Stocks of Retail Companies Soar in Arkansas

by Mark Friedman  on Monday, Oct. 29, 2012 12:00 am  

Both of Arkansas’ publicly traded retailers saw their stock prices surge in 2012.

(Click here for an overview and list of the state's top stockholders.)

Dillard’s Inc. of Little Rock experienced the biggest jump. On Jan. 3, the stock price opened at $45.82. On Oct. 12, the date used for this week’s stockholder’s list, it closed at $74.69, an increase of 63 percent. The stock price reached an all-time high just shy of $80 a share on Sept. 14.

Walt-Mart Stores Inc. of Bentonville also is having a good year. It watched its stock price climb 26.4 percent to $75.81 on Oct. 12.

Both companies outpaced the S&P 500, which rose 11.9 percent during that period to close at 1,428 on Oct. 12.

The strategic moves both companies made in recent years are paying off, which makes their stock more attractive to investors, said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm in New York.

Dillard’s CEO William Dillard II implemented the strategy after the company’s sales were in a freefall and its stock price tanked in 2008. At one point in November 2008, Dillard’s stock price fell to $2.50.

Dillard closed underperforming stores, cut expenses and improved its merchandise. The plan worked, Davidowitz said.

“If you look at the sector that Dillard’s is in, you have to immediately say that Dillard’s is outperforming the sector,” he said.

The department store sector index, which includes several companies such as Macy’s and Dillard’s, was down 3.2 percent to 1,541 between the beginning of the year and Oct. 12. The department store index is published by FinancialContent, a provider of stock market data that is headquartered in San Carlos, Calif. “I think Dillard’s is now positioned much better than they were before their restructuring in terms of inventory levels, inventory content, expenses and everything else,” Davidowitz said.

Dillard’s success could be seen on its balance sheet. For the fiscal year that ended Jan. 28, Dillard’s reported revenue of $6.4 billion compared with $6.25 billion a year earlier. It was the first annual sales increase since 2006. Its net income climbed 158.3 percent to $463.9 million for the fiscal year that ended Jan. 28 over the previous year.

Wal-Mart Stores

Wal-Mart found its way back to its core value, which is low prices, said Davidowitz.

In the late 2000s, Wal-Mart overhauled its stores by trying to make them look nicer. It even ditched its “Action Alley,” the place where promotional items were pulled off the shelves and displayed.

The moves failed. For the first time in Wal-Mart’s history, Wal-Mart’s U.S. same-store sales were down 0.2 percent for the fiscal year that ended January 2010. A year later, they were down 1.6 percent.

In February 2011, Wal-Mart CEO Mike Duke announced a return to the “Every Day Low Price Strategy.” Wal-Mart focused on having the lowest prices on food items, and the strategy is working, Davidowitz said. He said the average food customer goes to the store several times a week. And if grocery store customers are already in a Wal-Mart Supercenter, they can buy other items they need, he said.

Wal-Mart’s U.S. same-store sales were up 1.6 percent for the fiscal year that ended Jan. 31.

“Wal-Mart has repositioned themselves to be in a better place,” Davidowitz said.

And Wal-Mart’s stock surge reflects that, Davidowitz said. Wal-Mart has outperformed FinancialContent’s discount, variety store sector index, which it is a part of, between January and Oct. 12. The sector improved 19.6 percent compared with 26.4 percent for Wal-Mart during that period.

“They’ve really gone back to their tradition of [offering] the lowest price,” Davidowitz said. “They’ve now gotten back to that, and I think that’s helped them tremendously.”

 

 

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