Dillard's pushes profit up in 1Q
May 26, 2003-- Home Textiles Today,
Leaving behind a year-ago $530.3 million non-cash accounting charge that pushed the retailer into the loss column, Dillard's Inc. recorded a first-quarter profit of $24.3 million, compared with a prior-year deficit of $474.2 million.
But pulling the $530.3 million accounting charge out of the equation to level the year-over-year playing field, the Southern department store operator's profits were slashed by more than half, tumbling by 58.2 percent, to $24.3 million from $58.1 million.
And giving an extra lift to the bottom line this year was a $10.0 million after-tax gain, or $0.12 per share, stemming from the sale of the company's interest in a shopping mall in Brownsville, TX, and an extra $7.9 million after-tax credit as the company resolved some liabilities left over from its earlier acquisition of Mercantile Stores.
Hard hit in a notably difficult period for full-price retailers, sales declined by 5.1 percent, to $1.8 billion from $1.9 billion the preceding year. Same-store sales fell by 5 percent. "Sales were pressured during the quarter by continuing weakness in the overall retail sales environment," the retailer said.
In a highly promotional environment and under heavy markdown pressure, average gross margin contracted by 260 basis points, or 2.6 percentage points, to 33.2 percent from 35.8 percent. Gross margin dollars, hobbled by the falling sales, fell by 12.1 percent, to $601.9 million from $684.5 million.
Helped by the $7.9 million after-tax credit stemming from the settlement of issues tied to the Mercantile buyout, Dillard's pared its operating expenses by 1.9 percent, to $509.7 million from $519.7 million, a cash savings of $10 million. But excluding that credit, costs actually climbed by 0.4 percent. When measured as a percentage of the lowered level of sales, costs increased by 90 basis points, or nine-tenths of a percentage point, to 28.1 percent from 27.2 percent.
Squeezed thin by the falling sales and falling margins, operating profits declined by 40.0 percent, to $81.4 million from $135.6 million.
Providing some relief to the bottom line, interest expense was reduced by 3.1 percent, to $43.4 million from $44.8 million, saving the company about $1.5 million.
Hampered by falling sales, inventories climbed higher during the period, rising by 5.4 percent, to $2.0 billion from $1.9 billion a year ago.
|Qtr. 5/3 (x000)||2003||2002||% chg|
a-Results in the year-ago quarter include a $530.3 million charge stemming from a change in accounting. Excluding the one-time item, earnings declined by 58.2 percent, to $24.3 million from $58.1 million.
|Oper. income (EBIT)||81,400||135,600||-40.0|
|Per share (diluted)||0.29||(5.56)||—|
|Average gross margin||33.2%||35.8%||—|