Dillard's Reduces Print Ad Spending, With Stephens Media and Elsewhere

by Arkansas Business Staff  on Monday, Apr. 18, 2011 12:00 am  

Last week on his wide-ranging blog, Arkansas Times Editor Max Brantley took note of the amount of business that Dillard's Inc. does with business interests of one of its directors, Warren Stephens, as revealed in the proxy statement that Dillard's issued last week.

That includes $2.2 million on advertising with Stephens Media in fiscal 2010, $1.3 million paid to Stephens Insurance and $250,000 in fees paid to Stephens Inc.

But the numbers are virtually meaningless without context, so Whispers thought we'd provide some.

Dillard's has reduced its spending on print advertising in recent years; according to annual reports filed with the Securities & Exchange Commission, Dillard's has reduced its annual advertising budget by almost $92 million since fiscal 2007. And that has been reflected in its payments to Stephens Media, which were in excess of $3 million in fiscal 2008, $2.5 million in fiscal 2009 and, as Brantley noted, $2.2 million in the fiscal year that ended Jan. 31.

Here's a telling statement from the newest annual report: "The decrease in advertising expense was primarily a result of the Company's migration from newspaper media to less expensive internet marketing sources."

The $1.32 million paid to Stephens Insurance represents commissions on voluntary insurance benefits sold to Dillard's employees (about $275,000 was commissions from insurance products bought by the company itself). That compares with about $1.1 million in 2008 and a similar amount in 2009.

The only new money Stephens' interests got out of Dillard's last year was the $250,000 fee paid to Stephens Inc. for "an analysis with regard to the Company's real estate investment trust transaction," which was announced in January.

That REIT announcement added a couple hundred million to the market capitalization of Dillard's. There are undoubtedly other undisclosed costs associated with the transaction, but a quarter-million bucks sounds like a good investment for Dillard's shareholders.

Dissecting CDI
In our recent "Power List" biography of Lloyd Garrison, CEO of Dillard's-owned CDI Contractors, we reported that CDI had revenue of more than $200 million in 2010. That was incorrect. That's how much revenue CDI had in fiscal 2009.

But 2010 was a whole 'nother story, as Dillard's annual report makes clear:

"Net sales from the construction segment decreased $104.1 million or 51% during fiscal 2010 as compared to fiscal 2009 primarily because the weak recovery of the United States economy continues to have a negative impact on demand for construction projects in private industry."

Specifically, the 10-K reveals that CDI's revenue from outside customers (not, that is, work done building and renovating Dillard's stores) was just under $101 million in the fiscal year.

Because it is part of a publicly traded company, CDI is the only construction company in the state whose profitability is public record: Gross profit of $1.99 million, less "selling, administrative and general expenses" of $4.6 million for a loss of about $2.6 million.



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