Dillard's (DDS) Valuation Revisited as Operational Challenges Pressure Sales, Earnings and Growth Plans

Operational setback sharpens focus on Dillard's strategy

Fresh commentary on Dillard's (DDS) weak demand, sliding same store sales, and falling earnings per share has put management's strategy under the microscope, especially as the retailer pauses new store openings in order to overhaul existing locations.

See our latest analysis for Dillard's.

Despite the recent pullback and soft same store sales, Dillard's share price has still delivered a robust year to date share price return and an even stronger one year total shareholder return, suggesting longer term momentum has not fully broken.

If this kind of mixed picture has you rethinking retail, it might be a good moment to broaden your search and discover fast growing stocks with high insider ownership.

With earnings slipping, modest revenue growth, and shares now trading above analyst targets after a huge multi year run, investors face a key question: Is Dillard's still undervalued, or is future growth already priced in?

Price-to-Earnings of 17.6x: Is it justified?

Dillard's currently trades on a price to earnings ratio of 17.6 times, a level that looks modest relative to both the wider market and direct multiline retail peers, even after a powerful long term share price run.

The price to earnings multiple compares the company’s share price to its earnings per share, making it a straightforward way to gauge how much investors are paying for current profitability. For an established department store chain with decades of operating history, this lens is especially important because earnings power, rather than hyper growth, is the core of the investment case.

On one hand, Dillard's trades below the overall US market multiple of 19 times, and also below both the global multiline retail average of 19.7 times and a 20.2 times peer average, which suggests the stock is not priced as aggressively as many comparables. On the other hand, our analysis indicates a fair price to earnings ratio closer to 13.8 times, implying that if the market gravitates toward this fair level, today’s multiple embeds a noticeable premium to that intrinsic benchmark.

Explore the SWS fair ratio for Dillard's

Result: Price-to-Earnings of 17.6x (OVERVALUED)

However, sliding same store sales and earnings pressure, along with shares trading above analyst targets, could quickly unwind sentiment if consumer demand softens further.

Find out about the key risks to this Dillard's narrative.

Another lens on value

Our SWS DCF model paints a cooler picture, putting Dillard's fair value nearer $518.72. This suggests the current $654.08 price looks rich rather than cheap. If cash flows drift or sentiment cools, could that premium become a drag on future returns?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dillard's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 916 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Dillard's Narrative

If this perspective does not quite align with your own, or you would rather dig into the numbers yourself, you can quickly craft a personalized view in just a few minutes, Do it your way.

A great starting point for your Dillard's research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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