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Increased Markdowns Hurt Dillard’s Q2 as Losses Widen

It was not a good quarter for Dillard’s Inc. as key metrics–missed revenue expectations, declining comparable store sales and lower gross margins from last year–contributed to a wider second-quarter loss.

In a Nutshell: Dillard’s Inc. cited increased markdowns as the reason its gross margin fell 319 basis points in the quarter. But women’s apparel and accessories, which usually provides a retailer with higher margins than other sales categories, were also the department store’s weaker performers in the quarter.

Net Sales: Total revenue for the period ended Aug. 3 slipped by 2.8 percent to $1.46 billion from $1.50 billion. Included in revenue is a net sales decrease of 2.8 percent to $1.43 billion from $1.47 billion. Dillard’s said comparable sales fell 2 percent in the quarter. That’s compared with a 1 percent increase in the year-ago quarter.

As for sales, the retailer said “above trend performances” were in juniors; and children’s apparel, men’s apparel and accessories and home and furniture. The weaker performing categories were women’s apparel, accessories and lingerie.

By geography, sales were strongest in the East, followed by the West and Central regions.

Dillard’s also noted that gross margin from retail operations fell 319 basis points for the quarter, primarily due to increased markdowns

Earnings: The department store widened its second-quarter loss to $40.7 million, or $1.59 a diluted share, from a loss of $2.9 million, or 10 cents, a year ago. Dillard’s said includes in the net loss was a pre-tax gain of $4.9 million related to the sale of a store property.

Wall Street was expecting a loss of 70 cents on sales of $1.49 billion.

The company did return $51.4 million to shareholders in the quarter through share repurchases and dividend payments.