What happened

Dillard's Inc. (DDS 3.35%) saw its stock price fall 12.3% this week from last Friday's close through noon EST today, according to S&P Global Market Intelligence. The stock is trading at about $357 per share, up 10.4% year to date.

All of the major market indexes were down this week, as the S&P 500 fell 2.7%, the Dow Jones Industrial Average plunged 3%, and the Nasdaq Composite tumbled 3.3% as of Friday at noon EST.

So what

Retailer Dillard's has been pretty resilient over the past year amid the headwinds of inflation and a slowing economy. In its fiscal fourth quarter ended Jan. 28, 2023, Dillard's had $2.16 billion in net sales, which were basically flat compared to the year-ago period. Net income was down about 10% for the period, year over year, to $289 million, or $16.89 per share, on higher expenses and cost of sales.

It had a retail gross margin of 38.7% in the quarter, which was the second highest Q4 for the company, but it was down from a record 41.4% for the prior-year Q4. While sales during the holiday season were weaker than expected, markdowns in January led to a surge in sales that boosted its numbers.

For the full 52-week period ended Jan. 28, net sales were up 5.6% from the previous period to $6.87 billion, while net income was up 3.5% to $892 million, or $50.81 per share, over that same period.

The stock price fell on the Feb. 21 earnings release as the department store chain beat earnings projections for the quarter but missed on revenue. It also announced that it was closing three stores in the first quarter in Florida, Arizona, and Nebraska.

Now what

Dillard's decline may also have to do with a downgrade this week from JPMorgan Chase analyst Matthew Boss, who lowered the firm's price target significantly, reported the Fly. Boss reduced the target from $345 per share to $286 per share and gave it an underweight rating based on a constrained outlook for sales growth, given the economic environment and the continuing decline of mall traffic.

Dillard's did announce plans to open a store at the Empire Mall in Sioux Falls, South Dakota in the spring of 2024. This would be the first store in South Dakota and the 30th state that Dillard's has a store in. But unfortunately, strong economic headwinds persist for the stock right now.