Dillard’s fourth quarter earnings slide 32% as consumers continue migration to online merchandisers

Arkansas department store chain operator Dillard’s Inc. on Tuesday (Feb. 21) reported that fourth quarter profits fell below expectations as U.S. retailers continue to adjust as consumers migrate to online alternatives for their home merchandise needs.

For the period ended Jan. 28, 2017, Dillard’s reported net income of $56.9 million, or $1.72 per share, down 32.3% from net income of $84 million, or $2.31 per share, for the prior year fourth quarter. The fourth quarter results also include a one-time after-tax asset impairment of $2 million, or about six cents per share.

Revenue for the three-month period fell 9.5% to $1.9 billion, down from nearly $2.1 billion in the fourth quarter of 2015. Wall Street analysts had expected the retailer to report fourth quarter profits of $2.26 per share on revenue of $2 billion, according to Thomson Reuters.

For the full year, Dillard’s reported profits of $169.2 million, or $4.93 per share, compared to net income of $269.4 million, or $6.91 per share, for the prior year 52-week period. The yearly results included an after-tax asset impairment of $4.2 million, or 12 cents per share, company officials said.

“Our operating results reflect another quarter of mall traffic declines from continued retail industry challenges,” said Dillard’s CEO William Dillard. “In response, we are ramping up our efforts to bring more distinctive brand and service experiences to Dillard’s, both in-store and online. Our strong balance sheet provides us support in these challenging times, and during the year we returned $256 million to shareholders.”

Overall, Dillard’s total merchandise sales were $1.896 billion and $2.021 billion for the 13-week period ended Jan. 30, 2016. Total merchandise sales decreased 6% for the 13-week period ended Jan. 28, 2017. Sales in comparable stores for the period also decreased 6%.

Company officials said sales in all categories declined during the quarter, but ladies’ and men’s apparel and accessories outperformed other areas. Weakest performing categories were home and furniture and shoes. Sales were strongest in the Eastern region followed by the Western and Central regions, respectively.

Gross margin from retail operations, which excludes the company’s CDI construction business, improved 8 basis points of sales in the fourth quarter compared to 2015. Inventory increased 2% from a year ago and consolidated gross margin improved 24 basis points of sales. Selling, general and administrative expenses were $451.6 million, or 23.3% of sales, compared to and $449.4 million, or 21.7% of sales in the same period of 2016. Increased selling payroll and services purchased expense was partially offset by savings in several expense categories.

In the fourth quarter, Dillard’s purchased $80.6 million or 1.3 million shares of the retailer’s Class A common stock under the company’s $500 million share buyback program. For the year, Dillard’s has purchased $246.2 million, or 3.8 million shares of Class A Common Stock on the open market. Total shares outstanding of Dillard’s Class A and Class B Common Stock were 32.2 million and 35.9 million, respectively. Nearly $253.8 million remains under the company’s stock buyback plan.

In early pre-market trade today on the New York Stock Exchange, Dillard’s shares were trending downward 6.44%, or $3.77 at $54.74. Over the past 52 weeks, Dillard’s shares have been off 20%.