Dillard’s Net Rises on Flat Sales

Expense reduction helps profit grow 23.4 percent as comps grow just one percent.

Exterior of a Dillard's store.

Dillard’s Inc. employed modest expense reduction to squeeze higher profits out of flat sales in the first quarter.

This story first appeared in the May 16, 2013 issue of WWD.  Subscribe Today.

The Little Rock, Ark.-based department store group reported that in the three months ended May 4, net income expanded 23.4 percent to $117.2 million, or $2.50 a diluted share, from $95 million, or $1.89, in the 2011 quarter. Adjusting for special items, earnings per share for the quarter was $2.40, 31 cents above the $2.09 expected, on average, by the two analysts who supply estimates.

Revenues rose 0.2 percent to $1.589 billion from $1.586 billion in the prior-year period, with the more recent figure falling short of estimates of $1.61 billion. Excluding nonretail revenue, sales were unchanged at $1.55 billion for both periods but rose 1 percent on a same-store sales basis on top of a 5 percent improvement in the first quarter of 2012.

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A 2 percent reduction in cost of sales, to $937.8 million, allowed the company to boost gross margin to 41 percent of revenues from 39.7 percent in the prior-year period. A 0.8 percent cut in selling, general and administrative costs helped operating income advance 22.5 percent to $180.2 million.

“We are reporting a strong start to 2013 in spite of unseasonably cool weather,” said William Dillard 2nd, chief executive officer. “Positive comparable-store sales and gross margin expansion combined with good expense control led to another quarter of record profitability for Dillard’s.”

The company said sales were strongest in women’s accessories, lingerie and junior and children’s apparel, and weakest in home and furniture classifications. Sales were strongest in the central region, covering states from Texas to Montana.

Among the special items reported for the quarter was a pretax gain of $11.8 million, translating into a 16-cent-a-share aftertax benefit, from the company’s sale of its stake in Acumen Brands, a Fayetteville, Ark.-based e-commerce firm.

The company completed the quarter with 283 department store locations and 18 outlet stores spanning 29 states. During the just-completed three months, it closed a 94,000-square-foot unit in the Cache Valley Mall in Logan, Utah. During the current second quarter, it plans to close its 60,000-square-foot Randolph Mall location in Asheboro, N.C.