Dillard’s report 2Q loss of $17 million, share prices fall almost 16%

Shares of Dillard’s Inc. plunged Thursday (Aug. 10) after the Little Rock-based department store operator reported disappointing second quarter earnings as brick-and-mortar retailers continue to struggle amid increasing competition from online merchants.

For the 13-week period ended July 29, the upscale Arkansas retailer reported a net loss of $17.1 million, or 58 cents per share, compared to net income of $12.1 million, or 35 cents per share, in the same period of 2016. Dillard’s second quarter sales also fell slightly to nearly $1.43 billion, compared to $1.45 billion a year ago. Wall Street had expected the company to report second quarter earnings of 19 cents on sales of $1.44 billion, according to Thomson Reuters.

“Significant markdowns led to a disappointing loss as we dealt with inventory, which was up 2% at quarter end,” Dillard’s CEO William Dillard said in the earnings report.

At Thursday’s opening bell, Dillard’s stock (NYSE: DDS) was already off 15%, or $11.07 at $62.30 as trading approach was well above the company’s average daily volume of nearly 1.2 million shares. The shares would close the day at $61.70, down $11.64, or almost 16%. Over the past 52 weeks, the Arkansas retailer’s shares have traded between $45.51 and $83.44.

Dillard’s total merchandise sales were nearly $1.39 billion, down slightly from $1.4 billion in the same quarter of 2016. Same stores sales, a key metric of the retail industry, declined 1% as sales of ladies’ apparel, lingerie and men’s apparel notably outperformed sales of cosmetics, shoes and home furnishings. As most elementary students and teenager’s head back to school, sales in juniors’ and children’s’ apparel were mostly flat, company officials said.

Dillard’s operating expenses were $401.6 million in the second quarter, which is 28.2% of total sales. A year ago, Dillard’s selling, general and administration costs were $395 million, which represent 27.2% of sales. Company officials said the increase in operating expenses was primarily due to higher costs for payroll and outsourcing services.

The company said it purchased nearly 1.4 million of the company’s Class A common stock at a price of $69.5 million under the current $500 million stock buyback program. Year-to-date, the company has purchased 3.1 million shares at $160.6 million under the share repurchase program.

The Little Rock retailer also said it has amended and extended into a new $800 million senior unsecured revolving credit facility to meet the company’s liquidity needs. That credit line also has a $200 million expansion option if needed for working capital, expenditures, repayment of debt, share repurchases and other needs, officials said.

As news of Dillard’s earnings reached Wall Street, Macy’s also reported that its second profit net income had climbed $116 million, or 38 cents per share, from $11 million, or 3 cents per share, a year earlier. The upscale retail giant, a bellwether stock for the sector, saw second-quarter sales of only$5.55 billion, a decline of 5.4% from revenue of $5.86 billion a year ago.

Macy’s still expects comparable sales to decline by 2.2% to 3.3% for the full year. However, the Cincinnati-based retailer reaffirmed its fiscal 2017 targets. Macy’s President and CEO Jeff Gennette said second quarter earnings were in line with the company’s internal expectations, and the updated earnings and sales forecast is still on track for the rest of the year.

Dillard’s does not generally provide quarterly or yearly forecast for same-store sales, earnings or revenue growth. Dillard’s operates 268 Dillard’s locations and 25 clearance centers spanning 29 states.