Top 10 2006: Dillard's Stock Price Soars

by Mark Friedman  on Monday, Dec. 25, 2006 12:00 am  

Between 2002 and June 2006, Dillard's Inc.'s stock traded above $30 only once.
It was at the end of May 2002 and tied to a rally based on speculation that the Little Rock department store chain might be sold following the death of its founder, William T. Dillard, in February 2002.
When the company wasn't sold, the stock price fell below $20, where it stayed throughout 2003.
But the stock price started a gradual recovery after hitting a low of $12.13 on March 12, 2003. Since June of this year, the share price has fallen below $30 only for a few days. It hit $36.09 on Nov. 16, its highest since 1998, when it was selling for more than $40 a share.
Dillard's stock price has risen almost 40 percent since the beginning of the year. By comparison, Arkansas' other major retailer, Wal-Mart Stores Inc., has enjoyed barely over 1 percent in increased market value.
Dillard's stock appreciation might be tied to its strategy of targeting a more upscale customer and redesigning its stores.
"We've accomplished a lot in the stores with regard to taking it toward a more upscale and more contemporary tone," Dillard's spokeswoman Julie Bull told Arkansas Business in July. "We're carrying more upscale merchandise, more contemporary merchandise. So what we're trying to achieve there is to reach out to that upscale contemporary customer and get her to take a new look at Dillard's while at the same time continuing to serve our core customer."
And with the department store chain's healthy balance sheets, some analysts are warming up to Dillard's.
In April, Fitch Ratings revised its outlook on Dillard's to "positive" from "stable" because of its improved balance sheet, helped by debt reduction.
For the nine-month period that ended Oct. 31, Dillard's sales have increased to $5.247 billion from $5.222 billion in the same period in 2005. Also, its net income shot up to $90.66 million during that nine-month period. The comparable figure in 2005 was $23.02 million.
Even with the improved numbers, some analysts still are wary of Dillard's.
A retail analyst for Motley Fool said Dillard's might have waited too long to start focusing on upscale customers. Same-store sales at luxury department stores were up 4.7 percent in fiscal year 2006, while Dillard's were up 2 percent. Sill, it was Dillard's best showing in three years.
A Merrill Lynch analyst said that while Dillard's improved its financials during the past couple of years, "our optimism is limited due to the lack of management visibility coupled with inconsistent same-store sales."
Four of the company's top five officers are Dillard family members.
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