Dillard's (DDS) Soft Q2 Earnings Hurt Stock, Comps Down 5%

Core Viewpoint - Dillard's Inc. reported disappointing second-quarter fiscal 2024 results, with both sales and earnings missing expectations and declining year over year due to a challenging consumer environment and increased operating expenses [1][2]. Financial Performance - Earnings per share were $4.59, falling short of the Zacks Consensus Estimate of $5.91, and down 42.5% from $7.98 in the same quarter last year [2]. - Net sales reached $1.490 billion, a decrease of 4.9% from the prior year and below the Zacks Consensus Estimate of $1.528 billion [2]. - Total retail sales, excluding CDI Contractors, dropped 5% year over year to $1.426 billion, with comparable store sales also declining by 5% [4]. Margin and Expenses - The consolidated gross margin contracted by 120 basis points to 37.6%, with retail gross margin at 39.1%, reflecting a decrease of 130 basis points [5]. - Selling, General and Administrative (SG&A) expenses as a percentage of sales increased by 280 basis points to 29.1%, with total SG&A expenses growing 5.1% to $433.6 million, primarily due to higher payroll costs [6]. Cash Flow and Debt - Dillard's ended the quarter with cash and cash equivalents of $946.7 million and long-term debt of $321.5 million, with total shareholders' equity at $1.949 billion [7]. - The company generated $175.9 million in net cash from operating activities as of August 3, 2024 [7]. Capital Expenditure and Store Update - Capital expenditure for fiscal 2024 is expected to be $120 million, down from $133 million in fiscal 2023 [8]. - As of August 3, 2024, Dillard's operated 273 stores, including 28 clearance stores, and recently opened a new store in Sioux Falls, SD [9]. Outlook - For fiscal 2024, Dillard's anticipates depreciation and amortization expenses of $185 million, net interest and debt income expense of $13 million, and rentals of $22 million, consistent with fiscal 2023 [10].