Dillard's Doubles 4Q Profits

Little Rock, Ark. — Boosted by a one-time windfall $1.1 billion in proceeds from the sale of its credit-card business, Dillard's Inc more than doubled fourth-quarter profits, which shot up to $108.6 million from $51.2 million last year.

Plumping up the bottom line and providing a quick influx of cash, Dillard's sold its credit-card portfolio to GE Consumer Finance, which will continue to market and service the business to Dillard's customers.

Pull out the cash from the asset sale to create a level playing field, and Dillard's income during the all-important Christmas quarter rose a modest 4.9 percent, to $53.7 million.

Sales at the long-troubled Sun-belt retailer edged up just 0.2 percent, to $2.3 billion, while same-store sales were unchanged.

Driving the bottom-line improvement, in addition to the asset sale, was a combination of wider margins, lower costs and sharply reduced interest expense. Average gross margin improved 140 basis points, or 1.4 percentage points, to 33 percent from 31.6 percent the preceding year. At the same time, costs were whittled down 40 basis points, or four-tenths of a percentage point, to 24.6 percent of sales from 25 percent last year.

In a big lift to the bottom line, interest expense on debt was cut 30.7 percent, to $28.4 million from $41 million, generating a substantial cash savings of $12.6 million.