Dillard’s profit, stock take hit
Net income slumps 14% in 1Q; shares close $10.13 lower
Shares of Dillard’s Inc. stock tumbled Thursday after the Little Rock-based company reported profits of $66.3 million for the first quarter, a 14 percent decrease from the same period a year ago.
Earnings per share of $2.12 also declined from the previous year but topped analyst estimates of $2.02 for the quarter. Dillard’s reported a 5.5 percent drop in revenue to $1.45 billion, which missed analyst expectations of $1.47 billion.
The results, which largely were because of slumping sales and traffic that continue to plague department stores and mall anchors, led shares of company stock to plunge as much as 18 percent Thursday. Dillard’s shares closed trading at $47.77, down $10.13 and shy of the company’s 52-week low of $46.56.
“It’s tough out there,” Ken Perkins, president of research firm Retail Metrics LLC, said of the retail environment. “It has been for some time. … But it’s a theme throughout the group. [Dillard’s] is not alone in that regard. Nobody has seemed to gain traction and stem the tide well.”
Same-store sales at Dillard’s fell 4 percent during the quarter. Total merchandise sales, which exclude its construction business CDI Contractors LLC, also decreased 4.3 percent.
Dillard’s said its ladies, junior and children’s apparel produced the strongest merchandise sales during the quarter, while there were
weaker performances in cosmetics, home and furniture, ladies accessories and lingerie. Sales were strongest in the West region, followed by the East and South.
Bob Williams, senior vice president and managing director of Simmons First Investment Group, said Dillard’s is being affected by off-price competitors and the rise in online shopping. More consumers are using mobile phones and other devices to make purchases instead of browsing physical stores.
“They’re trying to improve their online presence, but they’ve by no means been able to get the growth from online that they’re losing by traffic,” Williams said.
The 14 percent drop in profit represents the ninthstraight quarter of declines for Dillard’s. Net income has fallen 32, 50, 60, 29, 36, 17, 13 and 2 percent, respectively, in eight previous quarters.
But Williams said Dillard’s — which operates 268 department stores and 25 clearance centers in 29 states — isn’t alone in its struggles. The first wave of quarterly retail earnings proved it Thursday.
Macy’s Inc. profits fell 39 percent in the quarter, which led to shares of the company’s stock plunging 17 percent in Thursday trading. Same-store sales tumbled 5.2 percent at Macy’s, representing the ninth-consecutive period of declines for the department store.
Kohl’s Corp. nearly quadrupled its profits during the first quarter because of effective cost-cutting measures, but shares fell nearly 8 percent after same-store sales decreased 2.7 percent.
“It’s the long-term thing that has to be keeping every department store’s CEO and mall-based CEO up at night,” Perkins said. “How do we generate foot traffic? How do we get people to come in?”
Dillard’s opened a new location in a Nashville, Tenn., mall during the quarter. The company also purchased a former Macy’s location in Layton, Utah, and a store in Temple, Texas, that will replace a leased location at the same mall. Both stores will open next fall.
In addition, the company said it purchased $91.1 million — or about 1.7 million shares — of stock under its $500 million share repurchase program.
“While our sales decline weighed heavily on our operating results, we remained active in returning cash to shareholders through $93 million of share repurchase and dividends,” Dillard’s Chief Executive Officer William T. Dillard said in a statement. “We still ended the quarter with $302 million of cash largely due to better cash management.”