On Apr 10, we downgraded the departmental store chain retailer,
Dillard's Inc . ( DDS ), to Neutral based
on the company's lower-than-expected fourth-quarter fiscal 2012
A fall in the Zacks Consensus Estimate was witnessed after the
company reported below-than-expected results for the fourth quarter
on Feb 25. Dillard's quarterly earnings of $2.87 per share and net
sales of $2,106.3 million were below the Consensus Estimates of
$2.90 and $2,140.0 million, respectively. Following this, the
estimate for fiscal 2013 declined 2.8% to $7.00 per share. Thus the
company currently holds a Zacks #4 Rank (Sell).
Apart from this, we remain apprehensive about the stock's future
performance as margins are likely to remain under pressure due to
rising input costs. In addition, the company operates in a
competitive environment and strives to maintain its market share,
actively competing with numerous manufacturers and distributors of
apparel and home furnishing products such as Kohl's
Corporation ( KSS ).
On the flip side, despite the earnings miss this quarter, our
long-term outlook on Dillard's remains positive based on its strong
performance over the last several quarters. Going forward, we
expect it to continue posting earnings as well as revenue growth in
the coming quarters.
Moreover, management is undertaking restructuring initiatives
and inventory reduction efforts to reduce costs while boosting its
profitability. We believe that Dillard's healthy balance sheet and
adequate cash flows allow it to make shareholder-friendly moves,
such as dividends and share repurchases.
Moreover, we believe that Dillard's wholly-owned Captive
Insurance Company and REIT auger well for its risk management
abilities as well as boost its liquidity position.
Other Stocks Worth Considering
Other stocks worth considering in the departmental store chain
industry are Macy's Inc . ( M ) and Bon-Ton
Stores Inc. ( BONT ). Currently,
Macy's has a Zacks Rank #1 (Strong Buy) while Bon-Ton holds a Zacks
Rank #2 (Buy).BON-TON STORES (BONT): Free Stock Analysis
ReportDILLARDS INC-A (DDS): Free Stock Analysis
ReportKOHLS CORP (KSS): Free Stock Analysis ReportMACYS INC (M): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment