Here's Why Dillard's Looks Poised For More Growth In 2020
Zacks Investment Research | Jan 07, 2020 09:03PM ET
Dillard’s Inc. (NYSE:DDS) has been on the growth trajectory lately backed by growth opportunities in physical stores and e-commerce. It is gaining from initiatives to enhance brand relations, focus on in-trend categories, store remodels and increased rewards to store personnel. Furthermore, the company’s focus on boosting productivity as well as enhancing domestic and omni-channel capabilities should strengthen the customer base.
These factors have collectively contributed to solid share price trend in the past year. The Zacks Rank #2 (Buy) company has gained 3.5% in the past year against the industry ’s decline of 35.4%.
Factors Favoring the Stock
Dillard’s offers a broad array of merchandise in its stores, featuring products from both national and exclusive brands. The company has created a niche for itself through a stringent focus on offering fashionable products to its customers and adding value through exceptional customer care service. We believe that its strategy of offering fashion-forward and trendy products acts as a catalyst for attracting more customers.
Although the department store industry is facing increased competition from specialty retailers and growing e-commerce, Dillard’s is shielded by its efforts to capture growth opportunities in brick-and-mortar stores and the e-commerce business. These will likely help it retain existing customers and attract new ones.
On the store front, the company is gaining from initiatives to enhance brand relations, and focus on in-trend categories, store remodels and increased rewards to store personnel. Moreover, its e-commerce business is catching pace with strategies like merchandise assortment enhancement and effective inventory management.
Driven by these initiatives, the company reported better-than-expected earnings results in third-quarter fiscal 2019. Results were aided by strong sequential gains in comparable sales (comps) as well as retail gross margin. Further, reduced inventory levels boosted performance.
Gross margin from retail operations rose 13 bps in the quarter mainly due to lower inventory levels. Notably, gross margin from retail stores reflected significant sequential gain versus a decline of 319 bps reported in second-quarter fiscal 2019. Merchandise inventories declined nearly 4% as of Nov 2, 2019, compared with flat inventories at the end of second-quarter fiscal 2019.
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We expect the company to gain from its focus on increasing productivity at existing stores, developing a leading omni-channel platform and enhancing domestic operations in the years ahead.
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