Dillard’s Inc. reported net income slipped in the first quarter, to $109.6 million, or $2.66 per share, compared to net income of $111.7
million, or $2.56 per share, for the prior year first quarter.
Dillard’s Chief Executive Officer, William T. Dillard, II, stated, “We are disappointed with our first quarter performance. Our 1 percent sales decline hampered our ability to leverage operating expenses and to drive net income growth. Although inventory is higher than we would like, we believe the levels are manageable.”
Net sales for the 13 weeks ended May 2, 2015 were $1.574 billion and $1.551 billion for the 13 weeks ended May 3, 2014. Net sales includes the operations of the company’s construction business, CDI Contractors, LLC (“CDI”).
Total merchandise sales (which excludes CDI) for the 13-week period ended May 2, 2015 were $1.518 billion and $1.539 billion for the 13-week period ended May 3, 2014. Total merchandise sales decreased 1 percent for the 13-week period ended May 2, 2015. Sales in comparable stores for the period decreased 1 percent.
Sales trends were strongest in the juniors' and children's apparel category followed by shoes and ladies' apparel. Sales were notably weak in the home and furniture category. Sales trends were strongest in the Eastern region, followed by the Central and Western regions, respectively. Regarding the impact of the Texas economy, the company noted that sales in Texas performed slightly below the company average during the first quarter.
Gross margin from retail operations (which excludes CDI) improved 52 basis points of sales for the 13 weeks ended May 2, 2015 compared to the prior year first quarter. Consolidated gross margin for the 13 weeks ended May 2, 2015 declined 50 basis points of sales compared to the prior year first quarter. The disparity between retail and consolidated gross margin performance is attributable to increased revenue at CDI, which is a substantially lower margin business. Inventory increased 5 percent at May 2, 2015 compared to May 3, 2014.
Selling, General & Administrative Expenses
Selling, general and administrative expenses (“operating expenses”) were $403.6 million (25.6 percent of sales) and $393.7 million (25.4 percent of sales) during the 13 weeks ended May 2, 2015 and May 3, 2014, respectively. Operating expenses from retail operations increased 101 basis points of sales to $402.3 million (26.5 percent) during the 13 weeks ended May 2, 2015 from $392.2 million (25.5 percent) during the 13 weeks ended May 3, 2014. The increase was driven by increased payroll and services purchased expense partially offset by decreased insurance and advertising expense. During the quarter, the company continued its initiative to increase pay for selling associates.
In a separate release today, the company announced that it has issued a new $1 billion senior unsecured credit facility, enhancing the company's liquidity. The new unsecured facility replaces the company's $1 billion secured credit facility and underscores Dillard's continued improvement in financial strength.
At May 2, 2015, the company operated 274 Dillard’s locations and 23 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at May 2, 2015 was 50.1 million.