Dillard's 3Q Net Income Down 26% Amid Flat Sales

Dillard's 3Q Net Income Down 26% Amid Flat Sales
Dillard’s headquarters at 1600 Cantrell Road in Little Rock.  (Stephanie Dunn)

Dillard's Inc. of Little Rock on Thursday reported a 26% percent decline in third-quarter net income amid flat same-store sales. But earnings surprised analysts who were expecting a loss.

The publicly traded department store chain reported net income of $5.5 million, or 22 cents per share, down from $7.4 million, or 27 cents per share, in the same quarter last year. Adjusted for non-recurring costs, earnings came to 23 cents per share.

The results topped Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for a loss of 29 cents per share.

Total merchandise sales were $1.334 billion, down 1% from the same quarter last year. Same-store sales, a closely watched metric in retail, remained unchanged, the company said.

Shares of the company (NYSE: DDS) rose on the news. At about 10 a.m., shares were trading up more than 13% to around $77.

"While we were not satisfied with the third quarter, it was a substantial improvement over the second quarter," CEO William T. Dillard II said in a news release. "We were pleased with our retail gross margin improvement (13 basis points) following a second quarter decline of 319 basis points. We managed inventory to a 4% decrease from flat at the end of the second quarter. Our flat comparable sales performance improved from the 2% second quarter sales decline."

Total sales, which include revenue from the company's construction firm, CDI Contractors LLC of Little Rock, were $1.39 billion, down from $1.42 billion in the same quarter last year.

During the quarter, the company purchased $35.2 million, about 600,000 shares, of Class A Common Stock under its $500 million share repurchase program. 

Dillard's also said it plans to open an expansion at Killeen Mall in Killeen, Texas, by the end of the fiscal year, replacing a 70,000-SF leased facility with a 75,000-SF owned facility at a dual anchor location. During the first quarter, the company plans to open an 85,000-SF expansion at Columbia Mall in Columbia, Missouri. 

Dillard's also plans to replace a 100,000-SF leased facility at Richland Fashion Mall in Waco, Texas, with a 125,000-SF owned facility early next year. But it plans to close its 100,000-SF Fiesta Mall Clearance Center in Mesa, Arizona, in January.  

In all, Dillard's operates 259 locations and 30 clearance centers in 29 states.