Byline: Thomas Cunningham

NEW YORK — Hurt by charges to close eight stores and markdowns to clear inventories, Dillard’s Inc. said its fourth-quarter earnings plunged 64.9 percent to to $26 million, or 26 cents a diluted share.
In the year-ago quarter, the Little-Rock, Ark.-based department store chain posted earnings of $74 million, or 70 cents.
Excluding charges in both periods, Dillard’s earnings per share fell 27.7 percent to 81 cents from $1.12.
The latest results were 26 cents behind Wall Street’s consensus estimate and reflect difficulties assimilating the former Mercantile chain, acquired by Dillard’s in 1998.
Total revenues for the quarter ended Jan. 29 ticked up 1.2 percent to $2.67 billion from $2.63 billion. Same-store sales rose 1 percent.
Dillard’s shares fell 7.6 percent, or 1 1/4, to close at 15 5/16 on the New York Stock Exchange Tuesday. The stock has ranged from 16 3/16 to 37 7/16 over the past year.
During the quarter, Dillard’s took a $55.5 million aftertax asset impairment charge mainly related to the store closings. By closing the stores, Dillard’s hopes to save $7 million, pre-tax, annually. In the year-ago period, Dillard’s had charges of $45.1 million for store closings, a write-down of Mercantile inventory and streamlining distribution operations. The closings, expected to be finished by the end of the year, include four former Mercantile stores. After Dillard’s bought the 103-unit Mercantile chain, some stores were sold off to Saks Inc. and May Co. Dillard’s also swapped some units with Belk Stores.
After the four Mercantile stores are closed this year, Dillard’s will operate about 60 former Mercantile units, according to a spokeswoman.
To cut costs, Dillard’s also plans to close a former Mercantile credit facility in Baton Rouge, La., and consolidate its operations into a center in Phoenix. Dillard’s is not alone in its difficulties integrating Mercantile units. Saks Inc. told analysts last year its growth in 2000 would be slowed partly because of difficulties integrating the 15 Mercantile units it bought.
Bernard Sosnick, analyst at Fahnestock & Co., said Dillard’s problems with the former Mercantile stores relate to getting rid of excess inventory.
Bob Buchanan, analyst at A.G. Edwards, said he saw that the company was struggling with inventory levels after visiting stores in St. Louis and Nashville. Aggressive inventory clearances hurt margins, but in the long run should improve Dillard’s performance, he said. “They got religion in the period with regard to their stock level,” Buchanan said. “Now I hope they’ll keep the stock down and improve margins going forward.”
Dillard’s heavy markdowns in the fourth quarter, Sosnick said, hurt margins in the period, but improved the inventory position. At the end of the quarter, Dillard’s inventory was down 5 percent from a year ago, at $2.05 billion.
Dillard’s has a history of taking markdowns later than most department stores, but plans to be more proactive, Buchanan said.
In 2000, Dillard’s will continue to try to lower inventory, particularly at the former Mercantile sites, and may try to improve its operating efficiency by consolidating its vendor list, Sosnick added.
The company has already trimmed vendors in the jewelry department, and may cut vendors in basic areas like hosiery and underwear, Buchanan said.
The inventory reduction freed up some cash to buy back debt, Dillard’s said during a conference call Tuesday. During the quarter, Dillard’s spent $119 million to buy back shares of its class-A common stock.
For the full year, Dillard’s earnings climbed to $164 million, or $1.55, from $135 million, or $1.26. Total revenues climbed 11.7 percent to $8.92 billion from $7.99 billion. Same-store sales gained 3 percent.

load comments
blog comments powered by Disqus