Bear of the Day: Dillard's (DDS)
Dillard’s (DDS) is a Zacks Rank #5 (Strong Sell) that is a department store chain in the United States. It offers a wide range of products, including clothing, footwear, accessories, beauty products, home goods, and furniture. They focus on selling mid- to high-end brands and operate both physical stores and an online platform.
The stock continues to trend lower in 2024 and recently accelerated to the downside after reporting earnings.
Investors might be tempted to buy the dip, but analysts have been lowering estimates and the chart has a bearish look to it.
About the Company
Dillard’s was founded in 1938 and is headquartered in Little Rock, Arkansas. The company employs about 30,000 employees and the stock market cap of $5.4 billion.
The company manages 273 Dillard’s locations, including 28 clearance stores, across 30 states. Additionally, it offers its merchandise online. The majority of its stores are situated in the Southwest, Southeast, and Midwest regions of the United States.
The stock holds Zacks Style Scores of “A” in Value, but “D” in both Growth and Momentum.
Q2 Earnings
In August, Dilliard's reported a 22% EPS miss for Q2. This was the first miss since 2020 when COVID was at its peak.
Revenue missed and same-store sales were down 5% y/y. Margins were also down y/y and inventory was unchanged.
Management expressed disappointment with the weak performance in the second quarter, citing a challenging consumer environment and rising expenses that impacted profitability. They are actively working to address these issues but noted that they ended the quarter with over $1 billion in cash and short-term investments.
Estimates Fall
Since earnings, analysts have cut earnings estimates sharply.
For the current quarter, the estimates have fallen from $7.35 to $6.47, or 12%.
The next quarter saw a similar drop, with numbers falling from $10.12 to $9.05, or 11%.
Looking at next year, analysts have dropped estimates by 11%, falling from $32.25 to $28.81.
With the falling estimates, analysts have been lowering price targets as well. UBS reiterated its sell rating and lowered its PT to $194. That is about 40% lower than current levels.
Technical Take
The stock is trading below all major moving averages. The 21-day is $347, the 50-day is $382 and the 200-day is $405. After the earnings report, the 50-day moved below the 200-day, a signal known as the “Death Cross”.
The stock has recently broken a Fibonacci support level just under $350. This breaks the long-term trend so investors should shy away from the name until the chart situation improves.
In Summary
Dillard’s recent struggles highlight serious challenges ahead, with disappointing earnings results and a bearish technical outlook.
The substantial cut in earnings estimates and the technical "Death Cross" signal suggest that the stock could face further declines. Investors should exercise caution and consider waiting for a clearer turnaround before reassessing the stock's potential.
For those interested in the space, a better option might be Khol’s (KSS). The stock is a Zacks Rank #3 (HOLD) that is coming off a 28% earnings beat.
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Dillard's, Inc. (DDS) : Free Stock Analysis Report
Kohl's Corporation (KSS) : Free Stock Analysis Report