Byline: Diane E. Picard

NEW YORK — Before a $78.5 million accounting charge, Dillard Department Stores Inc.’s earnings fell 9.5 percent in the fourth quarter to $107.6 million, or 95 cents a share.
The earnings were well below Wall Street’s $1.10 per share estimate for the Little Rock, Ark.-based company. In the year-ago quarter, Dillard’s earned $118.9 million, or $1.05.
Dillard’s executives could not be reached for comment, but analysts attributed the earnings shortfall to lackluster holiday sales and a drop in LIFO of 8 cents per share.
Sales for the three months ended Feb. 3 rose 10.1 percent to $1.9 billion from $1.7 billion, and same-store sales increased 3 percent.
Despite the earnings decline, Dillard’s stock jumped 2 7/8 to 34 3/4 in heavy trading on the New York Stock Exchange Monday following a strong trend in the overall market. Dillard’s plans to open 16 new stores in fiscal 1996, including an unspecified number of stores in Denver and Atlanta, which is a new market for the chain, and five additional units in Florida.
Robert F. Buchanan, an analyst at NatWest Securities, said it was a “difficult quarter” for Dillard’s even without the accounting charge.
“It was a miserable environment for apparel sales in general,” he added.
Still, Buchanan said he believes Dillard’s needs “to change its strategy to be able to compete against Federated and May.” The 238-store chain relies heavily on an everyday-low-price strategy and runs few sales promotions.
“Right now I think they are losing a lot of sales because they have little in-season cost-cutting,” Buchanan added.
Prudential Securities analyst L. Wayne Hood said the best-selling categories at Dillard’s included shoes and lingerie, which showed gains exceeding the company’s average sales increase. However, sales of women’s, children’s and juniors’ apparel fell below last year’s levels, he said.
Hood said Dillard used markdowns in the quarter to keep inventory current and began the fiscal year with cleaner inventory than it had a year ago.
He also noted that Dillard’s February sales showed signs of picking up.
Hood said Dillard’s plan to close its San Antonio and Cleveland buying offices and consolidate their functions will provide annual savings of about $10 million to $12 million, or 6-7 cents a share. The firm announced the restructuring moves on Friday.
Including the charge, Dillard’s reported net earnings of $29.1 million, or 26 cents a share, in the fourth quarter. The accounting charge reflects impairment of long-term assets used in Dillard’s business, which in future years will provide a noncash benefit from reduced depreciation expense. The reduction in depreciation charges in 1996 will be about $14 million.
For the full year, Dillard’s earnings dropped 33.5 percent to $167.2 million, or $1.48 a share, including the charge, from $251.8 million, or $2.23.
Sales were up 6.7 percent to $5.9 billion from $5.5 billion. Same-store sales were up 2 percent. — Fairchild News Service

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