After Aggressive Steps, Dillard's Shows Signs of Rebirth

by Mark Friedman  on Monday, May. 17, 2010 12:00 am  

"While Dillard's did not respond publicly to these suggestions [by the shareholders], it is clear to us now that many of these suggestions were being implemented at the company," Dreher wrote in a Nov. 19 report.

Dillard's spokeswoman Julie Bull declined to comment on Dillard's changes because the company is in a quiet period since it will release its first-quarter financial results soon.



Some of the fundamental changes are easy to spot. For instance, Dillard's has improved its inventory in recent years, Dreher wrote.

"Historically, Dillard's philosophy when it came to inventory was to ‘stack it high and let it fly,'" he wrote in November. "The company began to realize that this philosophy had become outdated and the consumer was more interested in an edited assortment of merchandise."

Dillard's responded to the customer demands. At the end of the fiscal year, Dillard's had an inventory reduction of 5 percent or $73.7 million from its previous year. And that followed an inventory reduction of 23 percent in fiscal 2008.

"Better flow of inventory, matching the timing of receipts to demand, and more conservative purchasing will likely drive gross margin improvement ... going forward," Dreher wrote.

Dillard's also has slashed its operating costs. The company said it saved $288.6 million in operating expenses for fiscal 2009. In filings with the U.S. Security & Exchange Commission, Dillard's said it saved a large portion on advertising and payroll expenses.

Dillard's doesn't reveal exactly how much it spends on advertising, but because director Warren Stephens of Little Rock owns half of Stephens Media of Las Vegas, Dillard's reveals its spending with that newspaper chain in its annual proxy statement. And spending with Stephens Media was down about 17 percent, from $3 million in fiscal 2008 to $2.5 million in 2009.

Dreher wrote that Dillard's saved money by shifting advertising in newspapers to "lower cost emails."




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