Dillard's Rises After Narrower-Than-Expected Second-Quarter Loss

Dillard's maintains it is 'uniquely positioned, among U.S. department store retailers, to weather the COVID-19 pandemic.'
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Dillard's  (DDS) - Get Report was climbing Friday after the department-store operator reported a narrower-than-expected second-quarter loss as the company attempts to recover from the coronavirus pandemic shutdown.

Shares of the Little Rock, Ark.-based company were climbing 14.7% to  $31.02.

Dillard's reported a loss of $8.6 million, or 37 cents a share, compared with a net loss of $40.7 million, or $1.59 a share, a year ago. The Zacks Consensus Estimate called for a loss of $4.54.

Net sales tumbled 35.6% from a year ago to $919 million, while the Zacks estimate called for sales of $965.1 million.

The company said it would not report comparable-store sales data due to the temporary closure of its brick-and-mortar stores as well as the interdependence between in-store and online sales.

Wedbush analyst Jen Redding, who has a neutral rating and $30 price target on Dillard's, said in a research note that the quarterly surprise was largely driven by better-than-expected gross margin, and selling, general and administrative expenses.

The analyst noted a "slight miss in revenues offset the gains, although positively reopened stores are performing at approximately 72% of last year's sales."

The company gave no specific third-quarter guidance, but Redding said management expects a net operating loss for fiscal 2020.

All Dillard's stores were re-opened by June 2, and all but one are open and operating under reduced hours. The El Centro, Calif. store was temporarily closed again by the local government, the company said.

Dillard's CEO William Dillard II said in statement that the company "worked hard to control inventory and expenses."

"These measures allowed us to improve gross margin and substantially narrow the loss from the prior year second quarter," Dillard said. "We will maintain this conservative financial approach as we move forward."

Dillard's reiterated its belief that it is "uniquely positioned, among U.S. department store retailers, to weather the COVID-19 pandemic."

Among other items, the company owns 90% of its retail store square footage and 100% of its corporate headquarters, distribution and fulfillment facilities. 

Store rent obligations are small compared with the industry, Dillard's said. In addition, the company saw strong e-commerce business at dillards.com which includes ship-from-store capability.

The company said it operates 251 Dillard’s locations and 31 clearance centers in 29 states. Dillard's has roughly 22,800 employees.