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Markdowns Result in a “Disappointing” Quarter for Dillard’s

Dillard’s department store, which operates 265 full-line locations and 27 clearance centers across 29 states, reported a “disappointing” third quarter Thursday.

In a nutshell: The department store chain saw gross margin decline by 87 basis points during the period ended Nov. 3, 2018, on increased markdowns. Inventory for the quarter increased by 4 percent compared to prior-year period.

Categories that experienced an above trend performance included women’s accessories, intimates, juniors’ and children’s clothing. Men’s clothing and accessories were slightly above trend as were the home and furniture categories. While shoes held their own, the retailer said women’s apparel and cosmetics underperformed.

Sales: The company reported a 2 percent increase in merchandise sales for the 13-week period, which totaled $1.34 billion, compared to the $1.31 billion during the prior year period. Comparable store sales during the quarter increased by 3 percent.

For the first three quarters, Dillard’s reported merchandise sales of $4.16 billion, which represents a 2 percent increase over the same period in 2017. Comp store sales increased 2 percent in the same timeframe.

Earnings: Dillard’s reported net income for the quarter of $7.4 million, or 27 cents per share, compared to $14.5 million and 50 cents per share during the third quarter of 2017. The net income included $2.9 million, or 11 cents per share, in tax benefits related to the federal tax cut.

Net income for the first three quarters of the year totaled $85.1 million, or $3.08 per share, compared to net income of $63.8 million, or $2.14 per share, for the 39-week period ended Oct. 28, 2017.

CEO’s Take: “While we are encouraged by our 3 percent comparable sales performance, this was a disappointing quarter as markdowns weighed heavily on gross margin, particularly in the first month. However, operating performance improved as the quarter progressed and sales turned positive. We also invested $54 million in share repurchases during the quarter,” said CEO William T. Dillard, II.