Dillard's doubles profits

Don Hogsett, May 17, 2004

Rebounding strongly from a long string of sales and earnings declines, Southern department store retailer Dillard's Inc. ramped up sales and more than doubled profits in a strong start to the new year.

Fueled by stronger sales and margins, and hacking away at interest expense and trimming stockpiles as well, Dillard's drove first-quarter profits up 121.4 percent, to $53.8 million from $24.3 million last year.

Sales improved 2.2 percent, to $1.9 billion from $1.8 billion, and the crucial gauge of same-store sales increased by 2 percent.

Setting the stage for the earnings recovery, in addition to stronger sales, Dillard's sold more of its goods at full price, substantially bulking up margins, which climbed 280 basis points, or 2.8 percentage points, to 36 percent from 33.2 percent a year ago. Gross margin dollars improved 10.8 percent, to $666.9 million from $601.9 million.

At the same time, the retailer held the line on costs, which were virtually unchanged at $509.8 million. Measured as a percentage of rising sales, costs declined 60 basis points, or six-tenths of a percentage point, to 27.5 percent from 28.1 percent the preceding year.

Lending further support to earnings, interest expense was cut 12.4 percent, to $38 million from $43.4 million a year ago, generating a cash savings of $5.4 million. Debt was slashed $385.4 million during the period, including the redemption of $331.6 million in preferred securities in February. In another substantial savings, inventories were whittled 1.8 percent, to $1.97 billion from $2 billion last year, yielding a cash benefit of $36 million.

Dillard's Inc.

Qtr. 5/1 (x000) 2004 2003 % chg
Sales $1,854,400 $1,813,900 2.2
Oper. income (EBIT) 157,100 92,200 70.4
Net income 53,800 24,300 121.4
Per share (diluted) 0.64 0.29 120.7
Average gross margin 36.0% 33.2% --
SG&A expenses 27.5% 28.1%

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