Barington Capital Group Continues to Seek Meeting With William Dillard

by John Henry  on Friday, Aug. 3, 2007 8:54 am  

James Mitarotonda, a co-founder and principal of Barington Capital Group, as seen in an article from the Wall Street Reporter here.

Executive Officer

Dillard's, Inc.

1600 Cantrell Road

Little Rock, Arkansas 72201


Dear Mr. Dillard:

Thank you for your letter. While we appreciate your offer to make Dillard's director of investor relations available to speak with us, our interest is to meet with you and members of your management team. As a steward of a publicly-traded company, we had expected that you would be receptive to meeting with one of your larger stockholders, especially one with substantial experience helping improve shareholder value as a long-term investor in a number of retail companies.

There is clearly room for improvement at Dillard's. As reported in Monday's New York Post, Dillard's "has historically lagged behind its peers by almost every retailing measure." Among other things, Dillard's suffers from sub-par operating margins(1) and sub-par same store sales growth(2) and trades at a valuation multiple that is considerably lower than the industry- average.(3) Furthermore, as noted in the July 15, 2007 research report of UBS Securities, the Company's Return on Invested Capital (ROIC) has been approximately 2 percentage points below its weighted average cost of capital. According to UBS, this is one of the main reasons the Company has typically traded at a lower multiple than its peers and implies that Dillard's is destroying value in its business.

While we strongly believe in the potential prospects of Dillard's, whose shares we believe are significantly undervalued, we hope you recognize that the status quo is not acceptable. We would therefore like to meet with you to discuss initiatives in areas such as inventory management, merchandising and cost containment that we believe the Company should implement to bridge these differences and substantially increase shareholder value. We would also like to discuss with you a number of measures to enhance the value of Dillard's real estate portfolio, including the conversion of certain properties into higher and better uses, the closure of unprofitable stores and the sale/leaseback of owned properties. Given the highly competitive nature of the retail industry, it is our belief that Dillard's needs to take advantage of every opportunity to improve its operations and realize its vast value potential.

As part owners of the Company and in light of our track record, we hope that you will reconsider our request. We would be happy to meet at a time and location that is most convenient for you.





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