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What's in the Cards for Dillard's (DDS) in Q3 Earnings?

Leading departmental store chain, Dillard’s, Inc. DDS is expected to release third-quarter fiscal 2017 results on Nov 9. The question lingering in investors’ minds is, whether the company will be able to deliver a positive earnings surprise in the to-be-reported quarter.

A look at the company’s earnings trend shows that Dillard’s has lagged the Zacks Consensus Estimate in six of the last eight quarters. In fact, it incurred a loss of 58 cents per share in the previous quarter, which compares unfavorably with the Zacks Consensus Estimate of earnings of 21 cents.

Let’s see what lies ahead for Dillard’s in the quarter under review.

Which Way are Estimates Treading?

In order to get a clear picture of what analysts are thinking about the company right before earnings release, let’s have a look at the earnings estimate revisions. The Zacks Consensus Estimate for the fiscal third quarter has moved down by 3 cents to 23 cents in the past 30 days. This reflects a plunge of about 65% from 67 cents earned in the year-ago quarter.

Analysts polled by Zacks also expect revenues of $1.3 billion, down 4.9% from the prior-year quarter’s figure.

Factors at Play

Dillard’s has been facing challenging trends in the retail sector, particularly in the apparel division. As the retail landscape is undergoing a fundamental change with technology playing a major role and customers’ preferences shifting from offline to online, the brick-and-mortar retailing concept is losing sheen. Also, retailers’ comparable-store sales are on the decline that is denting overall profits.

Evidently, Dillard’s second-quarter fiscal 2017 results were hurt, wherein both the top and bottom lines declined year over year. Further, merchandise comps were down 1%, mainly due to soft sales across the shoes, cosmetics, home and furniture categories. Results were marred by higher markdowns undertaken by the company to manage inventories.

Additionally, macroeconomic challenges like consumer spending patterns, demographic trends as well as stiff industry competition remains major concerns for the company.

These factors have been reflected in the company’s share price that plunged 30.9% in the past three months, wider than the industry’s decline of 18.4%.

While these factors pose concerns for the company, Dillard’s constant efforts to capitalize on growth opportunities in its brick-and-mortar stores and e-commerce business remain encouraging. Further, its focus on increasing productivity, enhancing domestic operations and developing an omni-channel platform should strengthen customer base.

What the Zacks Model Unveils?

Our proven model shows that Dillard’s is unlikely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dillard’s has an Earnings ESP of +47.83% as the Most Accurate estimate of 34 cents is pegged higher than the Zacks Consensus Estimate of 23 cents. However, the company’s Zacks Rank #4 (Sell) makes our surprise prediction difficult.

As it is we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Zumiez Inc. ZUMZ has an Earnings ESP of +0.69% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Home Depot, Inc. HD has an Earnings ESP of +0.76% and a Zacks Rank #2.

Abercrombie & Fitch Co. ANF has an Earnings ESP of +6.38% and a Zacks Rank #3.

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Home Depot, Inc. (The) (HD): Free Stock Analysis Report
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Dillard's, Inc. (DDS): Free Stock Analysis Report
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