Fortress Dillard's: A Thorn in the Side of Investors, Analysts

by Gwen Moritz  on Monday, Oct. 1, 2007 12:00 am  

(To view a graph of Dillard's sales trends, click here. For a graph depicting Dillard's stock progress, click here. To see the Dillard's Board of Directors, click here.)

How secretive is Dillard's Inc.? Here's a hint:

Spokeswoman Julie Bull says it would probably violate Securities & Exchange Commission regulations for CEO William Dillard II to grant an exclusive interview.

Scores of CEOs from publicly traded companies grant interviews or otherwise make public statements every day of the year. But a public statement out of Dillard's is so rare - and Dillard's is under such pressure from disgruntled institutional investors - that anything Dillard might say in an interview would probably constitute a "material event" that would trigger SEC reporting requirements.

It's probably unrealistic to think that Dillard would sit down and answer questions from Arkansas Business when he won't even return a call from someone who has invested some $90 million in his company. And that's the point: Dillard's Inc., which provided Dillard family members with salaries and dividends in excess of $16 million last year, has rarely been responsive - not to the press, not to stock analysts, not to investors. And because the company's bylaws give holders of Class B shares - that is, the Dillard family - the right to elect eight of 12 directors, there's not a darn thing anyone can do about it.

Except sell off Dillard's stock, of course. And that's been happening. Shares that were trading as high as $40 as recently as May have lost almost half that value.

But long-term investors, those with the kind of X-ray vision that sees beneath the quirky corporate structure and the latest disappointing quarterly earnings report, like the bones of the Little Rock-based company. The market may value the company at $1.71 billion, but its book value was $2.63 billion as of May 5.

And some investors think they can, with patience and pressure, effect change in a company whose market capitalization is half what it was a decade ago.

"From a faith-based perspective, we think anyone has a chance to change," Julie Tanner, corporate advocacy coordinator for Christian Brothers Investment Services of New York, said last week.

Then she added:

"Thank goodness I have other companies in my portfolio where I feel like I am accomplishing something. This company has been very difficult to wrap your arms around."

Critical Failure



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