Dillard’s Stock: Post-COVID Party Is Over, Time To Sell

In a recent article titled “Dillard’s Stock: Post-COVID Party Is Over, Time To Sell,” the author presents a compelling argument for investors to consider selling their shares in Dillard’s, Inc. (DDS). Despite experiencing significant growth since July 2020 and showing signs of financial improvement, the author suggests that the days of pandemic recovery are likely over for the retail company. With unimpressive growth prospects and a volatile retail market, the author advises caution when considering ownership of DDS stock. The article provides an in-depth analysis of Dillard’s financials, compares its performance to that of its peers, and offers insights on the future outlook of the company.

Overview

Dillard’s stock performance since July 2020

Dillard’s stock has experienced a significant increase of 1,700% since July 2020, outperforming NVIDIA. This impressive growth has caught the attention of investors and analysts, leading to a closer examination of the company’s financials and prospects.

Comparison with NVIDIA

Dillard’s outperformance of NVIDIA is particularly noteworthy. Despite being in different industries, Dillard’s has performed better than the tech giant in the post-pandemic era. This demonstrates the resilience and strength of Dillard’s, as it has weathered the challenges of the retail sector.

Financial improvement in Dillard’s

Dillard’s has shown signs of financial improvement, with healthy cash balances, stable debt, and steady cash flow. The company’s balance sheet reflects a healthy cash position and manageable debt levels. Additionally, Dillard’s has generated a significant amount of free cash flow, enabling them to return value to shareholders through stock buybacks and dividend payments.

Risks of owning Dillard’s stock

Despite the positive financial indicators, there are risks associated with owning Dillard’s stock. The retail industry is inherently volatile and subject to changing trends and consumer preferences. Furthermore, the growth prospects for Dillard’s are considered unimpressive compared to other companies in different sectors, which may deter potential investors.

Fundamental Analysis

Healthy cash balances

Dillard’s has demonstrated a healthy cash position, with $956 million in cash and short-term investments in the most recent quarter. This represents a 20% increase year-over-year and provides the company with financial stability and flexibility.

Stable debt

Dillard’s has maintained a stable debt balance of $321 million, excluding small amounts of lease liability. This manageable level of debt allows the company to allocate resources towards growth initiatives and shareholder returns.

Steady cash flow

Dillard’s has generated steady cash flow, with over $750 million in free cash flow in 2023. While this figure is slightly lower than the previous year, it still reflects a strong financial performance and the ability to fund operations and investments.

Stock buybacks and dividend payments

Dillard’s has been proactive in returning value to shareholders through stock buybacks and dividend payments. In 2023, the company deployed $620 million in cash for these purposes, representing approximately $38 per share per year or 9% of the current market cap. This demonstrates the company’s commitment to enhancing shareholder value.

Post-Pandemic Recovery

Dillard’s outperforms Macy’s in comps

Dillard’s has outperformed its competitor Macy’s in comparable store sales (comps) during the post-pandemic recovery period. This indicates that Dillard’s has been successful in attracting and retaining customers, despite the challenging retail landscape.

Signs of shifting trends

Dillard’s has benefited from shifting trends away from stay-at-home habits, particularly in 2021 and 2022. This suggests that the company has been able to adapt to changing consumer preferences and capitalize on emerging opportunities.

Dismal results in 2023

However, Dillard’s experienced dismal results in 2023, with comps of -4% and declining gross margins. Operating expenses also increased as a percentage of sales, leading to lower pretax income year-over-year. These results were attributed to a challenging sales environment during the fourth quarter.

Time to Sell

Consensus EPS growth projections

Consensus EPS growth projections for Dillard’s in 2024 and 2025 are -25% and -9%, respectively. These projections indicate a decline in earnings and suggest limited growth potential for the company in the near future.

Unimpressive growth prospects

Compared to other companies, Dillard’s growth prospects are considered unimpressive. The retail industry is highly competitive, and Dillard’s may struggle to generate significant growth in a saturated market.

Riskiness of the retail space

The retail industry is inherently risky, with changing consumer preferences and the rise of e-commerce posing challenges for brick-and-mortar retailers like Dillard’s. Investors should consider the volatile nature of the retail space when evaluating the potential risks and rewards of owning Dillard’s stock.

Forward P/E ratio

Dillard’s forward price-to-earnings (P/E) ratio of 14.5x is considered high compared to other companies. This suggests that the stock may be overvalued, potentially limiting upside potential for investors.

Author Background

Analyst and founder of DM Martins Research

The author of this article is an experienced analyst and the founder of DM Martins Research, an independent research firm. With a background in equity research and finance analysis, the author brings expertise and insights to the analysis of Dillard’s stock.

Experience in equity research and finance analysis

The author has a professional background in equity research and finance analysis, having worked at FBR Capital Markets, Telsey Advisory, and Bridgewater Associates. This experience provides a solid foundation for conducting thorough analysis and evaluating investment opportunities.

MBA degree from NYU Stern School of Business

The author holds an MBA degree from NYU Stern School of Business, highlighting their educational background in finance and business management. This academic qualification further strengthens the author’s credibility and expertise in the field of investment analysis.

Disclaimers

No stock position or plans

The author of this article has stated that they do not hold any stock position in Dillard’s and have no plans to initiate any such positions in the future. This disclosure ensures transparency and eliminates conflicts of interest that may arise from personal investments.

Opinions expressed in the article

The opinions expressed in this article are solely those of the author and do not represent the views or opinions of Seeking Alpha as a whole. The analysis and conclusions drawn in the article are based on the author’s assessment of the available information and should be considered as one perspective among many.

Seeking Alpha’s disclosure

Seeking Alpha is a platform for investors and analysts to share their opinions and analysis on various stocks and investment opportunities. The platform does not endorse or recommend specific stocks or investment strategies. Readers should conduct their own research and consult with financial advisors before making investment decisions.

About Dillard’s stock

Stock symbol and exchange

Dillard’s stock is traded on the New York Stock Exchange under the symbol “DDS.” Investors can buy and sell shares of Dillard’s through their preferred brokerage accounts.

Historical and current stock performance

Dillard’s stock has experienced significant growth since July 2020, increasing by approximately 1,700%. However, it is important for investors to consider the stock’s historical performance as well as current market conditions when evaluating its potential for future growth.

Market capitalization

Dillard’s market capitalization represents the total value of its outstanding shares. This figure is calculated by multiplying the stock’s current price by the number of shares in circulation. The market capitalization provides an indication of the company’s size and value in the stock market.

PE ratio and dividend yield

The price-to-earnings (PE) ratio is a valuation metric used to assess the relative value of a company’s stock. Dillard’s PE ratio can be compared to industry peers to determine if the stock is undervalued or overvalued. The dividend yield represents the annual dividend payment as a percentage of the stock’s price and provides insight into the company’s dividend policy.

Revenue growth

Dillard’s revenue growth reflects the rate at which the company’s sales have increased over a specified period. Positive revenue growth indicates a healthy and expanding business, while negative growth may be a cause for concern. Investors should consider Dillard’s revenue growth when evaluating the stock’s potential for future profitability.

Related Stocks

Comparison of Dillard’s with its peers

Dillard’s can be compared to other companies in the retail sector to assess its relative performance and competitiveness. By evaluating key metrics such as revenue growth, profitability, and market share, investors can gain insights into Dillard’s position within the industry.

Stock performance of related companies

Investors may also consider the performance of related companies in the retail sector when assessing the potential of Dillard’s stock. By analyzing the stock performance of competitors and industry leaders, investors can gain a broader perspective on the overall market trends and potential risks and opportunities.

Trending Analysis

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In conclusion, Dillard’s stock has experienced significant growth since July 2020 and has shown signs of financial improvement. However, the future growth prospects for the company are considered unimpressive, and there are risks associated with owning Dillard’s stock. Investors should carefully evaluate the company’s financials, industry dynamics, and market conditions before making investment decisions.