DILLARD’S PRICING AND RTW SALES UNNERVE SOME WALL ST. ANALYSTS

Byline: Valerie Seckler

NEW YORK — Ready-to-wear sales and everyday low pricing at Dillard Department Stores is making some Wall Street analysts nervous. In a conference call Thursday, store officials told analysts that rtw sales have bottomed out and are ready to turn around. However, Robert Buchanan, analyst at NatWest Securities, said the category “shows no real evidence of improvement.” “The prevailing winds may have changed for a few hours, but they’re blowing from the Northeast,” said Buchanan, who participated in the call. “Clearly, their January apparel numbers were better than November and December, but February looks erratic again,” said Lehman Bros. analyst Kimberly Walin. “There’s no real conclusion on rtw, but hopefully the ugliest is behind them.” Dillard’s officials could not be reached for comment.
As reported, Dillard’s sales climbed 6.7 percent in the quarter ended Jan. 28 to $1.7 billion from $1.6 billion. Comparable-store sales gained 4 percent.
Buchanan, who recently visited some Midwest stores, noted that Dillard’s fourth-quarter numbers “look good, but I could see they still have way too much inventory and need to take further markdowns.”
“They’ll have some liabilities going forward on fall/winter ’94 merchandise,” he added.
However, William W. Whyte, analyst at Stephens Inc., Little Rock, noted that Dillard’s had cut comparable-store inventories in women’s apparel 5 percent in the quarter and boosted inventories in footwear and men’s wear by 6 percent and 4 percent, respectively.
“They knew women’s would be tough and added sku’s where they thought they’d do business,” Whyte said. “It’s a solid merchandising strategy, but it diluted gross margins because women’s rtw margins are the best in the store.”
Dillard’s fourth-quarter gross margin of improved to 35.7 percent from 35.3 percent a year-ago but was lifted 0.74 points by the retailer’s pretax LIFO credit of $16.3 million, Whyte said.
Moreover, while Dillard’s earnings per share of $1.05 in quarter topped Wall Street estimates by 2 cents, Whyte pointed out that the LIFO credit boosted earnings by 9 cents.
Whyte said women’s apparel at Dillard’s “looked better this year, with an improved mix of styles and colors, but it still wasn’t enough to spark a buying frenzy.”
The company’s stock closed Friday on the New York Stock Exchange at 28, unchanged.
— Fairchild News Service

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