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Retail Stocks: Dillard's Stock Rallies On Blowout Earnings Ahead Of Big Week For Sector

By BILL PETERS

Dillard's stock rallied on Thursday and was setting up in a base after the department-store chain reported first-quarter results that beat expectations, helped by a big bump in margins and fewer markdowns as prices rise.

The report for the regional retailer, which sells clothing, cosmetics and home goods, arrives ahead of a big week for retail stocks. Kohl's, Ross Stores, TJX Cos. and Foot Locker all report next week.

Dillard's Earnings, Stock

Dillard's earned $13.68 per share. That was well above FactSet estimates for $6.74. Net sales came in at $1.61 billion, a 21% gain from a year ago and above forecasts for $1.545 billion.

Same-store sales jumped 23%, better than expectations for a 15% increase.

Dillard's stock leapt 10.5% to 312.76 in the stock market today, rebounding from the 50-day line. The stock was in a base with a 416.17 buy point. Investors could use 344.17 as an early entry from a handle that's too low in the consolidation to be proper.

Consumer demand has rebounded from lockdown-era lows in 2020. But stores continue to deal with supply-chain issues and concerns about whether consumers can handle price increases. Stores have also had difficulty attracting workers, and some have offered higher wages amid a tight labor market.

That tight labor market has affected the trucking and warehouse industries as well, making it more difficult and expensive to haul goods across the country. Pandemic-related disruptions to production and shipping have snarled global supply chains, also pushing transportation costs higher.

'Decreased Markdowns'

Still, Dillard's, during the quarter, reported a record-high retail gross margin of 47.3% of sales during the quarter. That figure compared to 42.6% of sales a year ago.

The chain attributed the gains to "positive customer response to the company's merchandise assortment combined with continued inventory management leading to decreased markdowns in the first quarter of 2022."

Retail operating costs were $398.9 million, or around 25% of sales, the company said, due to higher wages and other payroll expenses in what it called "the current nationwide highly competitive wage environment." Those costs represented a lower percentage of sales than in the year-ago period.

The company forecast capital expenditures of $150 million in 2022, a 44% increase.

Dillard's stock has a 91 Composite Rating. Its EPS Rating is 77.

Along with Dillard's stock, Kohl's added 1.8%. Ross Stores moved 1.45% higher. Foot Locker gained 6.3%.

Among other department store retail stocks, Macy's, which reports earnings on May 26, rallied 4.5%. Nordstrom, which reports May 24, rose 5.5%.

S&P 500 Flirts With Bear In Wild Day; These Market Areas Rally

'Modest Expectations' For Retail Stocks

Cowen retail stocks analyst Oliver Chen, in a research note this month, said that "high-end consumer and dressing-up category demand remains solid." And he said that investor expectations for the sector were muted, meaning bigger upside if companies' earnings come in stronger than expected.

"Slightly better than expected results could drive stock appreciation given modest expectations for (second quarter and full year) guidance, in our view," he said.

Still, Chen said challenges for the sector included higher freight costs, and inventory management. He also cited the absence of stimulus payments and higher prices.

"Rising prices in key staple categories could translate to more muted consumer demand, especially toward the low end of the income spectrum," he said.

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Dive Deeper:
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