NEW YORK -- Despite strong sales gains, first-quarter earnings at Dillard Department Stores Inc. were flat and well below what Wall Street analysts expected.
The Little Rock, Ark.-based chain reported earnings of $48.3 million, or 43 cents a share, against $48.2 million, or 43 cents, a year earlier.
In the quarter ended April 30, sales rose 10.4 percent to $1.3 billion from $1.2 billion. Same-store sales rose 7 percent.
The results were disappointing in light of the strong results reported by the competition. Federated Department Stores Inc. said Wednesday that its earnings for the first quarter jumped 48.5 percent, and May Department Stores Co. on Monday said its earnings leaped 16.7 percent.
Dillard's, however, reportedly may be experiencing some consumer reaction against its everyday-low-pricing strategy and was forced to reverse its game plan with unwanted price reductions.
Pressure on margins was stronger than expected, according to Jeffrey Edelman, analyst at C.J. Lawrence.
"Dillard's had heavy markdowns to clean inventory, but the good news is they enter the new quarter very clean," he said, noting that Dillard's bottom line tends to be higher when inventory is down.
"Dillard's came in much lower than we expected," said Steven Kernkraut of Bear Stearns & Co., noting he had projected earnings per share of 48 to 49 cents. "The sales growth was there, but they couldn't leverage the gains and bring it to the bottom line." He added that the company must have been overambitious in its plans and ended up with excess spring merchandise that had to be marked down.
Kernkraut said he had been projecting earnings per share of $2.50 for the year, against $2.14 in 1993, but said this estimate may be lowered.
Dillard's reported an increase in cost of sales to 66.4 percent against 64.8 percent a year ago. Net income as a percentage of sales slipped to 3.8 percent from 4.2 percent.
Janet Mangano, analyst at Burnham Securities, said Dillard's earnings per share came in below her estimate and the Wall Street consensus of 46 cents.
The retailer opened two stores in the quarter, bringing the total to 229 units in 21 states.Many industry observers expect Dillard's to pick up its expansion efforts.
"I believe they are going to make an acquisition," said retail analyst Edelman. "They have the balance sheet for it, and the acquisition will be a large one."
Reports about Dillard's being interested in Macy's -- currently in Chapter 11 and the object of a merger attempt by Federated -- have circulated for years, and chairman William Dillard stirred up speculation again in an interview printed in Wednesday's Wall Street Journal.
In the story, he said his company is interested in all or part of Macy's. But Dillard's has not made a formal play for Macy's, nor is it expected to. In the event of a Macy's breakup, however, it is widely believed that Dillard's would eagerly seek several Macy sites, particularly in Atlanta and other Southern markets where it does not operate stores.
Macy's generally operates in larger markets with higher real estate costs, while Dillard's is primarily in secondary markets. Analysts said they believe Dillard's would have a tough time operating in many of Macy's high-cost Northeastern locations.
“What he has done at Vuitton is really exceptional,” said @gameofthrones’ actress Gwendoline Christie on @mrkimjones’ final show for @louisvuitton. “He has rebooted luxury in terms of making it commercial, viable and contemporary. And most importantly artistic. He has never compromised his artistic vision for the sake of commodity.” (📷: @zefashioninsider)
After seeing a demand for men’s wear from its customers, British contemporary women’s wear label @ariesarise has added a men’s wear component and will launch a unisex collection with @mrporterlive. The 20-piece collection includes jackets, denim, logo T-shirts and more with deconstructed ‘90s vibes. Set to launch on January 18, you can shop the pieces on Aries’ website and on mrporter.com. #wwdfashion
“And so spending so much time with a character who thinks like that, inevitability you try and analyze yourself and go back and think about your own demons and dark chapters that you had in your life,” says @thedanielbruhl of his role in TNT’s “The Alienist.” The show, set in the Gilded Age of New York, also stars Dakota Fanning and Luke Evans. Head to WWD.com to read about how 39-year-old Brühl prepared for the role and why he thinks the show is so relevant to today #wwdeye ( 📷: @Eriktanner)
Now that Celine Dion’s collection has topped $10 million in sales, the pop superstar, fashion icon and newly-minted industry player is eyeing growth in Asia. Read the full report by @tiffanyap, link in bio. #wwdnews #celinedion
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
Among the familiar faces at @off____white’s show was a surprise figure: Japanese artist @takashipom, pictured here on Wednesday morning. Other show-goers included @jerrylorenzo, who spoke about his upcoming project: a @nike collaboration for back to school, with designs inspired by his childhood on the West Coast. Sitting in the front row were Future, Don Crawley, @miguel and more. See the rest of the photos on WWD.com #wwdeye (📷: Stephane Feugere)
According to @laurentsai, former “Terrace House: Aloha State” cast member, she didn’t know she was auditioning for the Japanese version of “Real World.” “I was telling a couple of my friends and someone’s like, ‘That sounds a lot like Terrace House.’ I was like, ’No it can’t be.’” Turns out, it was. But Tsai isn’t just a reality star — she’s an illustrator who has worked with Starbucks Japan and most recently, she’s dipping her toes into the fashion world. Head to WWD.com to read about her time on the show, modeling and her art. #wwdeye (📷: @danieldorsa)
More changes are coming to New York Fashion Week: Beginning with the spring 2019 collection, @alexanderwangny will move his New York show to June from September, adopting a biannual schedule with collections shown in June and December. Additionally, the @cfda is planning for an official summer/winter fashion season taking place as soon as June and December 2018. Read more about the upcoming changes on WWD.com. #wwdnews #wwdfashion (📷: @slovekinpics)