Dillard's Profits Tumble 29.4 Percent
May 30, 2005,
Little Rock, Ark. — Hurt by sliding sales and stepped-up markdown activity, which more than offset deep cuts in costs and interest expense, first quarter profits at Dillard's Inc. tumbled 29.4 percent, to $38 million from $53.8 million.
With sales trailing off, the company cut prices to move the goods, putting margins under pressure and taking a bite out of the bottom line. Average gross margin thinned 90 basis points, or nine-tenths of a percentage point, to 35.1 percent from 36 percent. Hurt by the shortfall in sales and markdown pressure, gross margin dollars slipped 5.1 percent, to $632.7 million from $666.9 million last year.
Helping to prop up earnings, Dillard's continued to hack away at costs, and operating expenses were reduced 2.5 percent, to $497.3 million from $509.8 million, generating a cash savings of $12.5 million. But when measured as a percentage of falling sales, costs edged up slightly, 10 basis points, or one-tenth of a percentage point, to 27.6 percent from 27.5 percent. The retailer said savings “were driven primarily by decreases in bad debt expense, payroll and communication costs as a result of the company's sale of its credit card business in November of 2004.”
In another big boost to the bottom line, Dillard's pared its interest expense almost a third, or 31.1 percent, on lower debt levels, to $26.6 million from $38 million a year ago, yielding a savings of $11.8 million. Long-term debt was whittled 26.4 percent, to $1.62 billion from $2.2 billion last year.
Acting as a drag, merchandise stockpiles rose 5.3 percent, to $2.1 billion from $2 billion last year, “primarily due to an increase relating to inventory in transit,” the retailer said.
|Qtr. 4/30 (x000)||2005||2004||% change|
|a. First quarter results include asset impairment and store closing charges of $400,000, compared with $4.7 million during the same period a year ago.
|Oper. Income (EBIT)||86,000||126,700||-32.1|
|Per share (diluted)||0.46||0.64||-28.1|
|Average gross margin||35.1%||36.0%||—|
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