DDS putting up an absolute monster earnings number in 1Q. The best single EPS quarter the company has had by far. Sales up 69% YY, much better than expected, and gross margins the best the company has seen with retail GM% over 42%. SG&A was 17% below 2019 levels with sales only 9% below. That means massive P&L EPS leverage. It all translated to $6.38 in EPS (excluding the asset sale gain). This is the type of EPS explosion we think we’ll be seeing across many retail names this earnings season, and it’s why many of our long ideas have done so well. We recently took DDS off our long list after our call had worked as the stock doubled in Jan dipped and then rallied back above $100 twice since. In taking it off the long list we noted the street was still WAY too low on EPS for 2021, but with the stock trading at 36x consensus, the market knew the street was out to lunch. Heading into this print we were at $7.70 with the street at $2.73 for 2021, clearly even our number now looks low. But we’re at the peak of rate of change and DDS is only trading up 2% in the aftermarket on this crusher of a quarter. It’s going to be a wild retail earnings season.
Takeaway: DDS demonstrating the EPS explosion we’ll be seeing across many retailers this EPS season. DDS only up slightly on the beat. Sell the news?
