Dillard's misses estimates, shares plunge

Wed Aug 18, 2004

NEW YORK, Aug 18 (Reuters) - Dillard's Inc. (DDS.N: Quote, Profile, Research) on Wednesday reported a narrower quarterly loss even after it cut costs, but a drop in same-store sales caused the latest results to miss Wall Street's estimates by a wide margin, sending the stock plunging 6 percent.

The Little Rock, Arkansas-based retailer said sales at stores open at least a year, or same-store sales, fell 3 percent in the second quarter ended July 31, making it tough to realize the full effect of cost controls on the bottom line.

Dillard's also said even though gross margins improved during the quarter, falling sales hurt results as it had also been implementing a higher level of markdowns to move inventory.

Its quarterly loss narrowed to $26 million, or 31 cents per share, from a loss of $50.4 million, or 60 cents per share, a year ago.

According to Reuters Estimates, analysts had expected, on average, a loss of 13 cents a share. Total sales also fell 3 percent to $1.67 billion from $1.72 billion a year earlier.

"This quarter again shows the leverage in the department store business," J.P. Morgan analyst Shari Eberts said in a note. "While Dillard's had positive (first quarter) comps and earnings surprised on the upside, (second quarter) was just the reverse, with weak sales hurting the bottom line."

Commenting on its strategy plan, the company said it was focused on improving its merchandise selection in an effort to differentiate it from its peers.

The merchandising efforts, Dillard's said, include introducing new, younger-focused and more upscale national brands, as well as fine-tuning inventory by store location to meet the needs of local shoppers.

In midday trading, Dillard's shares were down 5.6 percent at $21.80 after tumbling 6.6 percent, to $21.55 on the New York Stock Exchange, where they were the top percentage loser. The drop was the stock's largest one-day percentage slide in more than two months.

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