Shares of department store chain Dillard’s (NYSE:DDS) jumped 5.5% in the morning session after retail stocks surged after bellwether Target reported third quarter results that blew past analysts' EPS expectations, driven by a small beat on revenue, better profitability, and a lower-than-expected tax rate. While same-store sales declined, the figure exceeded analysts' expectations. The company also generated healthy operating cash flows and repositioned its inventory into a healthier position. Next quarter's EPS guidance was slightly ahead of Consensus. Zooming out, we think Target’s quarter was an impressive one that should please shareholders, especially in light of some troubling consumer commentary from other companies. After the initial pop the shares cooled down to $322.88, up 2.5% from previous close.
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What is the market telling us:
Dillard's's shares are quite volatile and over the last year have had 10 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 9% on the news that the company reported second quarter results that exceeded Wall Street's expectations for revenue, gross margin, and EPS. That the company continues to repurchase shares should also please shareholders.
On the other hand, same store sales missed (although again, revenue beat), and the company called out a "cautious consumer" in the press release, which was observed in the first quarter and continued in the first few weeks of the second. Overall, it was a positive quarter for the company considering the solid results and share purchase program.
Dillard's is up 1.6% since the beginning of the year, but at $322.88 per share it is still trading 22.3% below its 52-week high of $415.36 from February 2023. Investors who bought $1,000 worth of Dillard's's shares 5 years ago would now be looking at an investment worth $5,141.
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