Dillard’s, Inc. DDS continues to display solid momentum, thanks to its sound fundamentals and impressive growth efforts. Continued consumer demand, and focus on inventory and expense management bode well. The company’s strategy to offer more fashion-forward and trendy products in order to attract customers has been a key driver.
DDS boasts a robust earnings surprise trend, which continued in third-quarter fiscal 2022. The bottom and top lines beat the Zacks Consensus Estimate and rose year over year. This marked the eighth and ninth straight quarters of top and bottom-line beat, respectively. Results gained from the continued momentum in consumer demand. The company witnessed robust sales in cosmetics, men’s apparel and accessories, home and furniture, and shoes.
Backed by the robust earnings trend, the stock has outperformed the industry and the Retail - Wholesale sector in the past year. DDS has rallied 32.3% against the industry’s decline of 10.6% and the sector’s dip of 26.2%. The stock also compares favorably with the S&P 500’s fall of 13.4% in the same period.
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The Zacks Consensus Estimate for DDS' fourth quarter and fiscal 2022 earnings have moved up 36.6% and 14.2%, respectively, in the past 30 days. The positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating further outperformance in the near term.
Dillard's is likely to retain its sales momentum on strong consumer demand, and robust sales across product categories and regions. Total revenues of $1,544 million increased 4.3% from the prior-year quarter. Total retail sales (excluding CDI Contractors, LLC) advanced 3% year over year to $1,499 million. Comparable store sales rose 3% year over year. The company witnessed robust sales in cosmetics, men’s apparel and accessories, home and furniture, and shoes. Adjusted earnings of $10.96 per share rose 11.7% from the year-ago quarter's $9.81 per share.
The company’s initiatives to control inventory and expenses have been contributing to bottom-line gains for the past few quarters. Improved consumer demand and better inventory management have been leading to lower markdowns.
However, stiff competition and raw material price inflation are concerning. Also, the company has been witnessing elevated SG&A expenses for the past few quarters, which have been denting the bottom line to some extent. The persistence of the trend might partly affect the company’s profitability.
Nonetheless, investors are optimistic about the company’s share repurchases and dividend payments. In third-quarter fiscal 2022, DDS repurchased $24.3 million worth of Class A common stock under its existing repurchase program. As of Oct 29, 2022, Dillard's had $175.4 million authorization left under its February 2022 plan.
Other Stocks to Consider
Here are three other top-ranked stocks to consider — Ross Stores ROST, Walmart WMT and Dollar General DG.
Ross Stores, an off-price retailer of apparel and home accessories, currently sports a Zacks Rank #1. ROST has a long-term earnings growth rate of 10.5%. Shares of ROST have gained 6.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ross Stores’ fiscal 2022 sales and EPS suggests declines of 2% and 11.7%, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter surprise of 10.5%, on average.
Walmart, which operates variety stores, discount stores, supercenters, Sam’s Clubs and Neighborhood Markets, currently carries a Zacks Rank #2 (Buy). WMT has an expected EPS growth rate of 5.5% for three to five years. Shares of WMT have risen 9.2% in the past year.
The Zacks Consensus Estimate for Walmart’s current financial-year revenues suggests growth of 5.7% from the year-ago reported figure, while the earnings estimate indicates a decline of 6.2%. WMT has a trailing four-quarter earnings surprise of 3.8%, on average.
Dollar General, one of the largest discount retailers in the United States, currently carries a Zacks Rank #2. The expected EPS growth rate of the company for three to five years is 11.1%. Shares of DG have gained 14.4% in the past year.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10.8% and 13.8%, respectively, from the year-ago reported figures. DG has a trailing four-quarter earnings surprise of 2.2%, on average.
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