Author Topic: DDS - Dillard's  (Read 4249 times)

Gregmal

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DDS - Dillard's
« on: September 06, 2019, 07:21:10 PM »
I'll just link the thesis. As usual, Rick Pearson nails it.

https://moxreports.com/dillards-upside-perfect-storm/

https://moxreports.com/dillards-rebound-long-dds/

10Q should come out next week. Money says this trade has a pretty solid shot at making at least a buck or two.

DDS IMO is 2012 SHLD, without the debt, and with rather robust FCF. This has previous been a great trading vehicle and I expect it to continue to be one.

« Last Edit: September 06, 2019, 11:51:11 PM by Parsad »


Stuart D

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Re: Dillard's- The Infinity Squeeze
« Reply #1 on: September 06, 2019, 11:36:19 PM »
This is very interesting. I just started going through the proxy filings.
In 2013 Management owned 9.8% of class A shares (apart from voting rights are A and B shares equal?)

Every year since 2013 management have increased their ownership:
2013: 9.8%
2014: 10.9%
2015: 11.6%
2016: 13.6%
2017: 15.9%
2018: 19.1%
2019: 20.1%

Stuart D

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Re: DDS - Dillard's
« Reply #2 on: September 07, 2019, 12:22:14 AM »
I've got excel open to add up all the outstanding shares.

In this years proxy, as of 21-Mar-2019, management and large investment companies, e.g. Blackrock, Vanguard, etc. owned 88% of Class A shares combined, leaving 2.7m Class A shares remaining. If management and the large shareholders haven't sold their A-Shares (since March) then as of 3-August-2019, there will only be 1.7m Class A shares left.

1.7m shares x $70/share = $118m (to buy back the remaining shares)

The most recent 8-K says as of 3-Aug-2019 there is still $340m left in the buyback program. That means assuming Management, Blackrock, Vanguard, do not sell, the company has the capacity to buy 1.7m shares for $340m = $200 / share (average price).

This sounds too good to be true... what am I missing here?
« Last Edit: September 07, 2019, 12:37:01 AM by Stuart D »

Spekulatius

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Re: DDS - Dillard's
« Reply #3 on: September 07, 2019, 06:15:37 AM »
Just looking at this. The latest operating results have been pretty poor. Also, it seems that over the years, their Capex has been below depreciation for quite some time, which means that their stores are aging. Most stores are in flyover country where and old department store building may not be worth all that much. They sell buildings, but I haven’t seen a large profit. They do own some stores in Florida (39) and Texas (44)  which may be worth far above book.

Accelerated decay in operating results may be the main issue there. The shrinking float is interesting and makes it a very unappealing short, imo.
To be a realist, one has to believe in miracles.

Gregmal

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Re: DDS - Dillard's
« Reply #4 on: September 07, 2019, 07:16:26 AM »
The situation is interesting, but to be clear, I have no interest in this as a long term investment or any of the fundamentals really. It just seems like an opportune setup to make a little money. If the trade doesn't work out, I think you have a margin of safety and history of price swings on your side that make holding at these levels OK. But the objective is to just swing this thing for a quick trade.

Some other commentary...

I spent the past couple weeks watching this trade. My goodness. Lighting a match in an old hay barn is what comes to mind. In late July this jumped 25% in like 30 minutes on nothing but a random Friday squeeze.

Ive been involved in plenty of these retailers with real estate stories. Macy's, Sears, SRG, to name a few. I've only ever made money trading them. I don't think they are good buy and hold investments. That said..... anyone care to take a look at a comparative chart between DDS and all those "retailers"? Or of their favorite investments vs DDS since the GFC? DDS vs AMZN since 1 Jan 2009? It doesn't necessarily change my opinion that I have little interest owning this as a long term buy and hold, but is really impressive nonetheless. Look at the shares outstanding 10 years ago as well.

Perhaps Dillard's is more ALX than SHLD...

SHDL

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Re: DDS - Dillard's
« Reply #5 on: September 07, 2019, 09:22:31 AM »
Interesting situation for sure.  It is very nice to see someone do share buybacks right every once in a while.  If their FCF holds up and the stock price stays where it is, they should be able to essentially take the company private in just a few years…

@Stuart D:  I wouldn’t expect Vanguard, BlackRock, and co. to not sell.  The index funds will be forced to sell as the float shrinks, and the actively managed funds (if there are any that own this stock) are also likely to take some chips off the table if the stock were to rally.

RuleNumberOne

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Re: DDS - Dillard's
« Reply #6 on: September 07, 2019, 11:59:54 AM »
I got excited after reading that moxreport. Then I opened the 10-Qs and latest earnings release and found (numbers in millions):

The net cash has gone from +214 in 2017 to -232 currently. Share repurchases over the last 2 years have come mostly from debt, not FCF.

Cash used in operating and investing activities is 34 over the last 6 months. Their share repurchases are close to the end of the road.

Accounts payable shows suppliers don't want to extend any credit. Contributing to negative cash flow.

Their 4 stores in California that show up on Google are in the middle of nowhere. If that is a pattern, their square footage may not be worth that much. Current EV is > $2 billion.

Their expenses haven't gone down as fast as revenues. Management looks trapped because cash flow is negative.
« Last Edit: September 07, 2019, 12:02:16 PM by RuleNumberOne »


BG2008

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Re: DDS - Dillard's
« Reply #8 on: September 10, 2019, 07:55:00 AM »
Looks like it's working already

Gregmal

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Re: DDS - Dillard's
« Reply #9 on: September 10, 2019, 08:31:10 AM »
Looks like it's working already

Yup. Took a bit off at 66 from 59. Not bad for a few days. But I still think if the buybacks numbers are anywhere near what is being projected in the Unemon post, this is a moonshot.