Dillard’s Sale Talk Wrong, Paper Says; Stock Continues Slide

by Arkansas Business Staff  on Monday, Jun. 11, 2007 11:27 am  

Less than a month ago Dillard’s Inc. stock (NYSE: DDS) was near a 52-week high of $39.90 on May 21. This morning it was trading at less than $35 — down nearly 13 percent.
Part of the decline can be attributed to an overall movement lower of retail stocks. Dillard’s is far from the only one suffering in the slide. So are Saks Inc. and Kohl’s Corp., Nordstrom Inc., J.C. Penney Inc., Sears Holdings Corp and Macy’s Inc. Together those retailers were a drag on the market this morning.
But Dillard’s runup in its stock price was fueled by talk last month that it might be the next public company to sell after Acxiom Corp. and Alltel Corp.
In its May 21 issue, the New York Post planted a seed, by saying the department store chain may be looking at “strategic alternatives for the company.”
The article by Suzanne Kapner said analysts have seen Dillard’s as a takeover target for a long time, but the family that founded the company “has shown little interest in selling.”
“More likely is that the Dillard family is considering taking the company private or wringing money out of its sizable real estate portfolio through a sale and lease back,” the Post article said.
In its June 9 issue, the N.Y. Post’s Kapner said sources told her that “contrary to recent speculation, Dillard's Inc. does not appear to be considering strategic alternatives such as a sale and lease back of its real estate or going private through a leveraged buyout.”
Those rumors were bolstered by talk that Dillard's representatives had held preliminary conversations with investment bankers on the subject, the article said.
It was true that Dillard's CEO William Dillard II had been talking to bankers in recent weeks, but it was as a director of Acxiom Corp., and Dillard was working on the sale of that company to two private equity firms, ValueAct Capital and Silver Lake Partners.
Dillard’s, with all its real estate holdings and distribution centers, could be a prime target but the Post reporter found out what most in Arkansas already knew — that there will be no sale of Dillard’s unless all the Dillard’s agree. And sources told Kapner that “Dillard II and his siblings Alex, Mike and Drue Corbusier, all of whom hold executive positions with the company, are not interested in a deal.”
Two days after hitting its high on May 21, Dillard’s stock began a rapid tumble with the announcement that first-quarter profits fell 30 percent to $42.9 million. Net income was 53 cents a share, down from 77 cents a share during the same quarter last year. Analysts had expected net income of about 72 cents a share.
May sales were off 2 percent and, according to the Post article, analysts are not expecting much upside from operations going forward unless traffic picks up
In its annual report released, Dillard’s posted net income of $245.6 million on revenue of $7.6 billion.



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