Thursday, August 24, 2000


Dillard's profits drop 62 percent

By Lisa Biank Fasig
The Cincinnati Enquirer

        Dillard's Inc. reported a 62 percent drop in net earnings on declining sales in the second quarter, despite having cleared merchandising hurdles associated with its former Mercantile stores.

        The Little Rock, Ark., chain said net income declined to $13.8 million in the period ended July 29, from $36.2 million in the same quarter a year ago. On a per-share basis, that comes to 15 cents from 34 cents.

        Net income includes a one-time gain of $4.4 million, or 5 cents a share, for the early pay down of debt.

        Sales slipped 2 percent in the quarter, to $1.84 billion from $1.89 billion. Sales at stores open at least a year declined 3 percent.

        Analysts said Dillard's suffered some profit loss because of markdowns on merchandise, which eroded its margins. But earnings are still below expectations.

        “The shortfall is not from 35 cents a year ago, it's from 45 cents two years ago,” said Bernard Sosnick, retail analyst with Fahnestock & Co. in New York. “The company's had an uninspired record during the 1990s, during the best of economic times.”

        Last year, Dillard's second-quarter income slipped to $36.2 million from $47.9 million in 1998.

        At the time, Dillard's said it was surprised by the size of a shipment of Mercantile private-label merchandise. Dillard's, which acquired Mercantile in August 1998, had discontinued the labels and had to slash prices on the goods to move them fast.

        “They are definitely below what you would have expected the Mercantile stores to contribute at this point,” said analyst Jeff Stinson, with Midwest Research Maxus Group in Cleveland.


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