Dillard’s Reports Lower Profits Of $30 Million

Dillard’s Inc.’s second quarter profits easily beat Wall Street expectations, but the company’s top executive expressed disappointment in the department store chain’s performance compared to a year ago as gross margins declined and inventories rose.

For the period Aug. 1, 2015, Dillard’s reported net income of $29.9 million, 75 cents per share, down 13 percent compared to net income of $34.5 million, or 80 cents per share, in the same period a year ago. Dillard’s second quarter revenues, which include net sales from the company’s construction business, CDI Contractors LLC, were $1.514 billion versus $1.475 billion in the same period a year ago.

Wall Street analysts on average expected the Little Rock retailer to report second quarter earnings of 72 cents per share on revenues of $1.53 billion, according to Thomson Reuters.

“While we achieved positive comparable store sales, we were disappointed with our overall performance compared to the prior year,” Dillard’s CEO William T. Dillard II said in a statement. “However, from our strong cash position, we returned $208 million to shareholders under our share repurchase program.”

Total merchandise sales for the 13-week period ended August 1, 2015 were $1.468 billion and $1.461 billion for the 13-week period ended August 2, 2014. Sales in comparable stores for the period increased 1%.

Sales trends were notably strong in shoes followed by juniors’ and children’s apparel, while sales were notably weak in the home and furniture category. Sales trends were strongest in the Central region, followed by the Eastern and Western regions, respectively, officials said.

Gross margin from retail operations declined 54 basis points of sales for the quarter. The disparity between retail and consolidated gross margin performance is attributable to increased revenue at CDI, which is a substantially lower margin business, officials said. Inventory increased 3% year-over-year, officials said.

Selling, general and administrative expenses were up slightly at $404.3 million, or 26.7% of sales, compared to year ago’s $400.5 million, or 27.2% of sales. The increase was driven by increased selling payroll and insurance expense partially offset by decreased advertising expense.

Dillard’s opened its new 200,000 square foot location at Fashion Place in Murray, Utah on Saturday, August 8. The store replaces a 190,000 square foot location at the same center. The Arkansas retailer plans to open new stories in Slidell, La. And Cincinnati, Ohio, in the third quarter, company officials said.

Dillard’s also said that it purchased 1.8 million shares of its common stock under the company’s $500 million share buyback program. Ahead of Thursday’s opening bell, Dillard’s shares were trending at $95.91, down $1.20, or 1.17%. The retailer’s shares have traded in the range of $93.72 and $144.21 over the past year.