What a fantastic six months it’s been for Dillard's. Shares of the company have skyrocketed 69.7%, hitting $600.08. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Dillard's, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Is Dillard's Not Exciting?
We’re glad investors have benefited from the price increase, but we're swiping left on Dillard's for now. Here are three reasons there are better opportunities than DDS and a stock we'd rather own.
1. Lack of New Stores, a Headwind for Revenue
A retailer’s store count often determines how much revenue it can generate.
Dillard's listed 272 locations in the latest quarter and has kept its store count flat over the last two years while other consumer retail businesses have opted for growth.
When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.
2. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.
Dillard’s demand has been shrinking over the last two years as its same-store sales have averaged 2.9% annual declines.
3. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Dillard’s revenue to drop by 2.1%, a decrease from This projection is underwhelming and suggests its products will face some demand challenges.
Final Judgment
Dillard’s business quality ultimately falls short of our standards. Following the recent rally, the stock trades at 21.8× forward P/E (or $600.08 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d suggest looking at our favorite semiconductor picks and shovels play.
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