Dillard's Still Dragging

• Email
• Share
• Print

While the rest of the market spun its wheels this morning, shares of Dillard's (NYSE: DDS) jumped 6% on news of -- get this -- shrinking earnings. There's a reason we advise Fools to ignore the market's day-to-day fluctuations. In the short term, Mr. Market is nuts. Who else could get so excited at the sight of thinner profits from a firm in an ultra-competitive, ultra-low-margin business?

Before you friends of Dillard's make with the feisty email, listen. I've got nothing against the retailer. I've shopped there myself many times. But I won't be shopping for its stock anytime soon. The major reason is that this looks like a company that's stalling amid an otherwise robust retail turnaround. You know that rising tide, the one that's supposed to lift all boats? Well, it's doing a much better job of floating companies like TJX (NYSE: TJX), Saks (NYSE: SKS), Neiman Marcus Group (NYSE: NMG.A), Nordstrom (NYSE: JWN), and Wal-Mart (NYSE: WMT)

Either that, or Dillard's still has some leaks to plug. Excluding $0.13 per share in special charges, the firm's fourth-quarter earnings came in at $0.74. Last year, without a special gain, earnings were $0.77 per share for the same period. Both comps and total sales were down 4% for the quarter.

Management happily headlined a gross margin increase of 0.2% for the fourth quarter, but the folks in investor relations somehow neglected to mention that gross margins were down a full 1.6% over the past 52 weeks.

For the full year, revenues and comps took the same 4% dive, and earnings reached $0.11 per share. That might seem pretty fine compared to last year's loss of $4.67 per share, but considering the $6.22-per-stub accounting charge taken last year, it looks like a nosedive from the $1.55 in earnings the firm would otherwise have posted.

Until Dillard's gets a little more traction, I'd leave the stock to the truly faithful.

Check out the retail scene in the Fool's discussion boards.

Fool contributor Seth Jayson thinks Dillard's name is clunky because he can't help but imagine a U in place of that I. He has no stake in any company mentioned above. View his Fool profile here.