Dillard’s stock falls after loss
CEO blames ‘significant markdowns’ for weak second quarter.
Shares of Dillard’s Inc. stock tumbled nearly 16 percent during Thursday trading after the Little Rock-based retailer reported a net loss of $17.1 million, or 58 cents per share, for the second quarter.
The loss came a year after Dillard’s reported $12.1 million in net income, or 35 cents per share. Total revenue also fell 1.7 percent to $1.46 billion during the 13-week period, but beat analyst estimates of $1.44 billion according to Yahoo Finance.
Dillard’s stock dipped as much as 18 percent before closing trading at $61.70 Thursday, down $11.64. The stock had climbed 35 percent over the past four weeks since closing at $54.02 on July 10.
“Significant markdowns led to a disappointing loss as we dealt with inventory, which was up 2 percent at quarter end,” Dillard’s Chief Executive Officer William Dillard said in a news release.
The company’s same-store sales decreased 1 percent during the second quarter compared with the same period a year ago. Total merchandise sales, which exclude its construction business CDI Contractors LLC, also decreased 1 percent to $1.38 billion.
Dillard’s reported sales increased slightly in women’s apparel and were “consistent with the company trend” in juniors and children’s apparel, women’s accessories and lingerie and men’s apparel and accessories. Sales were slightly below trend in shoes and “below trend performances” were reported in cosmetics and home and furniture, according to the company.
“It was probably a very strenuous quarter for top management,” said Bob Williams, senior vice president and managing director of Simmons First Investment Group Inc. in Little Rock. “The mix of merchandise sales growth was kind of what you would expect given a weak economy and continuing low consumer confidence. But the amount of sales was bad enough that they had to resort to so many promotions and markdowns that it led to a loss of this magnitude.”
Ken Perkins, president of research firm Retail Metrics, said the influx in inventory and subsequent deep discounting that Dillard’s experienced in the quarter often is linked to lower traffic.
“Your online sales aren’t growing that much and you’re not generating enough traffic into stores,” Perkins said. “Then typically with apparel and seasonal apparel, you have some merchandise misses in terms of fashion that typically don’t gain traction and end up having to be marked down.”
Dillard’s reported its net income loss the same day Macy’s reported profits of $116 million, or 38 cents per share, during the second quarter. But same-store sales also declined 2.8 percent, which was the 10th-straight quarter of declines. Sales at stores open at least 12 months fell 0.4 percent at Kohl’s, which also reported second quarter earnings Thursday.
Shares fell for both Macy’s and Kohl’s, although Perkins believed there were signs of some “stabilization in traffic trends. Williams pointed to
another metric as one “bright light” for Dillard’s.
“Their rate of decline in same-store sales closed,” Williams said. “Last quarter, samestore sales were down 4 percent. This quarter only down 1 percent and that seems to have been across the board on retailers.”
Dillard’s announced in a separate news release that it had “amended and extended into a new $800 million senior unsecured revolving credit facility consistent with the company’s liquidity needs.”
The credit is available to Dillard’s for general corporate purposes, including working capital financing, issuing letters of credit, capital expenditures and the repayment of existing debt and share repurchases, according to the news release.
A $200 million expansion option remains in place and
the new maturity date is Aug. 9, 2022.
The earnings report came 10 days after Snow Park Capital Partners said it plans to press for changes at the company, believing there are ways Dillard’s can add value to shareholders through its real estate holdings. Jeffery Pierce, who is managing director of the New York-based activist investor fund, said earlier this month that he hopes to engage Dillard’s management with ideas — like leasing or repurposing store space for other retail tenants — that could unlock value.
Dillard’s operates 268 locations and 25 clearance centers in 29 states.
“The question remains to be seen, ultimately, whether management decides to meet with these folks and whether they decide to pursue some of the strategies they’re recommending,” Williams said.