Is Dillard's (DDS) Likely to Disappoint in Q1 Earnings?

Dillard’s Inc. DDS is expected to report first-quarter 2017 results on May 11, 2017. The big question facing investors is whether this department store chain featuring fashion apparel and home furnishings will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company reported negative earnings surprise of 20.9%. In fact, the company has missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 11.6%. Let’s see how things are shaping up for this announcement.

Dillard's, Inc. Price and EPS Surprise

 

Dillard's, Inc. Price and EPS Surprise | Dillard's, Inc. Quote

Factors Influencing This Quarter

Dillard's has been losing ground lately primarily due to persistently challenging trends in the apparel retail segment on account of the changing preferences of customers from offline to online. Additionally, raw material price volatility, macroeconomic challenges and competition remain major concerns for the company. These factors have been weighing on financial performance for a while now.

Evidently, Dillard’s lagged earnings estimates for the second straight quarter in fourth-quarter fiscal 2016. Further, it posted lower-than-expected sales in the last reported quarter, after posting four straight beats. Moreover, both the top line and bottom line plunged year over year.

Going forward, we believe the challenging trends in the retail sector will persist as brick-and-mortar stores continue to lose sheen to the rising online businesses. Further, Dillard's fiscal 2017 outlook indicates significant cost pressures, which might hurt margins and earnings.

However, Dillard’s niche position among fashion apparel, cosmetics and home furnishing retailers cannot be ignored. Driven by efforts to uphold growth at the brick-and-mortar stores, the company is likely to gain from better brand relations, focus on in-trend categories, store remodels and rewarding store personnel. Alongside, the company focuses on enhancing merchandise assortments and effective inventory management to boost growth across the eCommerce business.

Though the company’s shares continue to decline on account of the challenges in the retail space, it has considerably outperformed the Zacks categorized Retail – Regional Department Stores industry. Year to date, the stock dipped nearly 9.3%, while the broader industry declined 21.9%.

Earnings Whispers

Our proven model does not conclusively show that Dillard’s is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Dillard’s currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.98. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dillard’s currently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Home Depot Inc HD, slated to release earnings on May 16, currently has an Earnings ESP of +1.24% and a Zacks Rank #2 (Buy).

Wal-Mart Stores Inc. WMT, scheduled to release earnings on May 18, currently has an Earnings ESP of +1.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Best Buy Co. Inc. BBY, scheduled to release earnings on May 25, currently has an Earnings ESP of +12.50% and a Zacks Rank #2.

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