On Thursday, JPMorgan adjusted its outlook on Dillard's Inc. (NYSE: NYSE:DDS), reducing the stock price target to $323.00 from the previous $369.00, while keeping an Underweight rating on the stock. The revision follows the company's second-quarter earnings report, which disclosed earnings per share (EPS) of $4.59, falling approximately 25% short of the average analyst expectation of $6.01.
The shortfall in EPS was attributed to a notable decline in gross profit, down by 8.1% year-over-year, which was more severe than the anticipated 4.0% decrease. Same-store sales also dropped by 5%, in line with the lowest estimates but underperforming the general expectation of a 3% decline. The company's consolidated gross margin saw a contraction of 130 basis points year-over-year to 37.6%, which was below the projected 39.0%.
In addition to the disappointing sales figures, Dillard's reported a 5.1% year-over-year increase in selling, general, and administrative expenses (SG&A) against the backdrop of the 5% same-store sales decrease. This resulted in a significant deleverage of SG&A expenses, which rose to 29.1% of sales compared to the 28.5% that analysts had estimated.
The company's CEO, William T. Dillard II, expressed dissatisfaction with the performance, stating, "We are disappointed with our weak performance in the second quarter. While the consumer environment remained challenged, our expenses were up, squeezing our profitability. We are working to address this." The statement highlights the company's struggles amid a tough retail environment and increased costs that have impacted its profitability.
In other recent news, Dillard's Inc. experienced a significant drop in second-quarter profit due to increased expenses. The company reported earnings of $4.59 per share, a decrease from the previous year's earnings of $7.98 per share. Revenue also experienced a downturn, falling 5% to $1.49 billion from $1.57 billion in the same period last year.
In addition to these financial results, Dillard's also noted a 5% decrease in comparable store sales year-on-year, and a decline in retail gross margin to 39.1% of sales. Operating expenses were reported to have risen to $433.6 million, or 29.1% of sales.
Despite these challenges, Dillard's remains financially robust, ending the quarter with over $1 billion in cash and short-term investments. The company, which operates 273 stores across 30 states, has outlined expectations for capital expenditures of $120 million and depreciation and amortization of $185 million for fiscal 2024. These are among the recent developments impacting the company's performance.
InvestingPro Insights
Following JPMorgan's revised outlook on Dillard's Inc., it's beneficial to consider additional insights from InvestingPro to grasp the company's financial health and future prospects. Dillard's holds a notable position with a market capitalization of $5.78 billion and has demonstrated a commitment to returning value to shareholders, as evidenced by its 10 consecutive years of dividend increases and a significant dividend yield of 5.37% as of the last year. This is particularly relevant in the context of the company's recent performance challenges.
Moreover, Dillard's financial resilience is underscored by its ability to maintain more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. This suggests that despite the earnings miss and the pressure on gross margins, the company has a cushion to navigate economic uncertainties. The company's price-to-earnings (P/E) ratio stands at 8.13, which may attract investors looking for potentially undervalued stocks in the retail sector.
Investors seeking more comprehensive analysis will find additional InvestingPro Tips that delve into Dillard's financial details, including the company's cash flow adequacy to cover interest payments and its profitability over the last twelve months. In total, there are 11 InvestingPro Tips available for Dillard's Inc., providing a deeper understanding of the company's financial position and performance. For a more detailed perspective, visit InvestingPro's full suite of tips at https://www.investing.com/pro/DDS.
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