NEW YORK — A trend-bucking February same-store sales gain of 3 percent offered some consolation for Dillard’s Inc. as fourth-quarter profits plummeted on special charges and soft sales.
For the three months ended Feb. 1, the Little Rock, Ark.-based department store company reported a 28.8 percent plunge in net income to $72.3 million, or 85 cents a diluted share. That compares with earnings of $101.5 million, or $1.21, in the prior-year quarter.
Excluding aftertax charges of $34 million, or 40 cents a share, for asset impairment and store-closing costs, earnings per share were $1.25, 1 cent shy of Wall Street’s estimate. Bottom-line results were also hampered by pretax goodwill amortization charges of approximately $3.9 million, or 4 cents. On the other side of the ledger, those charges were partially offset by a one-time aftertax gain of $41.3 million, or 48 cents, from the sale of Dillard’s interest in the Flatiron Crossing center in Broomfield, Colo. Dillard’s unloaded its 50 percent stake in the real estate for $68.5 million during the quarter.
Total revenues for the period dipped 3.1 percent to $2.52 billion from $2.6 billion a year ago.
A.G. Edwards & Sons Inc. analyst Robert Buchanan wrestled with the complex income statement and had his own interpretation of results.
"They way I look at, they earned 73 cents from continuing operations," Buchanan said. "They reported 85 cents. I subtracted 48 cents a share for the gain on the sale of real estate, knocking that down to 37 cents. Then I added about 37 cents for asset impairment and other charges. After rounding, I think the real number is 73 cents versus $1.21 last year. That’s a very disappointing quarter. If you look at key items, they just got killed on gross margins. I think they need to take their markdowns a little quicker. They are just too slow to mark down their nonselling items compared with the competition. And they don’t issue coupons."
Gross margins retracted 140 basis points, despite progress made in increasing penetration of private label merchandise into overall sales. For the full year, in categories in w hich they’re represented, private label programs accounted for 21.6 percent of sales as compared with 18.4 percent last year.Quarterly sales declines were felt across all geographic regions and product categories. By region, sales fell 7 percent in the Central U.S., 6 percent in the West and 3 percent in the East. By merchandise category, women’s and junior apparel were the loss leaders, declining 9 percent on a comparable-store basis. Also on a comp basis, cosmetics dropped 3 percent, children’s apparel dipped 4 percent, home goods decreased 3 percent and shoes, accessories and lingerie declined 1 percent. Men’s clothing and accessories fared the worst, receding 7 percent.
Looking at the sales mix, women’s and junior clothing led the pack at 26.1 percent of sales. Shoes, accessories and lingerie tied men’s wear and accessories at 20 percent. Cosmetics contributed 15 percent to total sales, while home goods accounted for 11.2 percent.
While Dillard’s did manage positive comps in February while most retailers did not, fourth-quarter comps were down 5 percent. By month, comps declined 7 percent in November, 4 percent in December and 5 percent in January. For the full fiscal year, same-store sales fell 3 percent.
Overall, for the full fiscal year, Dillard’s reported a net loss of $398.4 million, or $4.71 a diluted share. That compares with last year’s profits of $71.8 million or 85 cents. Excluding extraordinary losses and gains, as well as accounting changes, in both years, the company would have reported a 107.1 percent earnings improvement to $136.3 million, or $1.60, versus $65.8 million, or 78 cents, last year. Full-year charges include aftertax asset impairment and store-closing costs of $33.4 million, or 39 cents. Dillard’s also recorded an extraordinary aftertax loss on early extinguishment of debt of $4.4 million, or 5 cents. One-time gains included an $8 million credit for the forgiveness of a lease obligation, and$6 million, or 7 cents, aftertax also related to the early extinguishment of debt.
Total revenues for the year decreased 2 percent to $8.23 billion from $8.4 billion a year ago. Revenues include amounts realized through aforementioned real estate transactions.
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