Dillard’s entered this quarter carrying a value label, with a trailing P/E below peers and a stock that recently traded under an internal fair value estimate. The market did not care today. The share price dropped about 9% as investors reacted to a much softer Q2 earnings print.

The headline is the profit squeeze. Basic earnings per share for the quarter came in at US$6.26 on revenue of US$1.53b, well below the blowout Q1 figure. Same store sales growth of 1% kept the top line steady, but the market clearly focused on earnings power rather than modest sales traction.

Is Dillard’s suddenly cheap for the right reasons after this earnings reset, or is the lower P/E simply flagging weaker profit power ahead? Compare the selloff with our…