Burdened by a steep gross margin decline, Dillard's Inc. swung to a loss in the second quarter on softer sales.

For the three months ended Aug. 4, the Little Rock, Ark.-based department store posted a loss of $25.2 million, or 31 cents a diluted share, which compares to net income of $15.7 million, or 20 cents, in the same period last year. Sales dropped 2.2 percent to $1.65 billion in the quarter from $1.69 billion last year. Total revenue during the quarter declined 2.5 percent to $1.69 billion from $1.73 billion last year. Same-store sales in the quarter showed a 3 percent decline.

In its quarterly report, the retailer said it "attributes the disappointing performance primarily to a gross margin decline (190 basis points of sales) as lackluster sales during the quarter necessitated higher markdown activity in order to maintain acceptable inventory levels."

The retailer said inventory in comparable stores at the end of the quarter declined 4 percent.

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