In the face of a deteriorating sales environment, Dillard's (NYSE:DDS) reported its Q3 FY2023 results today. The company's revenue decreased by 4.4% YoY to $1.50 billion, slightly missing the anticipated $1.52 billion by 1.1%. Despite the sales challenges that started in September, Dillard's focused on profitable sales and inventory control, which led to a retail gross margin of 45.3%.
However, the company's EPS of $9.49 significantly outperformed the estimated $7.19, beating it by 31.9%. This bright spot was overshadowed by a drastic reduction of 96.6% in free cash flow from Q3 FY2022, and a decrease in gross margin from 45.6% to 44.5%. The same-store sales experienced a significant drop of 6% YoY, greatly missing the expected decline of 1.8%.
Over the last year, Dillard's expanded its physical footprint by adding 24 new stores, bringing the total store count to 273. CEO William T. Dillard II confirmed a $48 million stock repurchase and disclosed that the company has $893 million in cash and short-term investments remaining.
The underperformance in sales comes amidst an increasingly challenging retail environment, with Dillard's focusing on profitable sales and inventory control to navigate through these difficulties.
InvestingPro Insights
InvestingPro's real-time data and expert tips provide valuable insights into Dillard's current financial situation and future prospects. Two key InvestingPro Tips for Dillard's are:
1. Management has been aggressively buying back shares, which aligns with the company's recent $48 million stock repurchase, as confirmed by CEO William T. Dillard II. This can be a positive signal to investors about the company's confidence in its own stock.
2. Dillard's holds more cash than debt on its balance sheet, reflected in the substantial $893 million in cash and short-term investments disclosed. This indicates a strong liquidity position and financial health of the company.
In terms of InvestingPro Data, three crucial metrics stand out:
1. Dillard's has raised its dividend for 9 consecutive years, demonstrating a commitment to returning capital to shareholders.
2. The company's strong earnings should allow management to continue dividend payments, which is a positive sign for income-focused investors.
3. Despite a slowdown in revenue growth, Dillard's operates with a high return on assets, indicating efficient use of its assets to generate earnings.
InvestingPro offers an additional 14 tips related to Dillard's, providing a comprehensive view of the company's financial landscape. These insights can be invaluable for investors seeking to understand the company's performance and potential in the challenging retail environment.
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