BELK’S CITES MARKDOWNS, CONSOLIDATION FOR NET DROP
NEW YORK — Belk Inc., stung by higher markdowns and costs to consolidate into four regional divisions, said Wednesday that its earnings sank 22.1 percent in the third quarter ended Oct. 30.
The largest privately held department store chain in the U.S., based in Charlotte, N.C., earned $4.1 million, or 7 cents a share, against $5.3 million, or 9 cents a year ago, according to a filing with the Securities & Exchange Commission.
Last year, after the company reorganized from 112 operating companies into one to compete better, it began reporting its figures.
Belk said the latest third quarter included $1.3 million in incremental selling, general and administrative expenses and a $300,000 restructuring charge tied to consolidation moves. Excluding these items, net income would have been up 7.8 percent, Belk said.
Belk announced plans last April to restructure its 13 operating units into four regional divisions in Charlotte and Raleigh, N.C.; Greenville, S.C., and Jacksonville, Fla. The consolidation is designed to cut operating expenses on an annual basis by $13 million to $15 million and achieve more consistent marketing, merchandising and advertising at Belk stores.
Sales in the last quarter inched up 1.3 percent to $490.1 million from $479.2 million, with same-store sales ahead 1 percent. Belk, which operates 211 stores, said sales were hurt by Hurricane Floyd and resulting floods.
The bottom line was hampered by a decrease in gross margins to 29.8 percent from 30.1 percent, primarily due to increased markdowns. Selling, general and administrative expenses rose to 27 percent of sales from 26.7 percent as a result of one-time expenses from hiring and relocating employees as part of its division consolidation. These offset reductions in personnel costs due to operating efficiencies, reduced bad debt losses on Belk’s credit card and increased late fees from credit customers.
In the nine months, earnings rose 20.1 percent to $24.6 million, or 44 cents a share, from $20.1 million, or 37 cents, a year ago.
The latest nine months included a $7.5 million charge in connection with the divisional consolidation, including $3.6 million to close excess facilities and $3.9 million in severance for eliminating 340 positions. Sales advanced 10.7 percent to $1.47 billion from $1.38 billion.