Weak same store sales weigh down Dillard’s first quarter earnings

Weak sales of cosmetics, home furnishings and accessories for women weighed down Little Rock department store operator Dillard’s first quarter earnings as the brick-and-mortar retailer continues to struggle against mounting competition from online rivals.

For the period ended April 29, Dillard’s reported net income of $66.3 million, or $2.12 per share, compared to net income of $77.4 million, or $2.17 per share, for the prior year first quarter. Net sales in the first quarter, which include the operations of the company’s CDI Contractors’ construction business, fell 5.3% to $1.42 billion, compared to $1.5 billion in the same period of 2015.

Wall Street had expected the upscale retailer to report first quarter earnings of $2.02 per share on revenue of $1.47 billion, according to Thomson Reuters. In pre-market trading on Thursday, Dillard’s shares were off 5%, or $2.90 at $57.90 on the New York Stock Exchange.

“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,” said Dillard’s CEO William T. Dillard. “We still ended the quarter with $302 million of cash largely due to better cash management.”

Across its operations, Dillard’s total merchandise sales were nearly $1.39 billion, down 4% from $1.45 billion in the same quarter of 2016. Sales in comparable stores for the period also decreased 4%, as sales of ladies’ apparel notably outperformed other merchandise categories during the first quarter followed by the juniors’ and children’s apparel category.

Weaker performances were noted in cosmetics, home and furniture, and ladies’ accessories and lingerie, company officials said. Sales were strongest in the Western region followed by the Eastern and Central regions, respectively.

Gross margin from retail operations in the first quarter, which excludes CDI results, improved 65 basis points compared to the prior year. Consolidated gross margin improved 108 basis points of from a year ago as inventory levels jumped 4%.

Dillard’s operating expenses were $398.5 million in the first quarter, which is 28.1% of total sales. A year ago, Dillard’s selling, general and administration costs were $398.4 million, which represent 26.5% of sales. The Little Rock department store chain said it purchased nearly 1.7 million of the company’s Class A common stock at a price of $91.1 million under the current $500 million stock buyback program.

On the operations side, Dillard’s opened its new 180,000 square foot replacement store at The Mall at Greenhills in Nashville, Tenn. The Little Rock mall icon also purchased a former 160,000 square foot Macy’s location at Layton Hills Mall in Layton, Utah, and a store at Temple Mall in Temple, Texas, that will replace a leased location at that center.

Dillard’s, which operates 268 Dillard’s locations and 25 clearance centers spanning 29 states, expects to open both stores in the fall of 2017. In the past year, Dillard’s stock has traded in the range of $46.56 on the low end to a high of $77.70.