Dillard’s shares close up 10% on market rally as retailer’s quarterly income misses estimates

Heavy trading pushed Dillard’s Inc. stock up more than 11% ahead of the Little Rock-based department store retailer’s disappointing third quarter earnings report, yet after hours trading was giving back most of the gain after the closing bell on Thursday.

In heavy trading on Thursday, Dillard’s shares were caught up in a broader midday rally as Wall Street investors were snapping up U.S. equities as fears of a Donald Trump presidency eased market concerns. The Dow Jones Industrial Average was leading the stock market rally at the closing bell at 18.807.88, up 218.19 or 1.17%.

Still, after market close, Dillard’s earnings came in well below Wall Street forecast for the upscale retailer with only weeks before Black Friday kicks off the Christmas shopping season. Analysts surveyed by Thomson Reuters had expected the retailer to report third quarter earnings of 78 cents per share on revenue of $1.41 billion.

For the 13-week period ended Oct. 29, Dillard’s reported net income of $22.8 million, or 67 cents per share, down 50% compared to net income of $45.7 million or $1.03 per share, in the same period a year ago. Third quarter sales, which include operations of the company’s construction business, CDI Contractors LLC of Little Rock, were up 1.36%, compared to $1.43 billion in the same period of 2015.

Now, heading into the all-important holiday shopping season, the department store chain and online merchandiser is looking to regain its footing as same stores sales, a key industry metric for sales growth at existing store locations, declined 2% in the quarter.

“Our sales decline continued to weigh heavily on profitability during the third quarter. As we work through this tough time, we are focused on improving customer experience through attracting and maintaining premium brands while providing exceptional service,” said Dillard’s CEO William Dillard. “Shareholder return remains a priority, and we returned $55 million of cash to shareholders through share repurchase and dividends.”

Companywide, total merchandise sales for the 13-week period ended Oct. 29 were $1.323 billion compared to $1.382 billion a year ago. Sales in comparable stores for the period decreased 2%.

Although all categories declined, better performing categories relative to the total trend were home and furniture, juniors’ and children’s apparel, ladies’ apparel and men’s clothing and accessories, company officials said. Weaker performing categories were ladies’ accessories and lingerie, cosmetics and shoes. Sales were strongest in the Western region, followed by the Central and Eastern regions, respectively.

Selling, general and administrative expenses for the 13-week period were $410.5 million, or 30.1% of sales, compared to $412.7 million during in the third quarter of 2015. Decreases in several expense categories, notably advertising and services purchased, were partially offset by increased payroll and insurance expense, officials said.

Company officials said the Arkansas retailer purchased 900 million share for $53.1 million of Class A common stock under its $500 million share repurchase program. At the end of the third quarter, authorization of $334.4 million remained under the program. Total shares outstanding of Class A and B common stock were 33.5 million at the end of the third quarter.

In October, Dillard’s opened a replacement store in Four Seasons Town Centre in Greensboro, N.C. At the end of the third quarter, the retailer operated 271 Dillard’s locations and 23 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage for the quarter was 49.6 million square feet.

At the end of Dillard’s rousing rally throughout the day, the Arkansas retailer’s shares settled at $70.47, up $6.35, or 9.9%. Over the past 52 weeks, Dillard’s stock (NYSE: DDS) has traded in the range on the low-end at $54.37 and a yearly high of $88.58 per share.

More than 1.5 million shares of Dillard’s stock traded hands, nearly three times the normal volume. In the after hour session, Dillard’s shares were down $4.49, or 6.37%, at $65.98.