Credit Suisse Believes Lack Of Revenue Growth Is Still An Issue For Dillard's

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In a report published Friday, Credit Suisse analyst Michael Exstein reiterated a Neutral rating and $105.00 price target on
Dillard's
DDS
. In the report, Credit Suisse noted, “Dillard's reported in-line results, but the issue remains a lack of revenue growth. The highlights of Dillard's quarter were impressive gross margin expansion, nearly flat inventories, and a resumption in share buyback activity. DDS resumed its more aggressive pace of share repurchases, which it appeared to have put on pause since 4Q13. Additionally, a gain on an asset sale had a positive $0.09 impact on EPS. But the issue of achieving any revenue growth appears to be becoming a bigger challenge for the company, as comps declined for the first time since 4Q09 and expenses did not leverage lower sales. Without revenue growth, operating margins appear to have little room to expand, given limited opportunities to further reduce SG&A dollars. Shares appear to fully reflect the operational turnaround as the company matures into primarily a share buyback story going forward. Further margin expansion without sales growth is likely to be a challenge. We adjust our FY14E EPS estimate to $7.68 from $7.56 and maintain our FY15E EPS estimate of $8.00.” Dillard's closed on Thursday at $112.76.
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Posted In: Analyst ColorReiterationAnalyst RatingsCredit SuisseMichael Exstein
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