Dillard’s, Inc. Reports Second Quarter Results

 

Dillard’s, Inc. (NYSE: DDS) (the “Company” or “Dillard’s”) announced operating results for the 13 and 26 weeks ended July 30, 2016. This release contains certain forward-looking statements. Please refer to the Company’s cautionary statements regarding forward-looking information included below under “Forward-Looking Information.”

Second Quarter Results

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Dillard’s reported net income for the 13 weeks ended July 30, 2016 of $12.1 million, or $0.35 per share, compared to net income of $29.9 million, or $0.75 per share, for the prior year second quarter.

Net sales for the 13 weeks ended July 30, 2016 and the 13 weeks ended August 1, 2015 were $1.452 billion and $1.514 billion, respectively. Net sales includes the operations of the Company’s construction business, CDI Contractors, LLC (“CDI”).

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Total merchandise sales (which excludes CDI) for the 13-week period ended July 30, 2016 were $1.403 billion and $1.468 billion for the 13-week period ended August 1, 2015. Total merchandise sales decreased 4% for the 13-week period ended July 30, 2016. Sales in comparable stores for the period decreased 5%. Although all sales categories declined, stronger performing categories were ladies’ apparel and men’s apparel and accessories. Sales of home and furniture were significantly weaker. Sales trends were strongest in the Eastern region, followed by the Western and Central regions, respectively.

Dillard’s Chief Executive Officer, William T. Dillard, II, stated, “The challenges facing apparel retailers continued through the second quarter, and our poor results reflect this. In spite of weak sales, we returned $57 million to shareholders through stock repurchase and dividends. While we continue to deal with weakness in the fashion retail industry, we believe we are in good financial shape for the long term.”

26 Week Results

Dillard’s reported net income for the 26 weeks ended July 30, 2016 of $89.5 million, or $2.55 per share, compared to net income of $139.5 million, or $3.43 per share, for the prior year 26-week period.

Net sales for the 26 weeks ended July 30, 2016 and the 26 weeks ended August 1, 2015 were $2.956 billion and $3.087 billion, respectively. Total merchandise sales for the 26-week period ended July 30, 2016 were $2.853 billion and $2.986 billion for the 26-week period ended August 1, 2015. Total merchandise sales decreased 4% for the 26-week period ended July 30, 2016. Sales in comparable stores for the period decreased 5%.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) declined 92 basis points of sales for the 13 weeks ended July 30, 2016 compared to the prior year second quarter. Consolidated gross margin for the 13 weeks ended July 30, 2016 declined 99 basis points of sales compared to the prior year second quarter. Inventory increased 1% at July 30, 2016 compared to August 1, 2015.

Selling, General & Administrative Expenses

Selling, general and administrative expenses (“operating expenses”) were $395.0 million (27.2% of sales) and $404.3 million (26.7% of sales) during the 13 weeks ended July 30, 2016 and August 1, 2015, respectively. Operating expenses from retail operations declined $9.2 million during the quarter to $393.8 million (28.1%) from $403.0 million (27.5%) but increased 60 basis points of sales due to lack of leverage. The expense decline was attributable to decreases in supplies, advertising, services purchased, utilities and payroll expense partially offset by increased insurance expense.

Share Repurchase

During the 13 weeks ended July 30, 2016, the Company purchased $54.1 million (0.9 million shares) of Class A Common Stock under its $500 million share repurchase program. During the year-to-date period ended July 30, 2016, the Company purchased $112.5 million (1.6 million shares) under the program. As of July 30, 2016, authorization of $387.5 million remained under the program. Total shares outstanding (Class A and Class B Common Stock) at July 30, 2016 and August 1, 2015 were 34.3 million and 39.4 million, respectively.

Store Information

The Company has closed its clearance centers at South Towne Center in Sandy, Utah (100,000 square feet) and Plaza Central, formerly Six Flags Mall, in Arlington, Texas (85,000 square feet). The Company operates 272 Dillard’s locations and 22 clearance centers spanning 29 states and an Internet (HHH) store at www.dillards.com. Total square footage is 49.6 million square feet.

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