Dillard's Rallies 35% In 3 Months: What's Driving The Stock?

Dillard’s Inc. (NYSE:DDS) has been moving up the charts mainly due to a robust surprise trend backed by various strategic actions. Notably, the company’s fourth-quarter fiscal 2017 results marked its third-earnings beat in the last four quarters. Moreover, the company delivered positive sales surprise for three consecutive quarters.

This robust performance has driven shares of Dillard’s up 35.3% in the last three months, significantly outperforming the industry’s 17% growth. Moreover, this Zacks Rank #1 (Strong Buy) stock witnessed a rise of 13.3% following fourth-quarter results on Mar 27. This also marks a notable improvement from the industry’s 1.5% upside.

Growth Catalysts

Dillard’s has created a niche position in the industry by its stringent focus on offering fashionable products to its customers and adding value through exceptional customer care service. We believe that the company’s strategy of offering fashion-forward and trendy products acts as a catalyst for attracting more customers.

The company is well positioned to benefit from growth opportunities in both its brick-and-mortar stores and e-commerce business, which is likely to aid in retaining existing customers and attracting new ones. On one hand, the company will gain by enhancing brand relations, focusing on in-trend categories, store remodels and rewarding store personnel. On the other hand, some of the strategies to boost growth across its e-commerce business include enhancing merchandise assortments and effective inventory management.

We expect the company’s top and bottom lines to gain from its focus on increasing productivity at existing stores, developing a leading omni-channel platform and enhancing domestic operations in the long term.

Further, Dillard’s boasts a healthy cash position which provides it the financial flexibility to take up shareholder-friendly moves as well as engage in store and online business expansion. In fiscal 2017, the company generated net cash flow from operations of $274.2 million and incurred $9.4 million in dividends. Moreover, it repurchased 4.1 million shares for about $219 million in fiscal 2017. As of Feb 3, 2018, Dillard’s had an authorization worth $34.8 million remaining under its $500 million buyback program.

All these efforts led the company to deliver another strong quarter in fourth-quarter fiscal 2017. Notably, both top and bottom lines surpassed estimates and improved year over year in the quarter, driven by the persistence of the positive trends witnessed in the third quarter into the fourth quarter. Earnings growth came on the back of solid comparable store sales (comps) increase, along with higher gross margins and relative expense management. Sales gained from strength across its ladies’ apparel, juniors' and children's apparel, and men's apparel and accessories categories.

Looking for Trending Retail Picks? Check These

Other top-ranked stocks in the retail sector include Macy’s Inc. (NYSE:M) sporting a Zacks Rank #1, and Kohl’s Corporation (NYSE:KSS) and Nordstrom Inc. (NYSE:JWN) both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Macy’s, with long-term earnings per share growth rate of 8.5%, has surged 41.3% in the last six months.

Kohl’s has advanced a substantial 47.4% in the last six months. The stock has a long-term growth rate of 6.7%.

Nordstrom has a long-term EPS growth rate of 6%. Further, the stock has returned 9.6% in the last six months.

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