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Dillard's (DDS) Soft Q2 Earnings Hurt Stock, Comps Down 5%
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Dillard's Inc. (DDS - Free Report) posted dull second-quarter fiscal 2024 results, wherein the bottom and top lines missed the Zacks Consensus Estimate. Also, DDS’ sales and earnings declined year over year.
A tough consumer landscape, which adversely impacted sales and comparable store sales (comps), as well as higher operating expenses, hurt the quarterly performance. Also, softness in the men’s apparel and accessories category was a headwind.
Earnings per share of $4.59 lagged the Zacks Consensus Estimate of $5.91. The bottom line also declined 42.5% from $7.98 in the year-ago quarter.
Net sales of $1.490 billion fell 4.9% from the prior-year quarter and came below the Zacks Consensus Estimate of $1.528 billion. Including service charges and other income, the company reported sales of $1.515 million, down 5.1% year over year.
Dillard’s shares lost 10.8% on Aug 15, following the soft fiscal second-quarter results. Shares of the company have lost 20.2% in the past three months compared with the industry's 17.5% decline.
Q2 Details
Total retail sales (excluding CDI Contractors, LLC) dropped 5% year over year to $1.426 billion. Comps also slipped 5% year over year. Retail sales were affected by the challenging sales environment. Our model had predicted a comps decline of 1.9% for the fiscal second quarter.
The company witnessed robust sales in the cosmetics category. On the flip side, men’s apparel and accessories was the weakest category.
The consolidated gross margin contracted 120 basis points (bps) year over year to 37.6%. The retail gross margin of 39.1% reflected a year-over-year decrease of 130 bps, due to moderate gross margin declines in shoes, home and furniture, and ladies’ apparel, accessories and lingerie. The metric fell slightly in cosmetics and juniors’ and children’s apparel. However, the gross margin in men’s apparel and accessories was nearly flat.
Dillard's consolidated SG&A expenses (as a percentage of sales) expanded 280 bps to 29.1% from the prior-year quarter. In dollar terms, SG&A expenses (operating expenses) grew 5.1% to $433.6 million. The increase in operating expenses is mainly attributed to higher payroll expenses.
Our model had predicted SG&A expenses (as a percentage of sales) growth of 130 bps. In dollar terms, we expected SG&A expenses to increase 2.3% year over year to $422.2 million.
Financial Details
Dillard’s ended the fiscal second quarter with cash and cash equivalents of $946.7 million, a long-term debt of $321.5 million and a total shareholders' equity of $1.949 billion. The Zacks Rank #3 (Hold) company provided $175.9 million of net cash from operating activities as of Aug 3, 2024. Ending inventory was essentially flat year over year as of the same date.
The company expects capital expenditure for fiscal 2024 to be $120 million, indicating a decline from $133 million in fiscal 2023.
Store Update
In March 2024, the company opened a store at the Empire Mall location in Sioux Falls, SD. This marked its entry into the state. As of Aug 3, 2024, DDS operated 273 Dillard’s stores, including 28 clearance stores across 30 states, as well as an online store at dillards.com.
In June 2024, the company closed its Eastwood Mall Clearance Center in Niles, OH.
Outlook
For fiscal 2024, Dillard’s expects depreciation and amortization expenses of $185 million compared with $180 million in fiscal 2023. The company projects a net interest and debt income expense of $13 million against an income of $5 million in fiscal 2023. It anticipates rentals of $22 million, in line with the fiscal 2023 figure.
The company has a trailing four-quarter earnings surprise of 202.7%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year earnings per share implies growth of 21.7% from the year-ago reported figure.
DICK'S Sporting, a sporting goods retailer, currently carries a Zacks Rank #2 (Buy). DKS delivered an average earnings surprise of 4.7% in the trailing four quarters.
The consensus estimate for DICK'S Sporting’s current financial-year sales indicates growth of 1.8% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an average earnings surprise of 42.8% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 15.6% from the year-ago reported figure.
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Dillard's (DDS) Soft Q2 Earnings Hurt Stock, Comps Down 5%
Dillard's Inc. (DDS - Free Report) posted dull second-quarter fiscal 2024 results, wherein the bottom and top lines missed the Zacks Consensus Estimate. Also, DDS’ sales and earnings declined year over year.
A tough consumer landscape, which adversely impacted sales and comparable store sales (comps), as well as higher operating expenses, hurt the quarterly performance. Also, softness in the men’s apparel and accessories category was a headwind.
Earnings per share of $4.59 lagged the Zacks Consensus Estimate of $5.91. The bottom line also declined 42.5% from $7.98 in the year-ago quarter.
Net sales of $1.490 billion fell 4.9% from the prior-year quarter and came below the Zacks Consensus Estimate of $1.528 billion. Including service charges and other income, the company reported sales of $1.515 million, down 5.1% year over year.
Dillard’s shares lost 10.8% on Aug 15, following the soft fiscal second-quarter results. Shares of the company have lost 20.2% in the past three months compared with the industry's 17.5% decline.
Q2 Details
Total retail sales (excluding CDI Contractors, LLC) dropped 5% year over year to $1.426 billion. Comps also slipped 5% year over year. Retail sales were affected by the challenging sales environment. Our model had predicted a comps decline of 1.9% for the fiscal second quarter.
Dillard's, Inc. Price, Consensus and EPS Surprise
Dillard's, Inc. price-consensus-eps-surprise-chart | Dillard's, Inc. Quote
The company witnessed robust sales in the cosmetics category. On the flip side, men’s apparel and accessories was the weakest category.
The consolidated gross margin contracted 120 basis points (bps) year over year to 37.6%. The retail gross margin of 39.1% reflected a year-over-year decrease of 130 bps, due to moderate gross margin declines in shoes, home and furniture, and ladies’ apparel, accessories and lingerie. The metric fell slightly in cosmetics and juniors’ and children’s apparel. However, the gross margin in men’s apparel and accessories was nearly flat.
Dillard's consolidated SG&A expenses (as a percentage of sales) expanded 280 bps to 29.1% from the prior-year quarter. In dollar terms, SG&A expenses (operating expenses) grew 5.1% to $433.6 million. The increase in operating expenses is mainly attributed to higher payroll expenses.
Our model had predicted SG&A expenses (as a percentage of sales) growth of 130 bps. In dollar terms, we expected SG&A expenses to increase 2.3% year over year to $422.2 million.
Financial Details
Dillard’s ended the fiscal second quarter with cash and cash equivalents of $946.7 million, a long-term debt of $321.5 million and a total shareholders' equity of $1.949 billion. The Zacks Rank #3 (Hold) company provided $175.9 million of net cash from operating activities as of Aug 3, 2024. Ending inventory was essentially flat year over year as of the same date.
The company expects capital expenditure for fiscal 2024 to be $120 million, indicating a decline from $133 million in fiscal 2023.
Store Update
In March 2024, the company opened a store at the Empire Mall location in Sioux Falls, SD. This marked its entry into the state. As of Aug 3, 2024, DDS operated 273 Dillard’s stores, including 28 clearance stores across 30 states, as well as an online store at dillards.com.
In June 2024, the company closed its Eastwood Mall Clearance Center in Niles, OH.
Outlook
For fiscal 2024, Dillard’s expects depreciation and amortization expenses of $185 million compared with $180 million in fiscal 2023. The company projects a net interest and debt income expense of $13 million against an income of $5 million in fiscal 2023. It anticipates rentals of $22 million, in line with the fiscal 2023 figure.
Key Picks
Below, we have highlighted three better-ranked stocks, namely Gap (GPS - Free Report) , DICK'S Sporting (DKS - Free Report) and Deckers (DECK - Free Report) .
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has a trailing four-quarter earnings surprise of 202.7%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year earnings per share implies growth of 21.7% from the year-ago reported figure.
DICK'S Sporting, a sporting goods retailer, currently carries a Zacks Rank #2 (Buy). DKS delivered an average earnings surprise of 4.7% in the trailing four quarters.
The consensus estimate for DICK'S Sporting’s current financial-year sales indicates growth of 1.8% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an average earnings surprise of 42.8% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 15.6% from the year-ago reported figure.