Shares of Dillard's Inc. jumped nearly 19 percent Monday after the regional department store chain reported stronger-than-expected profits built on lower expenses and higher gross margins that came despite a double-digit sales decline.
In the three months ended Jan. 30, the Little Rock, Ark.-based firm posted net income of $79.5 million, or $1.08 a diluted share, 16 cents above the analyst estimate reported by Yahoo Finance. In the year-ago period, Dillard’s recorded a net loss of $149.3 million, or $2.03 a share. The year-ago loss included a pretax asset impairment and store closure charge of $177.9 million versus $3.1 million in charges in the most recent quarter.
Net sales in the quarter fell 10.1 percent to $1.83 billion from $2.04 billion in the comparable period. Excluding revenues from the operations of CDI Contractors LLC, merchandise sales slid 9 percent. Same-store sales were off 8 percent. Dillard’s acquired the 50 percent of CDI it didn’t already own in August 2008.
Dillard’s shares ended the day at $20.03, up $3.16, or 18.7 percent, contributing to a 1.6 percent gain in the S&P Retail Index, which outperformed the major U.S. indices and advanced to 428.32. (For more on stocks, see page 18.)
The profitable earnings beat was the second in a row for Dillard’s, which in November posted third-quarter profits that took investors and analysts by surprise. The quarterly jump just before the holiday season helped Dillard’s post one of the strongest stock performances of any U.S. retailer last year. Shares rose 364.7 percent from depressed levels at the close of 2008, ending the year at $18.45. With Monday’s gain, they’re now up 8.6 percent this year.
William Dillard 2nd, chairman and chief executive officer, credited cost reductions and improved gross margin for the “solid fourth-quarter operating performance.”
“We achieved strong cash flow from operations for the year as well as notable year-over-year reductions in inventory and debt,” he said. “Moving ahead, we will maintain our disciplined approach to these areas while effecting continued merchandise mix improvements to further strengthen our appeal to the Dillard’s customer.”
Gross margin improved 820 basis points year-over-year, to 33 percent of sales from 24.8 percent in the 2008 quarter. Cost of goods sold declined 19.8 percent to $1.23 billion, or 67 percent of sales, from $1.53 billion, or 75.2 percent. Although down only slightly as a percentage of sales, expenses associated with advertising, selling, general and administrative operations were cut 10.5 percent to $431 million. Inventories dropped 5.4 percent to $1.3 billion while cash and cash equivalents nearly quadrupled, reaching $341.7 million from $96.8 million at the end of the final quarter of 2008.
For the full year, net income was $68.5 million, or 93 cents a diluted share, versus a net loss, including $197.9 million in pretax impairment, of $241.1 million, or $3.25, in 2008. Net sales dropped 10.8 percent to $6.09 billion from $6.83 billion.
Dillard’s shares proved the pacesetter on a day when, helped by encouraging developments about relief for Greek sovereign debt and a better-than-expected boost in personal spending in January, the S&P Retail Index was joined in positive territory by all three major indices in the U.S. as well as markets in Europe and Asia. In the U.S., the Dow Jones Industrial Average moved up 0.8 percent to 10,403.79, while the S&P 500 rose 1 percent to 1,115.71. Although falling just shy of the retail index on a percentage basis, the Nasdaq Composite Index rose 1.6 percent to 2,263.57.
While Dillard’s registered the strongest gain among the 172 issues monitored by WWD, it was joined in Monday’s winner’s circle by Casual Male Retail Group Inc., up 8.8 percent to $3.35, and a number of other specialty stores. Among other men’s wear specialists, Men’s Wearhouse Inc. was up 5.1 percent to $22.45 and Jos. A. Bank Clothiers Inc. picked up 1.7 percent to close at $45.47.
Overseas, Germany’s DAX rose 2.1 percent to 5,713.51 and the CAC 40, in Paris, 1.2 percent to 3,753.06, while London’s FTSE 100 pushed ahead 1 percent to 3,753.51.
Asian markets began the trading day with a strong advance by the Hang Seng Index in Hong Kong, up 2.2 percent to 21,056.93, and a 1.2 percent increase by Shanghai’s SSE Composite Index to 3,087.84. In Tokyo, the Nikkei 225 was up 0.5 percent to 10,172.06.
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