Why Dillard's (DDS) Stands Out From Department Store Peers
Dillard’s Inc. DDS has been resilient in a tough industry, thanks to its trendy product offerings as well as store growth and omni-channel efforts. The company created a niche for itself in the market, driven by its efforts to catch up with evolving trends. This is clear from its robust top and bottom-line performances in the recent quarters.
While the company reported in-line earnings in first-quarter fiscal 2019, the bottom line beat estimates in five of the last seven quarters. Moreover, sales improved year over year, driven by strong performance across most categories. Notably, the company witnessed robust performance in juniors' and children's apparel categories along with momentum in home and furniture, and men's apparel and accessories. Moreover, the eastern region performed exceedingly well, followed by the central and western regions.
These positives have aided the stock to outperform the industry year to date. Though this Zacks Rank #3 (Hold) stock has dipped 3.3% year to date, it fared better than the industry’s decline of 26.6%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking more closely at stocks in the broader industry, we note that the Dillard’s also outpaced its peers. Notably, stocks like Macy’s M, Nordstrom JWN and Kohl’s Corp. KSS have witnessed declines of 26.9%, 29.9% and 26.5%, respectively, in the year-to-date period.
Let’s delve deeper and find out reasons that are placing Dillard’s ahead of its peers.
Factors Aiding Stock Growth
Dillard’s stringent focus on offering fashionable products to customers and adding value through exceptional customer care service has been a key growth driver. Its strategy of offering fashion-forward and trendy products acts as a catalyst for attracting more customers. Moreover, we expect the company to gain from the focus on increasing productivity at existing stores, developing a leading omni-channel platform and enhancing domestic operations in the years ahead.
The company remains well poised to benefit from growth opportunities in brick-and-mortar stores and e-commerce business, which are likely to help retain existing customers and attract new ones. On the store front, it will gain by enhancing brand relations, focusing on in-trend categories, store remodels and rewarding store personnel.
Additionally, some of the strategies to boost growth across the company’s e-commerce business include enhancing merchandise assortments and effective inventory management. As of May 4, 2019, merchandise inventories improved 2.9% year over year to $1,832.6 million. We expect the company to gain from its focus on increasing productivity at existing stores, developing a leading omni-channel platform and enhancing its domestic operations in the years ahead.
Moreover, Dillard’s healthy cash flows provide the financial flexibility to undertake shareholder-friendly moves as well as engage in in-store and online business expansion. In the fiscal first quarter, the company generated operating cash flow of $48.3 million. Further, it remains committed to rewarding shareholders with dividends and buybacks.
These apart, we believe there is still momentum left in the stock of this large departmental store chain as it has a long-term impressive earnings growth rate of 9.9% and a VGM Score of B.
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