Our long-term 'Outperform' recommendation on the department
), remains intact as the company posted stronger-than-expected
second quarter 2012 results and continues to focus on cost
containment initiatives to boost profitability.
Dillard's posted sturdy second-quarter 2012 results with earnings
jumping over two-folds to 63 cents per share, beating the Zacks
Consensus Estimate of 49 cents per share. The company's improved
results were backed by solid comparable-store sales performance and
reduced input and operating costs, resulting from restructuring
initiatives and inventory reduction efforts. Further, total revenue
of the company escalated 3.3% year over year to 1,525.2 million and
surpassed the Zacks Consensus Estimate of $1,466.0 million.
Of late, Dillard's continues to benefit from improvements in
inventory management, focusing more on conservative purchasing and
efforts to better match the timing of receipts with demand, which
ultimately resulted in reduced markdowns.
Further, we believe Dillard's healthy balance sheet and adequate
cash flows allow it to make shareholder-friendly moves, such as
acquisitions, dividends and share repurchases. In an effort to
further enhance its financial flexibility, the company has modified
its old $1.0 billion senior secured revolving credit facility,
scheduled to expire on December 12, 2012. The new credit facility
will now have a maturity date of April 11, 2017, facilitating the
company to borrow more funds at the same level of inventory
Moreover, we anticipate Dillard's wholly owned Captive Insurance
Company and REIT, which has opened the avenues of debt and equity
markets, will help it manage risks more efficiently while enhancing
its liquidity position.
Headquartered in Little Rock, Arkansas, Dillard's is a large
department store chain, featuring fashion apparel and home
furnishings. The company's primary product categories are: women's
and junior's apparel; shoes; accessories and lingerie; men's
clothing and accessories; cosmetics; home; and children's clothing.
Its merchandise mix consists of both branded and private-label
items. Dillard's currently operates 304 stores including 16
clearance centers and one Internet store across 29 states, all
under the Dillard's brand name.
Although Dillard's is a large regional departmental store, the
company's individual stores compete with numerous players at the
national and local level. These competitors include specialty,
off-price, discount, internet, and mail-order retailers. Dillard's,
which competes with
), maintains a Zacks #3 Rank, which translates into a short-term
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