On Jun 9, 2014, we issued an updated research report on one of
the leading fashion apparel, cosmetics and home furnishings
) following the company's better-than-expected first-quarter fiscal
2014 bottom-line results.
Dillard's started fiscal 2014 on a strong note, wherein adjusted
earnings of $2.56 per share for the first quarter increased 6.2%
year over year and were above the Zacks Consensus Estimate of $2.38
per share. The company's results benefited from the successful
execution of its long-term growth strategies and the strength of
its distinguished and varied assortments.
With a positive earnings surprise of 7.1% in the first quarter,
the company surpassed the Zacks Consensus Estimate thrice in the
trailing 4 quarters. The average earnings surprise for the past 4
quarters is approximately 8%. We expect the company to keep up the
positive earnings trend in the years ahead, based on its focus on
increasing productivity at the existing stores, developing a unique
omni-channel platform and enhancing its domestic presence.
Moreover, we believe that the company's strategy of offering
fashion-forward and trendy products has attracted more customers to
its stores, as evident from positive comparable store sales (comps)
performance in the trailing 14 quarters. Improved comps performance
and enhanced e-Commerce capabilities have helped Dillard's post
sales growth over the last several quarters.
Other positive traits rooted in the stock include the company's
efforts to capitalize on growth opportunities in its brick and
mortar stores and e-Commerce business, with a target to retain
existing customers and attract new customers. Initiatives to boost
sales of physical stores include better branding, focusing on
in-trend categories, store remodeling and rewarding store
personnel, while its online strategies are focused on enhancing
merchandise assortments and effective inventory management.
Despite the aforementioned positive factors, we remain slightly
apprehensive about the stock's growth prospect due to the
prevailing macroeconomic headwinds and intense competition.
Moreover, from valuation perspective, the stock looks quite
expensive as it trades at a premium to the industry average, based
on forward earnings estimates thereby limiting its upside
Other Stocks to Consider
Currently, Dillard's carries a Zacks Rank #2 (Buy). Some other
stocks in the retail space worth considering include
American Apparel, Inc.
Foot Locker, Inc.
). All of these stocks have a Zacks Rank #2 (Buy).
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