Dillard’s management was uncharacteristically open at its annual meeting held at its Little Rock, Ark., headquarters over the weekend.
William Dillard 2nd, chief executive officer, said the company’s business had exploded into “total chaos” by the end of April.
Providing further color, Alex Dillard, president, said as a result of the coronavirus pandemic, the first quarter was the worst in the company’s history. From March 13 to 15, he said, sales dropped by approximately 50 percent. And that was before the government mandate to close its entire store fleet by April 9.
Alex Dillard went on to explain the company’s view on the mandatory store closures, which was different than other retailers, since it had fought store-by-store to stay open. Although the company was widely criticized for that attempt, management “was trying to generate enough cash to pay its associates, as their ongoing wellbeing was uncertain until the passage of the CARES Act,” the company said. He stressed that Dillard’s was clearly not staying open to maximize profits, noting that “nothing could be further from the truth as evidenced by our $162 million loss” for the first quarter.
While the stores were closed, he said, online orders doubled those prior to the pandemic and were filled by a “very limited staff” from the company’s retail store inventory.
Alex Dillard also acknowledged that the company offered “aggressive promotions” on its web site to move clearance merchandise. Beginning on March 24, the company offered an extra 40 percent off the clearance price, followed by an extra 50 percent off, which continued through April.
He added that, beginning the week of March 15, when business began to drop precipitously, Dillard’s began delaying merchandise receipts and canceling orders wherever possible. These actions resulted in a decline in merchandise receipts of 72 percent the last week of March followed by an 84 percent decline in April.
Alex Dillard said most of the April receipts that were received were for private label merchandise which has longer lead times than nationally branded items. But in total, merchandise purchases for the quarter were down 33 percent and inventory was down 14 percent compared to the first quarter of 2019, he said.
Turning to gross margins for the quarter, which were 12.8 percent of sales compared to 37.8 percent of sales in the first quarter of last year, Alex Dillard attributed that to the aggressive promotions as well as the company’s use of retail inventory method of inventory valuation.
Alex Dillard then turned to the company’s store reopenings, saying that beginning May 5, the company opened 45 full-line stores and 15 clearance centers, followed by an additional 80 Dillard’s stores and nine clearance centers on May 12. An additional 115 Dillard’s and five clearance centers will open next week.
Last Thursday, the department store chain reported that its total retail sales in the first quarter had dropped by 47 percent compared to the previous year. The retailer said it experienced a net loss of $162 million, or $6.94 per share, in the first period, compared to a net income of $78.6 million, or $2.99 per share, the same time last year.
Net sales for the first quarter were $787 million, compared to $1.5 billion around the same time last year. The company said it expects to be “in a net operating loss position for the fiscal year.”
“The mall business in general and department stores, specifically, have been particularly hard hit,” William Dillard 2nd said when reporting the results. “While our balance sheet was already strong, we took decisive — sometimes difficult — actions to preserve liquidity and ensure our long-term viability. As we reopen stores, we see positive things happening. We believe people are ready to get out and shop. We are hoping this is the start of better times.”
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