Will High Expectations Knock Dillard’s, Inc. (DDS) Off-Course?

However, J.C. Penney CEO Ron Johnson recently announced that the company will bring back sales this year. While J.C. Penney’s sales will not rebound to 2011 levels, the company could regain some market share this year as the return of promotions draws in more shoppers. J.C. Penney is also looking to move up-market (and thus into heavier competition with Dillard’s) by adding more fashion-oriented brands. This increase in competition from J.C. Penney could put pressure on sales growth at Dillard’s and other mid-to-upscale competitors like Macy’s and Nordstrom.

Last, the 2013 consumer spending environment will probably be sluggish. January consumer confidence was weaker than expected, and the 2% payroll tax hike that went into effect last month will have a significant impact on disposable income for many Americans. Even wealthier Dillard’s customers may look to cut back on spending this year, with the top income tax bracket returning to 39.6%.  As a result, Dillard’s could have trouble meeting the market’s lofty expectations in 2013.

The article Will High Expectations Knock Dillard’s Off-Course? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Dillard’s. The Motley Fool owns shares of Dillard’s.

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