Dillard's Inc. on Thursday renewed its share-repurchase program, two days after reporting upbeat full-year and fourth-quarter earnings, allowing the retailer to buy back up to $500 million of its stock.
Dillard's spent $219 million to repurchase shares under a plan announced in February 2016, with $34.8 million remaining for purchases, according to a news release.
Alan Ellstrand, associate dean of the Walton College of Business at the University of Arkansas, Fayetteville, said the buyback method has grown in popularity among companies because, in general, "it makes lots of people happy."
Since the corporate tax rate fell from 35 percent to the low 20s, companies have freed up cash for bonuses, salary increases, capital investments, or in this case, repurchasing shares, Ellstrand said.
It's popular with shareholders because stock prices rise, and it's "beneficial to people in the company because their holdings increase," he said.
Specifics on how many shares would be repurchased under the new plan were not disclosed. Dillard's representatives did not respond to a request for comment.
This authorization allows the company to repurchase its stock on the open market. Dillard's shares rose $5.76, or 7 percent, to close Friday at $87.97. The shares rose 23 percent this week.
The retailer also set its quarterly dividend at 10 cents per share for Class A and B shares, according to the news release. The payout date is May 7, 2018, for shareholders as of March 30.
Dillard's increased its dividend to 10 cents in the fall of 2017, up from 7 cents, according to data compiled by Morningstar.
Dillard's on Tuesday reported its first same-store sales increase since 2015, ending a streak of declines that lasted nine quarters. That same day, Macy's reported its first sales increase since 2014.
Ken Perkins, a retail analyst with Retail Metric LLC, said Dillard's, along with Macy's and other department stores, benefited from a healthier economy that sparked stronger Christmas season sales.
Little Rock-based Dillard's reported a 31 percent surge in profits for 2017 compared with a year ago.
"They really blew expectations out of the water," Perkins said, comparing Dillard's growth with the retail sector's 8 percent average uptick.
The retail chain also reported an adjusted per-share profit of $2.82 for its first quarter, beating Wall Street estimates of $1.77 per share. And Dillard's benefited by $774 million, or $2.73 per share, as a result of the new federal tax plan.
Department giants nationwide seem to be taking advantage of the new corporate tax structure, Perkins said, whether it's through expansions, investments in technology, or share buybacks.
"Can [Dillard's] build on this momentum?" Perkins said. "Because, historically, they've been all over the map."
If President Donald Trump follows through next week on his plan to place tariffs on imported steel and aluminum, it's likely that the U.S. could be hit with global retaliatory tariffs that could affect all industries, said Mervin Jebaraj, director of the Center for Business and Economic Research at UA.
"If countries retaliate, we might see that tax advantage go away."
Business on 03/03/2018