Investors should sell Dillard’s after the department store chain’s disappointing quarterly results, JPMorgan said. Analyst Matthew Boss downgraded the Arkansas-based retailer to underweight from neutral, saying the retailer is in trouble after its fourth-quarter results missed JPMorgan’s expectations. “DDS reported 4Q adjusted earnings per share of $15.14 excluding $1.75 of 1x income tax items (lower than JPM at $16.35) with same-store sales (Flat vs. JPM +1 .6%) and gross margin (37.7% vs. JPM at 39.2%) misses our model,” Boss wrote in a Tuesday note. “On a deeper look, gross profit dollars fell 7.1% year-over-year, the model’s first decline in 7 quarters, driven by a combination of 110bps sequential three-year same-store sales CAGR and a 320bps decline in gross margin compared to 2019,” the boss added. Dillard’s stock has outperformed over the past few years. In 2022, the stock advanced more than 30%, significantly outpacing the 19% decline in the S&P 500. In 2021, Dillard’s rose more than 280%. So far this year, its performance is more in line with the broader index, up more than 4%. Still, the analyst cited weaker sales and increased margins during the holiday season as troubling signs for the company as it also grapples with declining mall traffic. The analyst’s forward model shows a 21% decline in earnings per share in 2023 and a 9% sequential decline in 2024. JPMorgan’s December 2023 price target was cut to $286 from $345. That means the stock could be down 15% from Tuesday’s closing price. —CNBC’s Michael Bloom contributed to this report.
