Dillard's is set to benefit from rising oil costs as a result of its high exposure to energy-dependent states, according to Bank of America Merrill Lynch.
Same-store sales are expected to grow meaningfully on improved consumer demand, Balsky said. The analyst cited the company’s free shipping policy on orders over $150 and focus on adding new brands as comp drivers. (See the analyst's track record here.)
Perhaps most surprising to investors, Balsky also highlighted the energy sector's strength in recent months.
“We think weakness in energy markets when oil prices dropped hurt sales,” she said in a Monday note.
Dillard’s has a large presence in Texas and Oklahoma — regions significantly impacted by trends in the energy markets — and “strong ties with the southern consumer," the analyst said.
Ongoing trends in energy should continue to be a tailwind, Balsky said. Retail sales in Texas are up over 7 percent over the past 12 months.
One point of concern for Dillard's investors: continued inventory growth during the first quarter. Inventory growth of 3.9 percent was 290 basis points worse than the analyst had forecast. That said, “it’s in much better shape than it was in early 2016 and 2017,” Balsky said, adding that growing consumer demand should help to minimize the impact of promotions.
Dillard's shares were up 4.56 percent midday Monday at $81.
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Photo by Zereshk/Wikimedia.
Latest Ratings for BBD
|Sep 2017||Goldman Sachs||Upgrades||Neutral||Buy|
|Sep 2016||Goldman Sachs||Assumes||Neutral|
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