DDS - Dillard's

[Gregmal]

Looks like they took out a bit over 300K shares. So about 1.5% of class A outstanding and about 3.2% of available float in roughly a month.

Bloomberg's most recent equity float shows 9.2M(now 8.9M) vs 8.6M shares short.

[Cardboard]

The guy was expecting 1,043,000 shares so 300,000 is a big miss.

Nonetheless thanks for the idea and profits as I cashed out late yesterday as it was already up 30%+ in matter of hours and you never know with options expiring in a few weeks.

I still like the thesis here of a cheap retailer with stable sales shorted to death. Will look into how to play it next.

Cardboard

[Gregmal]

The guy was expecting 1,043,000 shares so 300,000 is a big miss.

Nonetheless thanks for the idea and profits as I cashed out late yesterday as it was already up 30%+ in matter of hours and you never know with options expiring in a few weeks.

I still like the thesis here of a cheap retailer with stable sales shorted to death. Will look into how to play it next.

Cardboard

No problem, glad you made some money. I took much off and whats left is on the house.

I'd point out too that the 300K+ is what Pearson projected in his writeup. Unemon's 1M figure from a day ago would have been hard to pull off, and the stock probably would have went to $100 if they hit that. Either way, a lot can happen. Figures were as of 8/31 so I would project perhaps another 50-100K since then, although typically around $70 is where they tone it down.

"I expect to see a further 300-600k shares bought back during this post-PR window and that the float will drop further to around 9 million shares. See table below."

https://moxreports.com

Rick Pearson continues to be a monster. Definitely worth following if you guys don't already.

[RuleNumberOne]

The shorts are right. Dillards owns 248 stores totaling 44 million square feet. The average sale price of stores closed so far has been below what is required to justify the current EV. That moxreport guy is a pump-and-dump artist, he claims the real estate is worth $150-$300 per share but provides no proof. Some anonymous fellow posts on SeekingAlpha with similar tall claims (SeekingAlpha does not review blog posts). If shorts just hold, they will win eventually.
 
Today's 10-Q:

"During the six months ended August 3, 2019, the Company received cash proceeds of $22.0 million and recorded a related gain of $12.3 million for the sale of three store locations in Boardman, Ohio, Boynton Beach, Florida and Cary, North Carolina.

During the six months ended August 4, 2018, the Company received cash proceeds of $1.9 million from the sale of a location classified as an asset held for sale. These proceeds were being held in escrow for the acquisition of replacement property under like-kind exchange agreements. The Company used the proceeds for the acquisition of a replacement property at the Oaks Mall in Gainesville, Florida (104,000 square feet)."

The governance leaves much to be desired. Two-thirds of the board is appointed by the Dillards who own the privately-held Class B shares. The current 74-year-old CEO is the son of the founder. If he is too attached to the company and keeps buying a $40 stock at $70 per share using debt, who is going to stop him? Sales keep going down and the company loses money.

Munger's description of the stock market as a place "full of bullshit and craziness" is spot on.

248 stores x $6 million per store = $1.5 billion.

EV including the debentures is $2.3 billion.

[RuleNumberOne]

If the EV were to reset to $1.5 billion, with $550 million of net debt:

    - the price per share would be $38. (25 million Class A and Class B shares).

[Gregmal]

With all due respect Rulenumberone, and perhaps because the thread title was changed, but youre focusing on the wrong things. This was basically a math trade. Short interest was nearly 90% of float, on a stock that’s exhibited certain previous patterns, and that setup the move for a short squeeze, taking this from 59/60 to 70 in under 5 days. It was never represented as anything more.

[Cardboard]

In any case, he is wrong on his math too as sales are not going down, company is not losing money and since when do we value retailers solely based on land or value of non-performing stores real estate?

This ain't SHLD and it only takes 30 seconds by looking at their financial statements to figure that out. Not saying it is a growing retailer but, I see zero material in the posts by Rulenumberone to convince me to take a short position either.

Cardboard

[RuleNumberOne]

Cardboard,

Your claim that sales are not going down and the company is not losing money is as bad as the moxreports claim of real estate value. Evidence in the latest earnings release is very clear.

From the latest earnings release linked below:

Same store sales went down 2% this quarter.

Revenue went from $1468 million to $1427 million YoY.

Compared to the year ago quarter, gross profit went from $483 million to $432 million.

Cost of sales went up to 72.3% of sales from 69.3% of sales.

SG&A expense and rental expense stayed the same. Interest expense went down $ 2 million.

Pre-tax loss of $52 million.

The company is leading a hand to mouth existence or worse (depreciation and amortization + net income = 0.) What about capex, e.g. broken air conditioners or escalators?


https://investor.dillards.com/press-releases/press-release-details/2019/Dillards-Inc-Reports-Second-Quarter-Results/default.aspx

In any case, he is wrong on his math too as sales are not going down, company is not losing money and since when do we value retailers solely based on land or value of non-performing stores real estate?

This ain't SHLD and it only takes 30 seconds by looking at their financial statements to figure that out. Not saying it is a growing retailer but, I see zero material in the posts by Rulenumberone to convince me to take a short position either.

Cardboard

[Gregmal]

Cardboard don't forget, this is CoBF. The land of make believe. Where MDXG from 2.47-3.90 = ...disqualified!!! You didn't hold it long enough! and 59-70 in 3 days = you're missing something! Them fundamentals are bad!

[writser]

Don't be salty, you made a great trade. Pat on the back!

Serious question: do you actually think the squeeze thesis is any good on a fundamental basis? Because this seems a bit like a 'Burford-trade' in reverse: generate a lot of hype (in this case about a short squeeze in a stock with a very low float) and the desired result will follow, regardless of the fundamentals. But shares are actually down today and the borrow fee is also down since August. I thought the 'mox-report' wasn't very convincing and in fact it looks pretty much like something Muddywaters could have written. Also, the DDS super squeeze story has been around for years - looks like people are starting to anticipate / expect it.

Not that there is anything wrong with making money because of people hyping a possible short squeeze rather than an actual short squeeze occurring. I made some money on the short side in Burford as well despite having no strong view on fundamentals.

I agree with you that DDS is an interesting stock on multiple levels.