Dillard’s Stock Is Soaring After It Managed to Narrow its Losses Amid COVID-19 Pressures

Shares for Dillard’s are surging in after-hours trading after the company released second-quarter results that were mostly better than expected against the backdrop of a coronavirus-battered retail landscape.

The Little Rock, Ark.-based department store chain said today that it narrowed its net losses for the 13-week-period ended Aug. 1 to $8.6 million, or 37 cents per share, from net losses of $40.7 million, or $1.59 per share, in the comparable year-ago quarter. Those results far outpaced analysts’ estimates for losses of $4.54 per share.

Dillard’s revenues, meanwhile, tumbled around 35% year over year to $893 million, falling short of market watchers’ forecasts for sales of $1.01 billion.

Nevertheless, as retailers grapple with widespread reductions in discretionary spending and consumers’ ongoing fears of public spaces, investors appeared to cheer Dillard’s ability to narrow its net losses. On the heels of the release, the firm’s shares advanced nearly 11%, as of 4:30 p.m. ET, to $30.

Like the majority of its retail peers, Dillard’s was forced to shutter most of its locations across the U.S. in April in accordance with government and state orders that sought to stem the spread of COVID-19. As of June 2, all Dillard’s store locations were re-opened to the public but continue to operate under reduced hours with the exception of one location.

While Dillard’s cautioned that its current revenue performance is no indication of future trends, it said its sales in the stores since re-opening through August 1, 2020 were about 72% of the prior year sales on corresponding days.

Just this week, a study by data tracking service Placer.ai suggested department stores like Macy’s, JCPenney and Dillard’s were starting to see traffic wean in recent weeks amid new spikes in COVID-19 cases in Florida, Arizona, Texas and other states.

Dillards, according to Placer, was enjoying traffic gains of 6.6% in February before the pandemic swept across the country. Its visits flatlined in April before both May and June saw traffic move closer to pre-pandemic levels, said the report.

Notably, with most of its stores located in Texas and Florida — both states reopened earlier than much of the U.S. — Dillard’s appeared to sidestep the flatlining that its department store peers saw in May. Still, as those very states experience coronavirus spikes, Placer suggests Dillard’s could be at risk for a significant pullback in traffic.

“The brand’s recovery pace is falling off, or plateauing, from its initial traffic rush after being allowed to reopen,” said the report. “Although visits were just 26.7% down for the week of June 15, the closest to 2019 levels, traffic has continued to decline since then.”

For the second quarter, Dillard’s said its inventory decreased 20% while retail gross margin improved to 31.1% compared with 28.7% for the year-ago period.

“During the quarter, we worked hard to control inventory and expenses,” said Dillard’s CEO William Dillard II. “These measures allowed us to improve gross margin and substantially narrow the loss from the prior year second quarter. We will maintain this conservative financial approach as we move forward.”

The firm declined to provide a full-year outlook, citing the ongoing uncertainty surrounding the pandemic.

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