Dillard’s quarterly income down 1.9%, revenue up

Shares in Little Rock department store owner, Dillard’s Inc., closed down in trading Thursday after the retail giant reported that quarterly earnings were down 10 cents from the same period a year ago.

For the 13-week period ended May 2, Dillard’s reported net income of $109.6 million, or $2.66 per share, down 1.9% from $111.7 million, or $2.56 per share, in the first quarter of 2014. Dillard’s revenue, which includes sales from the company’s construction business, CDI Contractors, rose slightly to $1.57 billion, compared to $1.55 billion a year ago.

“We are disappointed with our first quarter performance. Our 1% sales decline hampered our ability to leverage operating expenses and to drive net income growth. Although inventory is higher than we would like, we believe the levels are manageable,” said Dillard’s CEO William Dillard II.

Other highlights of the quarter include:
• Total merchandise sales fell 1.3% to $1.51 billion in the first quarter of 2015, compared to $1.53 billion a year ago.

• Comparable store sales decreased 1% for the period.

• Sales trends were strongest in the juniors’ and children’s apparel category followed by shoes and ladies’ apparel. Sales were notably weak in the home and furniture category.

• Sales trends were strongest in the Eastern region, followed by the Central and Western regions, respectively.

• Dillard’s officials noted that sales in Texas performed slightly below the company average in the first quarter.

Gross margin in the first quarter from retail operations improved 52 basis points of sales from a year ago. Consolidated gross margin declined 50 basis points of sales compared to the prior year first quarter. The disparity between retail and consolidated gross margin performance is attributable to increased revenue at CDI, which is a substantially lower margin business. Inventory increased 5% in the first quarter of 2015, compared to the same period in 2014.

Selling, general and administrative expenses rose 2.5% to $403.6 million, compared to $393.7 million a year earlier. Company officials said operating expenses from retail operations increased 101 basis points of sales to $402.3 million compared to $392.2 million in fiscal 2014. The increase was driven by increased payroll and services purchased expense partially offset by decreased insurance and advertising expense.

During the quarter, Dillard’s said it continued its initiative to increase pay for selling associates.

Meanwhile, Dillard’s said it has issued a new $1 billion senior unsecured credit facility, enhancing the retailer’s cash flow. The credit line replaces the department store giant’s earlier $1 billion secured credit facility and underscores its continued improvement in financial strength, company officials said.

At Thursday’s closing bell, Dillard’s stock (NYSE: DDS) ended the day at $124.20, down $2.34 or 1.85% as 855,000 shares traded hands, twice the Little Rock retailer’s normal volume. The retail giant, which currently has a market value of $5.12 billion, has traded in the range of $95.80 and $144.21 over the past 12 months.

Dillard’s shares were also sliding in after-hours trading after the retail giant fell below expectations. Wall Street had expected the Arkansas department store owner to report first quarter net income of $2.78 per share on revenue of $1.61 billion, according to Thomson Reuters.