Why Dillard's, Inc. Stock Spiked Last Week
Three months ago, department store operator Dillard's (NYSE: DDS) released a dreadful second-quarter earnings report, as an inventory glut undermined gross margin. Dillard's ended the quarter with inventory still up 2% year over year, so investors had to worry that the company's profitability woes would continue in the third quarter.
On Thursday, Dillard's stock rose by double digits after larger rivals Macy's (NYSE: M) and Kohl's posted better-than-expected third quarter results. Dillard's justified that spike on Thursday afternoon by reporting solid sales results for the third quarter, along with a profit that was more than twice what analysts were expecting. Still, the stock looks overly expensive in light of Dillard's ongoing margin problems.
In the second quarter, Dillard's comparable store sales declined just 1% year over year. That was significantly better than the trend at department store giant Macy's. However, Dillard's gross margin plummeted by more than 2 percentage points during the quarter. This led to a loss of $0.58 per share, whereas analysts had been expecting EPS of $0.19.
Source: Fool.com
