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NEW YORK (TheStreet) -- Dillard's (DDS) - Get Free Report dropped on Monday after fourth-quarter earnings failed to meet analyst expectations.

By midafternoon, shares had fallen 7% to $83.12. Trading volume of 3.1 million was more than five times its three-month daily average.

In the three months to January, the department store chain recorded net profit of $119.1 million, 26% lower than a year earlier. Excluding one-time charges, net earnings fell 6% to $2.69 a share. Analysts surveyed by Thomson Reuters had expected earnings of $3 a share.

Revenue of $2.03 billion dropped 3.4% from a year earlier. Comparable-store sales increased 2% over the quarter.

"Although it was a profitable fourth quarter, we are disappointed in our gross margin performance, as lower than anticipated sales necessitated heavier markdowns," said CEO William T. Dillard in a statement.

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TheStreet Ratings team rates DILLARDS INC as a Buy with a ratings score of B+. The team has this to say about their recommendation:

"We rate DILLARDS INC (DDS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, increase in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."