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Dillard's Strategies on Track, Boosts Shareholders' Returns

Zacks Equity Research

In a bid to impress investors, Dillard’s, Inc. DDS has recently approved a quarterly dividend hike of 42.9% to 10 cents per share compared with the previous payout of 7 cents. The new dividend will be paid on Class A and Class B common stock on Oct 30, to shareholders of record as on Sep 29, 2017.

Moreover, the company’s constant efforts to capitalize on growth opportunities in its brick-and-mortar stores and e-commerce business bode well. Its focus on increasing productivity, enhancing domestic operations and boosting shareholder’s return are also noteworthy.

In fact, these attributes are well reflected in the company’s stock price movement. Shares of Dillard’s have rallied 9.7% in the last three months against the industry’s decline by an equivalent rate. Also, its shares have outperformed the broader Retail-Wholesale sector that gained a meager 0.5% and is currently placed at the bottom 6% of the Zacks classified sectors (15 out of 16).



Let’s Delve Deep

Strategic Endeavors

Dillard’s enjoys a niche position among fashion apparel, cosmetics and home furnishing retailers. We believe that the company’s strategy of offering fashion-forward and trendy products, store remodels and omnichannel initiatives acts as a catalyst for attracting more customers, consequently leading to overall growth.

Furthermore, Dillard’s efforts to increase its shareholders’ value are evident from dividend payout of $4.5 million in the first half of fiscal 2017. Also, it bought back 1.4 million shares for $69.5 million in the fiscal second quarter, which represents a total of 3.1 million shares for $160.6 million on a year-to-date basis. Along with this, this Zacks Rank #3 (Hold) company had authorization worth $93.2 million remaining as of Jul 29, 2017.

Concerns/Hurdles

However, Dillard’s incurred loss of 58 cents per share in the most recent quarter, which lagged the Zacks Consensus Estimate of 21 cents. In fact, its bottom line has also fallen short of the estimates in three of the trailing four quarters, with an average miss of 100.8%. Management blamed the quarterly loss on considerable markdowns in the quarter. Though its top line dropped year over year, the same surpassed the Zacks Consensus Estimate.

We note that the Zacks Consensus Estimate of $3.37 for fiscal 2017 and $3.12 for fiscal 2018 has moved down 64 cents and 57 cents, respectively, over the last 30 days.

Furthermore, Dillard’s has been plagued with the persistent challenging trends in the apparel retail segment. Also, stiff competition and consumers’ changing preferences toward online shopping are weighing down on its performance.

Bottom Line

Although Dillard’s is facing a number of challenges now, management is striving hard to spark a turnaround in its performance.  

Still Interested in the Retail Space–

A few better-ranked stocks in the broader Retail sector are The Children's Place, Inc. PLCE, The Gap, Inc. GPS and Canada Goose Holdings Inc. GOOS carrying a Zacks rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Children's Place, with a long-term earnings growth rate of 9% has pulled off an average positive earnings surprise of 16.3% in the last four quarters.

Gap, Inc., with a long-term earnings growth rate of 8% has delivered an average positive earnings surprise of 9.3% in the last four quarters.

Canada Goose Holdings, with a long-term earnings growth rate of 34.1% has delivered positive earnings surprise of 33.3% in the last reported quarter.

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