Dillard’s Inc. missed Wall Street’s revenue projection as sagging holiday sales forced the department store retailer to discount piles of product.
In a Nutshell: Cosmetics and women’s apparel did well in Q4, while home and furniture disappointed. That was a bit of an about-face from the third quarter when men’s apparel and accessories along with those three categories drove sales. Juniors’ and children’s apparel were the fourth quarter’s worst offenders despite the critical back-to-school selling season.
The Little Rock, Ark.-based retailer first noticed spending shifts emerging in the second quarter. However, cosmetics were a standout all year, suggesting that customer shopping trends are falling in line with recession-minded behaviors.
Consolidated gross margin for the 13 weeks ended Jan. 28 was 37.7 percent of sales, down from 40.8 percent for the year-ago quarter. Retail gross margin of 38.7 percent was Dillard’s second-best fourth quarter performance, following the record of 41.4 percent from 12 months earlier.
“Weaker sales at the beginning of the quarter and during the holiday season led to increased markdowns and stronger January sales compared to the prior year fourth quarter,” Dillard’s said, noting that inventory rose 4 percent at the end of Q4 from a year ago.
Dillard’s CEO William T. Dillard II brushed off the disappointing results, pointing to the company’s “strong cash flow” that enabled it to “return $708 million to our shareholders,” most of whom are employees. The company paid $436.6 million to repurchase 1.7 million shares last year. At the end of the fourth quarter, Dillard’s still had $175.4 million left in its February 2022 share repurchase program.
“We are entering our 85th year of operation in a strong position with today’s results,” it said.
The company plans to open a new store at The Empire all in Sioux Falls, S.D., in the spring next year. In the current first quarter, it will close stores in Santa Rose Mall in Florida, Conestoga Mall in Nebraska, and Phoenix’s Metrocenter Mall. At the end of the quarter, Dillard’s operated 247 stores and 27 clearance centers across 29 states, as well as dillards.com.
Net Sales: For the three months ended Jan. 28, net sales rose 0.4 percent to $2.13 billion from $2.11 billion a year ago, with retail sales at $2.07 billion from $2.08 billion a year ago. Net sales includes CDI Contractors LLC, Dillard’s construction business.
Dillard’s said quarterly comparable store sales were flat.
For the year, net sales rose 5.8 percent to $6.87 billion from $6.49 billion a year ago, while total retail sales rose 5.1 percent to $6.70 billion from $6.38 billion on a comp store sales gain of 5 percent.
Earnings: Net income fell nearly 10 percent to $289.2 million, or $16.89 a diluted share, from $321.2 million, or $16.61, in the year-ago period. Included in the current quarter was a pretax gain of $13.8 million, or $10.8 million after tax, related to the sale of two store properties.
Wall Street was expecting adjusted diluted earnings per share of $12.35 on $2.15 billion in revenue.
Dillard’s didn’t provide an outlook for either the first quarter or full fiscal year.
For the full year, net income rose 3.4 percent to $891.6 million, or $50.81 a diluted share, from $862.5 million, or $41.88, in 2021.
CEO’s Take: “Fiscal year earnings per share of $50.81 seemed impossible just a couple of years ago, but we have seen what we can do by controlling our inventory and focusing on our customer,” Dillard said.