Dillard’s Analysis 2010
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November 9, 2010
[DILLARD’S INC.]
TABLE OF CONTENTS
Our Path to Dillard’s Company Overview Segments Competitive Advantage Macroeconomic Analysis Industry Analysis A Cyclical Industry Competitors SWOT Analysis Porter’s Five Forces The Turnaround Strategic Plan About the Dillard Family The Potential Proxy Battle of 2008 Share Repurchase Programs Making Room for Dillard’s in the SMF Portfolio Ratio Analysis Pro Forma Income Statement Pro Forma Balance Sheet Valuation Recommendation & Conclusion Appendix Value Line Analysis 2 3 3 4 4 8 10 11 12 12 14 15 16 17 ___ 17 ___ 19 ___ 24 ___ ______ 27 _____________________________ 29 _________ 33 __ 34 __37
Page 1
November 9, 2010
[DILLARD’S INC.]
OUR PATH TO DILLARD’S
As we began to search for a promising company to invest in during the second round of stock presentations, our team’s major focus was to find a cyclical company with the potential to provide promising returns as the country slowly climbed out of the recession. We noted that the retail industry had historically reacted cyclically to economic conditions and, more importantly, was a leading industry during times of economic growth. Another focus was on the current imbalances in our portfolio. The SMF portfolio has a very small percentage, as compared to the S&P 500’s, of consumer discretionary. Also, the portfolio lacks holdings in major retail industry players. With this in mind, we set out to find a stock within this particular industry that showed potential. Noting that SMF’s current portfolio beta averages at 1.01, we also thought that a riskier company might provide the opportunity of higher returns and increase the riskiness of our overall portfolio. Furthermore, we discussed the possibility of the Great Recession producing some strong turnaround candidates. We looked for companies who had been badly beaten down by the recent recession but still had strong fundamentals and were undertaking changes to return to pre-recession values. This...
[DILLARD’S INC.]
TABLE OF CONTENTS
Our Path to Dillard’s Company Overview Segments Competitive Advantage Macroeconomic Analysis Industry Analysis A Cyclical Industry Competitors SWOT Analysis Porter’s Five Forces The Turnaround Strategic Plan About the Dillard Family The Potential Proxy Battle of 2008 Share Repurchase Programs Making Room for Dillard’s in the SMF Portfolio Ratio Analysis Pro Forma Income Statement Pro Forma Balance Sheet Valuation Recommendation & Conclusion Appendix Value Line Analysis 2 3 3 4 4 8 10 11 12 12 14 15 16 17 ___ 17 ___ 19 ___ 24 ___ ______ 27 _____________________________ 29 _________ 33 __ 34 __37
Page 1
November 9, 2010
[DILLARD’S INC.]
OUR PATH TO DILLARD’S
As we began to search for a promising company to invest in during the second round of stock presentations, our team’s major focus was to find a cyclical company with the potential to provide promising returns as the country slowly climbed out of the recession. We noted that the retail industry had historically reacted cyclically to economic conditions and, more importantly, was a leading industry during times of economic growth. Another focus was on the current imbalances in our portfolio. The SMF portfolio has a very small percentage, as compared to the S&P 500’s, of consumer discretionary. Also, the portfolio lacks holdings in major retail industry players. With this in mind, we set out to find a stock within this particular industry that showed potential. Noting that SMF’s current portfolio beta averages at 1.01, we also thought that a riskier company might provide the opportunity of higher returns and increase the riskiness of our overall portfolio. Furthermore, we discussed the possibility of the Great Recession producing some strong turnaround candidates. We looked for companies who had been badly beaten down by the recent recession but still had strong fundamentals and were undertaking changes to return to pre-recession values. This...