Dillard’s Inc. fell short of both Wall Street estimates and year-ago profit and sales levels as it showed clear signs of the struggles confronting mall-based department stores at the start of the year.
In the three months ended May 2, the Little Rock, Ark.-based firm saw net income recede 1.9 percent to $109.6 million, or $2.66 a diluted share, from $111.7 million, or $2.56, a year ago.
While net sales gained 1.4 percent to $1.57 billion from $1.55 billion, merchandise sales, excluding those of its CDI Contractors LLC construction business, fell 1.4 percent, to $1.52 billion from $1.54 billion, and were down 1 percent on a same-store basis.
On average, analysts expected net income of $2.78 a share in profit on sales of $1.61 billion.
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“We are disappointed with our first-quarter performance,” said William Dillard 2nd, chief executive officer. “Our 1 percent sales decline hampered our ability to leverage operating expenses and to drive net income growth. Although inventory is higher than we would like, we believe the levels are manageable.”
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Investors shared the ceo’s disappointment, sending shares down 3.4 percent to $120 in the first 30 minutes of after-hours trading after they dropped 1.9 percent to $124.20 during the regular trading session. Results were released after the markets closed Thursday.
Inventories rose 4.9 percent during the quarter, to $1.64 billion from $1.56 billion, a percentage higher than the ones for either the cost of sales (up 2.3 percent) or selling, general and administrative costs (up 2.5 percent). Regarding the SG&A line, the company said higher payroll and service costs were only partially offset by decreases in insurance and advertising expense.
“The company continued its initiative to increase pay for selling associates,” the firm said.
Dillard’s said it had issued a new $1 billion senior unsecured revolving credit facility, maturing in May 2020, to replace a secured credit facility in the same amount. It will be used for general corporate purposes including working capital financing, issuance of letters of credit and capital expenditures.
The company, which operates 274 department stores and 23 clearance centers across 29 states, expects to invest $160 million in capital expenditures this year, up from $152 million in 2014.