and ladies’ apparel were among the underperforming categories.
The consolidated gross margin contracted 110 basis points (bps) year over year to 36.6% in the fiscal fourth quarter. The retail gross margin of 37.7% reflected a year-over-year decline of 100 bps, driven by gross margin declines in the men’s apparel and accessories, juniors’ and children’s apparel, and shoes categories. This was offset by moderate gross margin growth in the home and furniture category, while the cosmetics, ladies’ accessories and lingerie, and ladies’ apparel categories were flat. We had estimated a gross margin decline of 270 bps in the fiscal fourth quarter to 36%.
Dillard's consolidated SG&A expenses (as a percentage of sales) expanded 80 bps to 22.4% from the prior-year quarter's 21.6%. In dollar terms, SG&A expenses (operating expenses) grew 4% to $476.7 million. The increase in operating expenses is mainly attributed to higher payroll and payroll-related expenses. The 53rd week in the fiscal fourth quarter led to additional operating expenses of $18.3 million.
Our model had predicted SG&A expense (as a percentage of sales) growth of 190 bps for the fiscal fourth quarter. In dollar terms, we expected SG&A expenses to increase 5.8% year over year to $485.1 million.
Financial Details
Dillard’s ended fiscal 2023 with cash and cash equivalents of $808.3 million, a long-term debt of $321.4 million, and a total shareholders' equity of $1,697.1 million. The company provided $883.6 million of net cash from operating activities as of Feb 3, 2024. Ending inventory declined 2% year over year as of Feb 3, 2024.
Capital expenditure for fiscal 2024 is likely to be $125 million, indicating a decline from the $133 million spent in fiscal 2023.
In the fiscal fourth quarter, the company repurchased 52,000 Class A shares for $16.2 million, under its existing repurchase program. This resulted in a total repurchase of 917,700 shares for $281.4 million in fiscal 2023. As of Feb 3, 2024, DDS had an authorization worth $394 million remaining under its share repurchase program announced in May 2023.
Outlook
For fiscal 2024, Dillard’s expects depreciation and amortization of $185 million, whereas it reported $180 million in fiscal 2023. The company expects a net interest and debt income of $8 million, whereas it recorded an income of $5 million in fiscal 2023. DDS anticipates rentals of $22 million for fiscal 2024, in line with fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Dillard's has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dillard's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Dillard's, Inc. (DDS) : Free Stock Analysis Report
