LITTLE ROCK, Ark. — Dillard's Inc. chief executive officer William Dillard 2nd said Saturday that in hindsight, the department store chain entered too many markets it shouldn't have and revealed plans to trim the store base and cut capital expenditure by more than 45 percent.
Speaking at the company's annual shareholders' meeting here, Dillard didn't specify which markets the company should have avoided.
But he admitted the firm's sales of $7.2 billion for 2007, which were down 6 percent from 2006, "weren't pretty."
And 2008 isn't looking much better. For the 13-week period ending May 3, sales were $1.7 billion, off 5 percent from the same period in 2007. Same-store sales fell 6 percent.
On Saturday, Dillard focused on his plans for 2008, which include: closing underperforming stores, reducing capital and other expenses and improving the merchandise.
The company, which currently has 326 stores, has already closed three locations this year and six more are scheduled to shutter by the end of the year. The number of employees has dropped from 52,000 in 2005 to just under 50,000 in 2007.
The cost-cutting moves made in the first quarter of 2008 could result in a savings of $50 million in this fiscal year, Dillard said.
Still, Dillard said the retailer is facing challenging times because of the sluggish housing market and rising gas prices.
Dillard said the company will slash capital spending from $396 million in 2007 to $215 million in 2008.
Dillard said the retailer started cutting expenses at the end of 2007 because of the economy.
"I wish we would have seen this coming 18 months ago, instead of nine months ago," Dillard said. "Fortunately, we have started this."
He also said he doesn't see the economy improving any time soon.
As an example of how the retail landscape has changed, Dillard said between 2000 and 2006, Florida was the company's best state for sales, with Las Vegas and Arizona not far behind. Now Florida is the worst state and Arizona and Las Vegas are also among the worst performing stores in the chain.
To improve sales, Dillard's plans to carry more upscale and contemporary merchandise.
Other plans for 2008 call for the retailer to buy back more of its shares. Last fall, the company spent $111 million to buy back shares of its Class A stock, which completed a $200 million stock repurchase program. Dillard said the company will buy more shares when it can.
During the approximately 10-minute meeting, Dillard said the four new nominees to Dillard's board had been elected.
In April, James Mitarotonda, the hedge fund investor with Barington Capital Group and its ally, Clinton Group Inc., reached an agreement with Dillard's to elect the four nominees to the retailer's board to avoid a looming proxy fight.
Those installed Saturday were: James A. Haslam 3rd, 54, CEO of Pilot Travel Centers LLC of Knoxville, Tenn.; R. Brad Martin, 56, former chairman and ceo of Saks Inc. and current chairman of RBM Venture Co. of Memphis; Frank R. Mori, 67, CO-CEO and president of Takihyo Inc., former president and CEO of Anne Klein Inc. and former CEO and founding partner of Donna Karan International, and Nick White, 63, president and CEO of White & Associates of Rogers, Ark., and a former executive vice president at Wal-Mart Stores Inc.
Dillard's bylaws, though, give holders of Class B shares — which is the Dillard's family — the right to elect eight of the 12 directors.
Still, Mitarotonda, who had lobbied for the new members, was happy with the additions. "The company has added four strong independent directors," Mitarotonda said in April. "It appears to me that the company is committed to taking action to improve shareholder value."
Barington and its group of investors, which includes the Clinton Group, own 5.6 percent of the outstanding Class A common stock of Dillard's. Mitarotonda had been critical of Dillard's management since the summer of 2007.
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