Holiday Markdowns Hit Dillard’s Q4 Profit

Dillard's storeLittle Rock—Dillard’s Inc. today reported that its fourth quarter profit sank 26% as holiday sale promotions hit the retailer’s gross margin sending it down 180 basis points.

For the quarter ended Feb. 1, the department store posted net income of $119.1 million, or $2.71 a share, compared with a profit of $161.4 million, or $3.36 a share, a year ago. That below analysts’ average estimate for $2.99 a share.

Net revenue declined 4% to $2.08 billion, edging past analysts’ estimate for $2.07 billion in sales. Total merchandise sales fell to $2.01 billion from $2.09 billion a year ago. Comparable store sales were up 2%.

Misses on 2013 Profit, Sales Estimate

Sales trends for the fourth quarter were strongest in women’s accessories and lingerie followed by shoes. Sales trends were strongest in the Central region, followed by the Eastern and Western regions, respectively.

“Although it was a profitable fourth quarter, we are disappointed in our gross margin performance, as lower than anticipated sales necessitated heavier markdowns,” said William T. Dillard, chief executive. “We are pleased with our expense control as well as with our strong cash flow for the year.”

As apparently was the case with many retailers, Dillard’s increased markdowns during holiday to combat weak sales, resulting in its gross margin narrowing to 32.8% from 34.6% a year ago.

Selling, general and administrative expenses decreased 90 basis points of sales though. Operating expenses were $439.2 million, a $35.7 million decline “primarily due to the additional week of operations in the prior year fourth quarter.”

For fiscal 2013, Dillard’s net income was $323.7 million or $7.10 a share, compared with net income of $336 million, or $6.87 a share, in the prior year. Adjusted net income for the year was $318.6 million, or $6.99 per share. Net sales for the year, including CDI, edged down to $6.53 billion from $6.59 billion last year.

Analysts expected Dillard’s to earn $7.28 a share for the year on revenues of $6.70 billion.


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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology.