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Why Dillard's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of department-store operator Dillard's (NYSE: DDS  ) sank 10% today after its quarterly results disappointed Wall Street.

So what: The stock has rallied over the past year on strong sales growth, but a small fourth-quarter miss -- adjusted EPS of $2.87 versus the consensus of $2.89 -- is forcing Mr. Market to sober up a bit. While Dillard's managed to increase same-store sales for the 10th consecutive quarter, analysts are concerned that the rate of growth isn't keeping up with the valuation.

Now what: For 2013, management expects capital expenditures of $175 million, depreciation and amortization of $261 million, rentals of $27 million, and interest and debt expense of $65 million. "As we mark our 75th year at Dillard's this month, we are proud of our progress and excited about the future," said CEO William Dillard II in a statement. Given its still-hefty debt load and questionable competitive position, however, I'd be extra cautious about buying into that optimism.

Interested in more info Dillard's? Add it to your watchlist.

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