Department store chain Dillard's Inc. of Little Rock, rocked by the economic effects of store closures amid COVID-19, reported Thursday a $162.0 million net loss in its first quarter, down from a profit of $78.6 million in the same quarter last year.
Total retail sales were $751.0 million, down 47% from $1.42 billion in the same period last year.
"COVID-19 has impacted every aspect of our business," Dillard's CEO William T. Dillard II said in a news release. "The mall business in general and department stores, specifically, have been particularly hard hit. While our balance sheet was already strong, we took decisive, sometimes difficult, actions to preserve liquidity and ensure our long-term viability. As we re-open stores, we see positive things happening.
“We believe people are ready to get out and shop,” he said. “We are hoping this is the start of better times."
The company (NYSE: DDS) said that, "given the uncertainty surrounding the COVID-19 pandemic and its economic effects," it could not estimate the pandemic's financial impact to fiscal 2020 results, only that it "expects to be in a net operating loss position for the fiscal year."
The company also said its CEO chose to forego his salary beginning in early April. Dillard’s base salary for the fiscal year that ended on Feb. 1 was $1.07 million. On April 17, the company began a temporary 20% salary cut for all salaried employees, which remains in effect.
Dillard's said it took several steps to improve liquidity in the first quarter, including:
- Extending vendor payment terms
- Canceling, suspending and significantly delaying merchandise shipments
- Reducing merchandise purchases during the quarter by 33%
- Reviewing and reducing discretionary operating and capital expenditures
- Reducing payroll expense
- Affecting extraordinary measures to clear inventory
Dillard’s said it plans to reopen 116 stores and five clearance centers next week. As of Thursday, Dillard’s has reopened 149 of its locations, including 24 clearance centers, that were temporarily closed.
It began temporarily closing stores on March 19 as required by state and local governments. By April 9, all 285 store locations were temporarily closed.
On May 5, the retailer reopened 45 stores in cities where allowed. Dillard’s reopened an additional 80 stores on May 12th. Those stores are operating with reduced hours.
“The 45 stores that opened on May 5th have produced sales of approximately 56% of last year's performance while operating at reduced hours,” Dillard’s said.
Dillard’s continued to pay its employees at closed stores for a period of time. On March 27, it started furloughing employees.
“At the peak of store closures, approximately 90% of Dillard's 38,000 associates were furloughed,” it said.
Dillard's has continued to provide certain benefits to its furloughed associates. The “vast majority” of employees have returned to stores when they were reopened. Still, about 65% of Dillard's employees remain on furlough.
Dillard's said it has told its furloughed employees about government benefits they might be eligible to receive.
Payroll expenses for the quarter that ended May 2, was $168.5 million, a decline of 35% from the same period a year ago.
Dillard’s management said it believes it is “uniquely positioned, among U.S. department store retailers, to weather the COVID-19 pandemic primarily because of its strong balance sheet and available liquidity.”
Dillard’s noted that it owns 90% of its retail store square footage and 100% of its corporate headquarters, distribution and fulfillment facilities.
And its website, Dillards.com, has “continued to provide cash flow,” although the filing didn’t release its ecommerice numbers.
Analysts had projected Dillard’s bleak numbers. According to a March 23 research report on department stores from J.P. Morgan of New York, sales at Dillard’s stores open at least a year were expected to be down 31.7% in its first quarter, and 13.9% in its second quarter. In the second half of the year, Dillard’s is expected to “improve to low to mid-single-digit comps,” the report said.
The department store chain's annual shareholder's meeting will be held at 9 a.m. Saturday at its corporate headquarters at 1600 Cantrell Road.