Analysts blame poor inventory management for at least part of the troubles.
By MARK ALBRIGHT
Published August 21, 2003
Shares of Dillard's Inc. took a hit Wednesday after the department store chain reported a bigger-than-expected loss.
"Clearly, the results are disappointing," said James Freeman, chief financial officer of the department store chain based in Little Rock, Ark.
After the company reported its 10th consecutive quarter of decreased sales, some analysts went a step further. Several downgraded Dillard's stock, partly blaming what one called "inept" inventory management. Dillard's shares lost 9 percent of their value Wednesday, closing at $15.41, down $1.51.
The company reported a second-quarter loss of $50.4-million, or 60 cents a share, compared to net income of $6.7-million, or 8 cents a share, in the same quarter a year ago. Revenues slipped 5 percent to $1.7-billion. Sales in stores open more than a year, a measure of a retailer's hold on its customers, slumped 5 percent.
While sales at most department store chains have languished through a difficult summer, Dillard's remains stuck at the back of the pack.
One reason: Optimism. The chain incorrectly banked on an improving economy lifting sales during the quarter that ended Aug. 2. The company aggressively increased its inventory by 5 percent earlier this year, then had to slash prices to move goods. Going into the fall, Dillard's has whittled down the excess, but its inventory still is about 3 percent ahead of last year.
"The improvement that people hoped for clearly hasn't materialized," said Mark Foster, a portfolio manager with Kirr Marbach & Co., which holds 398,000 Dillard's shares. "I don't think management executes as well here as at the competitors."
Analysts at Fahnestock & Co. termed Dillard's inventory management decision "inept," arguing that the company waited too long to drop prices this summer.
Dillard's also cut costs during the quarter by trimming its payroll and reducing its advertising budget, which is dominated by newspapers. Analysts said neither strategy will help boost sales.
Executives downplayed the notion that Dillard's might bid for a large group of Lord & Taylor stores that are being sold by May Department Stores Inc. May is pulling Lord & Taylor out of the Southeast, making department store buildings available in many top-flight malls. Vacated Lord & Taylor stores would open space in major markets such as Atlanta and South Florida where Dillard's has had a tough time gathering a real estate presence. Freeman said Dillard's is interested in a few Lord & Taylor stores, but only if the opportunity is right.
"We have been closing more stores than we open," said Freeman. Dillard's, which has 329 stores in 29 states, opens three stores this fall but has closed 35 since 2001.
- Information from Bloomberg News was used in this report. Mark Albright can be reached at albright@sptimes.com or 727 893-8252.
