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CFRA raised its rating on Dillard’s (NYSE:DDS) to a Buy after having the department store stock set at Hold. The firm has the view that although Dillard’s (DDS) is battling significant long-term headwinds as consumers shift away from large department stores and more towards ecommerce shopping, it has done well to shrink outstanding shares while maintaining a strong balance sheet.
Analyst Zachary Warring and team see FY23 as a peak year for the Arkansas-based company and expect earnings and sales to drop from the current levels moving forward after DDS benefitted from massive tailwinds over the past 12 months. However, the overall view of the department store stock is positive.
“DDS is well positioned geographically in the south, is operating efficiently through better managing inventories and costs, and continues repurchasing shares aggressively.”
CFRA’s 12-month price target of $385 works out to 11.0X the firm’s FY25 EPS estimate and is noted to be lower than the company’s 10-year average forward P/E multiple of 14.3X. The lower multiple is due to the slowing U.S. consumer and continued long-term downtrend in large brick-and-mortar businesses across the U.S.
Dillard’s (DDS) posted a mixed Q3 earnings report. Total retail sales and comparable store sales both decreased 6% during the quarter. Net income fell to $155.3M from $187.9M in the prior year. Earnings per share of $9.49 during the quarter was down from $10.96 a year ago, but was well ahead of the consensus expectation of analysts.
Shares of Dillard’s (DDS) are down 8.1% on a year-to-date basis.