Zacks_Analysts' Blog : Dillard's Beats Estimates - Analyst Blog

Dillard's Inc. (DDS), a leading fashion apparel, cosmetics and home furnishings retailer, posted strong second-quarter 2011 earnings of 30 cents per share, outpacing the Zacks Consensus Estimate of 19 cents per share and prior-year quarter earnings of 3 cents per share.

On a reported basis, including one-time items, Dillard's reported earnings were 32 cents per share compared with the prior-year quarter's earnings of 10 cents per share. The quarterly earnings topped estimates on the back of strong same store sales growth and improved margins.

Dillard's top line (including CDI Contractors, construction, LLC or CDI) inched up 3.8% to $1,475.0 million for the second quarter of 2011 from $1,420.8 million in the year-ago quarter. Merchandise sales excluding CDI came in at $1,426.0 million compared with $1,359.0 million in the year-ago quarter. Comparable same-store sales growth was 6.0%. Total revenue outpaced the Zacks Consensus Estimate of $1,441.0 million.

Gross margin from retail operations (which excludes CDI) remains consistent at 33.7% for the second quarter of fiscal 2011. Benefits resulting from positive comparable store sales performance coupled with an efficient inventory management were offset by high input costs. However, consolidated gross margin (which includes CDI) picked up 20 basis points in the quarter under review.

Dillard's advertising, selling, administrative and general expenses inched up $4.0 million to $396.0 million. The expenses plummeted mainly due to rise in selling payroll, supplies and services purchased were partially offset by abridged net advertising and utility expenditures.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $179.5 million compared with $214.7 million in the year-ago period. Long-term debt and capital leases was $706.5 million and shareholders' equity was $1,931.0 million versus $756.3 million and $2,175.7 million, respectively, in the prior-year period. In the second quarter of 2011, net cash provided by operating activities came in at $125.0 million.

During the quarter, the board of directors of the company approved a new $250.0 million share repurchase program of Class A shares. Moreover, the company has also recently raised its dividend payout by 25% to 5 cents a share.

Store Update

In the quarter, Dillard announced closure of operations at its Highland Mall in Austin, Texas along with Decatur Mall in Decatur, Alabama and Westminster Mall in Westminster, Colorado. Currently, the company operates 291 stores, 14 clearance centers across 29 states and an internet store.

Based in Little Rock, Arkansas, Dillard's Inc. is a large departmental store chain, featuring fashion apparel and home furnishings in the United States. Macy's Inc. (M), which competes with Dillard's, reported second-quarter 2011 earnings of 55 cents per share.

Dillard's shares maintain a Zacks #1 Rank, which translates into a short-term Strong Buy rating. Our long-term recommendation on the stock remains Outperform.