Dillard’s Shares Sink as Q3 Margin Falls Short of Expectations (DDS)

Dillard’s Inc. (NYSE: DDS) shares are sinking in trading today even as the company reported an 85% increase in third-quarter profit.

Dillard’s shares have been pushed lower as the company’s retail gross margin for the third quarter fell short of expectations. At last check, Dillard’s shares were trading 12.38% lower at $48.34 on above average volume of 3.29 million. Despite today’s losses, Dillard’s shares are still up more than 27% this year.

Dillard’s, which is engaged in apparel and home furnishing retail business, reported third-quarter net income of $26.6 million, or $0.50 per share, compared with net income of $14.4 million, or $0.22 per share reported for the same period in the previous year. Analysts were expecting the Little Rock, Arkansas-based company to report a profit of $0.32 per share.

Dillard’s revenue for the three-month period ended October 29 was $1.38 billion, compared with $1.34 billion reported for the same period in the previous year. Analysts were expecting the retailer to report revenue of $1.37 billion. The company’s total merchandize sales rose 4% during the quarter, while its comparable store sales jumped 5%.

Although the company’s earnings and revenue for the third quarter beat estimates, shares are falling on lower than expected retail gross margin. Dillard’s has taken a number of steps such as cutting costs, closing down stores and reducing inventory to boost its margin. However, third-quarter gross margin of 36.2% still disappointed investors.

Dillard’s CEO William T. Dillard II, said that the company’s 5% comparable store sales performance provided strong income momentum as it maintained gross margin and leveraged operating expenses, which resulted in an 85% increase in net income for the quarter. Dillard further said that the third-quarter performance further solidifies the company’s confidence in its strategy as it enters the holiday season.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.