Dillard’s 1st Quarter Profits Increase as Margins Improve

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Little Rock, AR–Dillard’s Inc. reported today a surge in fiscal first-quarter profit as cost-cutting improved margins at the department-store operator and revenue rose moderately.

The company’s same-store sales have underperformed the industry over the past decade, but ratings agencies have nevertheless become increasingly bullish on Dillard’s, which has earned three upgrades on its junk-level ratings since March.

For the quarter ended May 1, Dillard’s posted a profit of $48.8 million, or 68 cents a share, up from $7.7 million, or 10 cents a share, a year earlier. Excluding a 2-cent asset impairment and store closing charge, the company would have earned 70 cents a share. That was almost double the 38-cent average estimate of analysts surveyed by FactSet.

Gross margin, excluding Dillard’s contractor business, grew to 38.3% from 34.9% on lower costs as inventories slid 12%. Last month, Standard & Poor’s Ratings Services said the company’s margins have recovered moderately because of cost cutting and lower inventory levels, which has led to less promotional activity.

Last week, Dillard’s reported sales at came in at $1.45 billion for the quarter, missing estimates of $1.52 billion. However, comparable sales rose 2%. Advertising, selling and other expenses fell to 27.1% of sales from 28.1%.