DILLARD’S, INC. (DDS): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/DDS

Headline

Field	Value
Ticker	DDS
Company	DILLARD’S, INC.
Sector / Industry	Consumer Defensive
Current price	$588.92/sh
Composition	Retail operations segment 96% / Construction segment 4%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Implied growth	7.4%
Multiple paid	11x operating income

Solve inputs: computed at a 11.5% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~4.1pp.

Reconcile: at the x-ray's 9.3% required return this reads ~-2.1%/yr; the models below use their own rates.

How unusual the bet is: elevated

Reference	Value
vs own history	+2.81σ
cohort percentile (of 68 peers)	7
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	1.07x	4	expensive
Earnings	0.99x	3	justifies
Relative	0.92x	5	justifies
Growth	0.94x	3	justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=15)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$655.60	0.90x	yes	FCF base $0.8B, growth 1% (input: historical growth), terminal g 1.0%, WACC 9.2%, 5yr projection
DCF Exit Multiple	Growth	$625.14	0.94x	yes	Exit EV/EBITDA: 43.3x / 45.3x / 47.3x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$636.61	0.93x	yes	P/E 22x (static sector reference · 2026-04), scenarios: 18.6x / 22.0x / 25.4x (bear / base = reference held flat / bull), EV/EBITDA 23.4x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$454.75	1.30x	yes	BV/sh $129.70, ROE (TTM) 32.4%, ke 9.3%
Two-Stage Excess Return	Asset	$892.76	0.66x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$391.94	1.50x	yes	Rev $6.6B, growth 1% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.4x / 1.6x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$639.44	0.92x	yes	EPS $42.07, growth 15% (input: historical EPS growth), PEG=0.92 (Undervalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	$701.40	0.84x	yes	BV $129.70 + 5yr PV of (ROE (TTM) 32.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$350.39	1.68x	yes	√(22.5 × EPS $42.07 × BVPS $129.70) — Graham's conservative floor
EV/EBITDA Relative	Relative	$231.66	2.54x	yes	EBITDA $0.18B × sector EV/EBITDA 14.0x
FCF Yield	Earnings	$594.35	0.99x	yes	FCF $754.6M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$1357.46	0.43x	yes	EPS $42.07 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	$845.87	0.70x	yes	Revenue $6.60B × sector P/S 2.0x
PEG Fair Value	Relative	$959.16	0.61x	yes	EPS $42.07 × (PEG 1.5 × growth 15.2% (input: historical EPS growth)) → PE 22.8x
Earnings Yield	Earnings	$454.81	1.29x	yes	EPS $42.07 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net cash	$1.2b
Net debt / NOPAT (after-tax)	-1.82x (net cash)
Net debt / operating income (pre-tax)	-1.44x (net cash)
Share count CAGR (buyback)	-3.9%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Dillard's runs the department store business backwards from the rest of the industry: it owns most of its real estate, borrows essentially nothing, and hands the surplus back: for fiscal 2025 "the Board of Directors declared a special dividend of $30.00 per share" on top of the ordinary quarterly payout.
• The structural risk is the channel rather than the company, with net sales at $6,473.6 million in fiscal 2025 against $6,752.1 million two years earlier, a drift that no amount of expense control reverses.
• The first quarter reported June 5, 2026 showed comparable store sales up 3% and retail gross margin at 45.8%, and the next test of whether that holds arrives with second-quarter results on August 13, 2026.

Bull Case

In each of the last two fiscal years an extra payout landed on top of the ordinary quarterly one. For fiscal 2025 "the Board of Directors declared a special dividend of $30.00 per share", and $25.00 a share the year before. Companies with a reinvestment story do not do that. What Dillard's has instead is a business that throws off more cash than it can sensibly redeploy into new stores, and a management team that has decided, repeatedly, to hand the difference over rather than manufacture a use for it.

The buyback works the same way and has been running for years. Repurchases cost $107.8 million in fiscal 2025, $121.0 million in fiscal 2024 and $281.4 million in fiscal 2023, retiring 300 thousand, 329 thousand and 918 thousand shares respectively. The share count has fallen about 3.9% a year over the four years to May 2026. On a flat sales base, that alone lifts sales and earnings per remaining share every year, which is why the per-share numbers and the top line tell different stories.

The recent operating trajectory is better than the multi-year one, and the first quarter of this fiscal year is the clearest evidence. Retail sales rose "$50.2 million, or approximately 3%, and sales in comparable stores increased approximately 3% during the three months ended May 2, 2026". The filing reports that "Gross margin, as a percentage of sales, increased to 44.5% from 43.9%", with the retail segment at 45.8% against 45.5%. Cash flow provided by operations was $364.0 million against $232.6 million. A department store growing comparable sales while widening gross margin is not the industry norm, and the cash conversion behind it is what funds everything above.

The balance sheet is the quiet reason the strategy is possible. The only meaningful borrowing is "$200million outstanding of its 7.5% subordinated debentures due August1, 2038", held through a wholly owned finance subsidiary, and the company states plainly that it "had no borrowings during fiscal 2025, 2024 and 2023" under its credit agreement, which left $774.7 million of unutilized availability at January 31, 2026. Interest on all long-term obligations is expected to run 19.7 million dollars in fiscal 2026. A retailer that pays a fraction of one quarter's cash flow to service its entire debt load has an unusual amount of freedom about when to buy back stock and when to sit still.

Returns on the equity employed are the last piece. Trailing return on equity runs about 32.4% against book value per share of $129.70, and trailing earnings per share of $42.07 sit against today's quote of $569.18. The bull case does not require the department store industry to recover. It requires this particular operator to keep converting a flat sales base into cash at the rate it currently does, and to keep shrinking the denominator.

Bear Case

The advantage a regional department store used to hold was the anchor position: the retailer everyone walked past on the way to somewhere else. That advantage is being taken apart in slow motion, and the top line is where it shows first. Net sales were $6,752.1 million in fiscal 2023, $6,482.6 million in fiscal 2024, and $6,473.6 million in fiscal 2025. Gross margin as a percentage of net sales went 40.3%, then 39.5%, then 39.5% across those same three years. Two years of no growth and a permanently lower margin rate is not a cycle. It is a channel losing relevance at a manageable pace.

The peer set says the same thing with different names on it. M carries $22.7 billion of revenue shrinking slightly and converts it at a 4.6% operating margin. KSS runs $15.5 billion with revenue down 3.8%. Meanwhile BURL, selling the same categories at lower prices in cheaper boxes, grew revenue 10.6%. The customer has not stopped buying apparel. She has changed where she buys it, and the format taking share is the one with the lower cost structure.

Which makes the price a specific bet. Working backward from today's quote, the market needs company-wide operating profit to compound at roughly 6.4% a year over the next five years. Against its own record that assumption runs well above what this business has actually delivered, and the sensitivity is uncomfortable: a single percentage point of movement in the discount rate swings the required growth by about four points. The bear case is not that Dillard's is expensive against its peers, because it is not. It is that the price quietly assumes a growth rate the format has not produced.

Look at where the cost line is heading and the squeeze becomes concrete. "Selling, general and administrative expenses for the three months ended May 2, 2026 were $444.0 million", which is 28.3% of net sales against 27.6% a year earlier. Comparable sales grew 3% and the expense rate still rose. Store payroll, occupancy and marketing do not scale down with a shrinking channel; they scale down with store closures, and closing stores in a business built on owned real estate means selling the asset that makes the model work.

Inventory deserves a look too. Retail store inventory increased 2% at January 31, 2026 compared with a year earlier, and ending inventory rose 3% at May 2, 2026. Modest increases on modest sales growth are unremarkable in isolation. In a business where gross margin depends on selling merchandise at first markdown rather than third, a stock position running slightly ahead of sales is the first thing to watch when the weather or the consumer turns.

To be fair to the bull, none of this threatens solvency, and the capital return is real rather than promised. The bear case is about direction. A company can return a great deal of cash and still be worth less each year if the base it draws from keeps thinning.

Valuation

Something unusual happens when the standard methods are run against this price: they all agree. Asset-based approaches land essentially at the current quote. The earnings-power methods, the peer-multiple methods and the discounted cash-flow approaches all land at or above it. There is no family here that finds the price stretched, which is a genuinely rare result and the single most important framing fact in the section.

Reading the price the other way produces the tension. Inverted, today's quote requires company-wide operating profit to grow about 6.4% a year for five years. That is not a heroic number in the abstract. It is a demanding one for this business, because the pace runs well above what it has actually delivered across its own recent record, and the calculation is sensitive: roughly four points of required growth move for every point of movement in the cost of capital. Both readings are honest. The methods look at what the company earns now and find the price fair; the inverted read looks at what has to happen next and finds the assumption ambitious. That gap is the analytical question, not an error in either direction.

Against the cohort, the shares sit in the lower half of the peer multiple range, which is consistent with a market that has decided department stores deserve a discount and has not distinguished much within the group. That may be lazy pricing or accurate pricing. What can be said from the filings is that this operator converts revenue at a materially better rate than its two closest listed comparables: M runs a 4.6% operating margin and KSS 3.9%, while Dillard's reports that "Gross margin, as a percentage of sales, increased to 44.5% from 43.9%" in its first quarter, with the retail segment at 45.8%.

The inputs behind the price are unusually clean. Trailing earnings per share are $42.07 and book value per share is $129.70. Free cash flow runs near $754.6 million. Nothing in that set needs an adjustment or an add-back to make sense, which is worth saying out loud in a sector where reported profit often turns on how a retailer chose to treat its markdowns.

Downside protection comes from the capital structure rather than from any valuation floor. The company reports "$200million outstanding of its 7.5% subordinated debentures due August1, 2038" as its only significant long-term obligation, states that it "had no borrowings during fiscal 2025, 2024 and 2023" under its credit agreement, and had $774.7 million of unutilized availability at January 31, 2026. A retailer with that structure does not face a refinancing decision at the wrong moment in a cycle, which matters more in this industry than in most, because the wrong moment is exactly when department store assets fetch the least.

Catalysts

First-quarter results landed on June 5, 2026 and were the strongest data point in some time. Comparable store sales rose approximately 3%, gross margin widened to 44.5% of net sales from 43.9%, and cash flow from operations reached $364.0 million against $232.6 million in the prior-year quarter. Second-quarter results are scheduled for August 13, 2026, and the question they answer is whether a 3% comparable sales figure was a spring weather effect or the start of something steadier.

Capital return continues on its usual cadence. The board declared a quarterly cash dividend of $0.30 per share on May 28, 2026, with the shares trading ex-dividend on June 30, 2026. The ordinary dividend is small by design; the special declarations, most recently $30.00 per share in fiscal 2025, are where the bulk of the distribution happens, and they are announced rather than scheduled. Anyone owning this for income has to be comfortable with a payout that arrives in one lump when management decides the year justified it.

The buyback is the other lever and it is discretionary in the same way. Repurchase spending has fallen in each of the last three fiscal years, from $281.4 million to $121.0 million to $107.8 million, which tracks the share price rather than the capacity to buy. That pattern is worth holding in mind ahead of August: this management has shown it will slow repurchases rather than pay up, so a strong quarter does not automatically mean a larger buyback follows it.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• M (Macy's, Inc.)
• FY2025 10-K: …' s ever-changing environment. We conduct our retail merchandising business under highly competitive conditions. Although Macy's, Inc. is one of the nation's largest retailers, we have numerous and varied competitors at the national and local levels and digital competitors at the global level, including department…
• FY2025 10-K: …It is difficult to successfully predict the products and services our customers will demand. As customers expect a more personalized experience, our ability to collect, use and protect relevant customer data is important to our ability to effectively meet their expectations, but is subject to the impact of…
• KSS (KOHL'S CORP)
• FY2025 10-K: …to excel in their jobs and serve our customers. We are committed to the highest integrity standards and maintain a Code of Ethics to guide ethical decision-making for associates. As a company of integrity, we expect our associates to be honest and accountable. Our ethics training, which we require all associates to…
• FY2025 10-K: …of 50 basis points to last year. The increase in gross margin was driven by lower freight costs and strong inventory management as our receipts were down 5% to last year as we continue to benefit from operating with greater flexibility. This was partially offset by elevated shrink levels. Selling, General, and…
• BURL (BURLINGTON STORES, INC.)
• FY2025 10-K: …we have diversified our product offerings, we believe traffic to our stores is still driven, in part, by weather patterns. Competition and Margin Pressure. We believe that in order to remain competitive with retailers, including off-price retailers and discount stores, we must continue to offer brand-name merchandise…
• FY2025 10-K: …with other retailers, expand their merchandise offerings, expand their e-commerce capabilities, and/or add new sales channels, change their pricing strategies, or use technology more effectively than we do, including the use of artificial intelligence. More generally, consumer e-commerce spending may continue to…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

FY2026 Form 10-K, fiscal year ended January 31, 2026 · Q1 fiscal 2026 Form 10-Q, filed June 5, 2026 · company dividend declaration, May 28, 2026