Leading fashion apparel, cosmetics and home furnishings retailer, Dillard's Inc. (DDS) yesterday reported better-than-anticipated third-quarter fiscal 2014 results, wherein earnings of $1.30 per share came ahead of the Zacks Consensus Estimate of $1.27 and marked a year-over-year improvement of nearly 15%. Following the announcement, the company’s shares gained 6.4% and touched intraday high of $116.43.
Dillard's net sales (including CDI Contractors LLC or CDI) inched down 0.5% year over year to $1,459.8 million in the quarter. Merchandise sales, excluding CDI, also marginally declined to $1,422 million from $1,437 million reported in the year-ago quarter.
The company’s total revenue (including service charges and other income) of $1,499.2 million reflected a marginal decline from the year-ago quarter revenue of $1,506.9 million and was lower than the Zacks Consensus Estimate of $1,523 million.
Merchandise comparable-store sales (comps) for the thirteen-week period ended Nov 1, 2014 were down 1% from the thirteen-week period ended Nov 2, 2013.
During the quarter, the outperforming categories were juniors’ and children’s apparel. This was followed by strong performance at the men's apparel and accessories category. However, the home and furniture categories recorded the lowest sales in the quarter. The best performing region was Central, followed by the Eastern and Western regions, respectively.
In the quarter, consolidated gross margin improved 50 basis points (bps) to 38.3%, while gross margin from retail operations (excluding CDI) expanded 69 bps. The year-over-year improvement in retail gross margin was primarily due to higher markups and lower markdowns.
Dillard's selling, general and administrative (SG&A) expenses for the quarter increased nearly 2% to $412.3 million from $404.4 million in the prior year, primarily due to higher payroll costs. SG&A as a percentage of sales increased 70 bps to 28.2% in the quarter.
Other Financial Details
Dillard’s ended the quarter with cash and cash equivalents of $91.9 million compared with $111 million at the end of third-quarter last year. As of Nov 1, 2014, the company’s long-term debt and capital leases improved marginally to $620.9 million from $621.7 million as of Nov 2, 2013.
For the nine months of fiscal 2014, the company’s net cash flow from operations was $209.9 million compared with $173 million in the prior-year period.
Furthermore, during the quarter, the company repurchased 2 million of its common stock for $224.5 million, which signifies an average price of $109.89 per share.
Store Update
During the quarter, the company opened two namesake stores located at The Shops at Summerlin in Las Vegas, NV and The Mall at University Town Center in Sarasota, FL. As of Nov 1, 2014, Dillard’s had about 280 namesake outlets and 18 clearance centers operating in 29 states and an online store at www.dillards.com. Dillard’s total square footage as of Nov 1, 2014 was 50.9 million.
Fiscal 2014 Outlook
Dillard’s reiterated its forecast for fiscal 2014. The company continues to project rentals of approximately $26 million in fiscal 2014 compared with $27 million reported in fiscal 2013. Net interest and debt expenses for the year are expected to be nearly $61 million compared with $65 million in fiscal 2013. Moreover, the company still expects capital expenditure to be about $150 million in fiscal 2014 compared with $95 million in fiscal 2013.
However, Dillard’s lowered its fiscal 2014 projection for depreciation and amortization expenses to $250 million from $255 million projected earlier.
Other Stocks to Consider
Currently, Dillard’s holds a Zacks Rank #4 (Sell). Better-ranked stocks in the retail industry include Columbia Sportswear Company (COLM), L Brands Inc. (LB) and Ross Stores Inc. (ROST). While Columbia Sportswear holds a Zacks Rank #1 (Strong Buy), L Brands and Ross Stores carries a Zacks Rank #2 (Buy).
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