Dillard's Stock Soars After Another Huge Earnings Beat

Before the COVID-19 pandemic, Dillard's (NYSE: DDS) was struggling with stagnant sales and steadily eroding margins. In fiscal 2019, the regional department store chain recorded revenue of $6.3 billion and a woeful adjusted pre-tax margin of 1.8%. That translated to adjusted earnings per share (EPS) of just $3.56. Five years earlier, revenue totaled $6.8 billion and Dillard's posted a 7.6% adjusted pre-tax margin, enabling it to generate adjusted EPS of $7.70.

Surprisingly, though, the company's sales and profitability have rocketed far beyond pre-pandemic heights in 2021, driving the stock into the stratosphere. Last week, the retailer reported a big earnings beat for the third quarter, igniting another rally. But with the stock having quintupled year to date -- outpacing the gains of other department store stocks -- investors appear to have unrealistic expectations for the company's long-term prospects.