Dillards Posts First-Quarter Profit

LITTLE ROCK, Ark. – Dillard's Inc. posted a profit for its first quarter in contrast to a loss a year ago despite an 8 percent sales decline. But its stock dropped nearly 13 percent.

"It seems to me that business has just totally collapsed since the end of March," said William Dillard II, chief executive of the Little Rock-based department store chain. "Not just for us, but it seems for everyone who uses our particular product mix."

The company said it would continue to discount merchandise in order to move goods from the racks. Since last year, Dillard's has been placing an increased focus on its own clothing labels and those items may show better results in the fall.

But Dillard said overall profit margins could drop if sales continue their current trend.

To help shore up its bottom line, the company will close two stores in the coming months — one in Metairie, La., at the Clearview Mall, and one in Tennessee at the Memphis Mall.

The company earned $29 million, or 34 cents per share, for the quarter ending May 5, in contrast to a loss of $74 million, or 78 cents a share, a year earlier.

The latest results include a gain that added 4 cents a share to its earnings for early debt retirement. Without the gain, Dillard earned 30 cents a share. That fell below the 33 cents a share expected by analysts surveyed by Thomson Financial/First Call.

In late trading on the New York Stock Exchange, Dillard's shares were down $2.53 a share at $16.99.

Analysts have forecast a rough year for traditional department stores and other retailers as shoppers seek bargains. The analysts cited high credit card debt, uncertainty about the economy and increased fuel costs.

Dillard's total revenue fell to $1.98 billion, from $2.15 billion in the same quarter last year.

March was particularly bad for Dillard's, with sales at stores open at least a year dropping 13 percent. Sales fell 3 percent in February and 6 percent in April. Comparable sales of cosmetics were steady but Dillard's clothing, accessories and home items all saw sales declines.

The chain opened two new stores in North Carolina — in Wilmington and Hickory — and bought four former ZCMI stores in Idaho and Utah, and those stores are operating under the Dillard's name. Dillard's also bought eight former Montgomery Ward stores and says it is deciding what to do with the properties. In all, Dillard's operated 342 stores in 29 states at the close of its first quarter.