Dillard's rebounds in 2Q

By Don Hogsett -- Home Textiles Today, 9/9/2002 12:00:00 AM

LITTLE ROCK, AL —

Building margins, slashing costs, paying down debt and working off its stockpiles, department store retailer Dillard's Inc. climbed back on track with a second-quarter profit before one-time items of 12.5 million, recovering from a year-ago loss of $20.6 million.

But tugging at the bottom line was a $5.8 million charge stemming from the early retirement of debt, leaving the retailer with a net profit of $6.7 million.

Stunted by store closings, Dillard's sales dipped slightly, by 0.6 percent, to $1.82 billion from $1.83 billion last year. Same-store sales were flat.

Home remained the weakest of all of Dillard's merchandise categories during the second quarter, with same-store sales declining by 7.0 percent. Almost as bad was men's clothing, with same-store sales falling off by 4.0 percent. Cosmetics slipped by 2.0 percent. The strongest categories were children's clothing, up by 4.0 percent, followed by womens' and juniors' with a 3.0 percent increase.

Helping to fuel the earnings recovery, Dillard's boosted its average gross margin by 180 basis points, or 1.8 percentage points, to 34.1 percent from 32.3 percent a year ago. Despite the slightly lower level of sales, gross margin dollars increased by 5.2 percent, to $620.7 million from $589.9 million a year ago. The company credited an improved merchandise mix, a stronger competitive position and increased penetration of its private-brand merchandise as it replaces "underperforming branded vendors with Dillard's private brands."

At the same time, Dillard's hacked away at overhead, reducing its expenses by 1.3 percent, or $6.9 million, to $531.0 million from $537.9 million last year. As a percentage of lower sales, expenses were pared by 20 basis points, to 29.2 percent from 29.4 percent.

As the retailer paid down long-term debt, it whittled down its interest expense by 8.0 percent, to $46.9 million from $51.0 million last year, generating a cash savings of $4.1 million.

Dillard's retired $210.1 million of long-term debt in advance of its scheduled maturity dates during the period. Additionally, the retailer improved its cash position to $118.5 million from $53.2 million the preceding year.

Dillard's Inc.