As the COVID-19 pandemic began to sweep across the U.S. earlier this year, I warned investors to avoid Dillard’s (DDS) stock. The pandemic peaked at the worst possible moment for Dillard’s, as the company has earned the majority of its annual profits in the first fiscal quarter in recent years. Furthermore, with a less-developed e-commerce business than its biggest rivals, Dillard’s was poorly positioned to offset lost in-store sales with online growth.
The department store chain’s first quarter performance was as bad as expected. However, the company did a remarkable job of clearing out seasonal inventory proactively in the early days of the pandemic, enabling it to improve its Q2 profit margin modestly on a year-over-year basis.
By quickly stemming its pandemic-related losses, Dillard’s ensured that its asset value remains intact. With Dillard’s stock trading well below book value and management continuing to buy back shares during the pandemic, the