Dillard's (DDS, Financial) just delivered a showstopper, sending its stock soaring nearly 11%. The company reported Q3 GAAP EPS of $7.73, beating Wall Street estimates by $1.34, while revenue came in at $1.43 billion, down 2.7% year-over-year but right in line with expectations. Despite a tough retail environment and a 4% drop in comparable store sales, Dillard's showed investors it knows how to play the profitability game, maintaining a strong retail gross margin of 44.5%. CEO William T. Dillard, II struck an optimistic tone, pointing to disciplined expense control, a $1.1 billion cash position, and a $107 million stock buyback as reasons for confidence heading into the crucial holiday season.
Earnings may have taken a hit compared to last year—net income fell to $124.6 million from $155.3 million—but the company's operational finesse stood out. Cosmetics emerged with the strongest performance, offsetting weaker performances in juniors' and men's apparel, while operating expenses dipped slightly to 29.4% of sales. Inventory rose 3%, a strategic move to prep for the tighter holiday shopping window this year. The market's reaction? A clear vote of confidence in Dillard's ability to balance short-term challenges with long-term shareholder value.
So, why the rally? It's simple: Dillard's isn't just holding the line—it's executing. With $287 million still available under its stock repurchase program and a clear focus on margins, the company is proving it can navigate retail's choppy waters and still reward investors. As the holiday season ramps up, Dillard's is in the spotlight, poised to show whether it can finish the year strong.
