Apparel and home furnishing retailer Dillard's, Inc. (DDS), reported Tuesday a profit for the third quarter compared to loss last year, reflecting improved margin and cost control initiatives, despite a drop in quarterly revenues. He company also reported a 22% drop in inventory, and said it is well-positioned to meet anticipated fourth quarter holiday demand.
In a statement, chief executive officer, William Dillard II said, "We are pleased with the continued improvement in merchandise gross margin of 420 basis points during the third quarter as well as with our cost control, strong cash flow from operations and year-over-year debt reduction. We continued to benefit from our improvements in inventory management, where we have focused on more conservative purchasing combined with efforts to better match the timing of receipts with demand."
The Little Rock, Arkansas-based company reported net income of $8.0 million or $0.11 per share for the third quarter, compared to a net loss of $56.0 million or $0.76 per share in the prior-year quarter.
Analysts polled by Thomson Reuters expected the company to report a loss of $0.51 per share for the third quarter. Analysts' estimates typically exclude special items.
The results for the latest quarter include a $10.6 million or $0.14 per share income tax benefit, primarily related to state administrative settlement and a change to a capital loss valuation allowance. The year-ago quarter results included asset impairment and store closing charges of $5.9 million or $0.08 per share, hurricane-related expenses of $2.8 million or $0.04 per share, and a $4.6 million or $0.06 per share gain related to the sale of a store.
Total revenues for the quarter decreased to $1.39 billion from $1.55 billion in the same quarter last year. Wall Street analysts had a consensus revenue estimate of $1.38 billion for the quarter.
Net sales for the quarter decreased to $1.36 billion from $1.51 billion in the year-ago quarter. Net sales for the latest quarter include the operations of CDI Contractors, LLC, a former equity method joint venture investment.
Total merchandise sales for the quarter declined 11% year-over-year to $1.32 billion, and merchandise comparable stores sales decreased 9%.
Dillard's gross margin from retail operations for the quarter climbed 420 basis points from the prior-year quarter, as the company focused on inventory management efforts resulting in lower inventory levels, decreased markdown activity.
Inventory for the quarter reduced by $490.6 million or 22% compared to the year-ago quarter, and inventory in comparable stores declined 23%.
Advertising, selling, administrative and general expenses declined to $402.1 million from $490.7 million in the year-ago quarter, and as a percentage of sales expenses declined 290 basis points to 29.6%, primarily due to the company's cost control initiatives along with the recent store closures.
During the third quarter, Dillard's closed its Chesapeake Square location in Chesapeake, Virginia, and has identified four other locations for closure during 2009 and remains committed to closing under-performing stores where needed.
At the end of the third quarter, the company operated 302 Dillard's locations and 11 clearance centers spanning 29 states and an Internet store.
For the nine-month period, the company reported a sharply narrower net loss of $11.0 million or $0.15 per share than $91.7 million or $0.47 per share in the prior-year period. Net sales for the year-to-date period declined to $4.26 billion from $4.79 billion in the same period last year.
"Accordingly, even with the substantial inventory decline at the end of the quarter (22%), we believe we are well-positioned to meet anticipated fourth quarter holiday demand with a steady flow of compelling product receipts throughout the season," Dillard II added.
DDS closed Monday's regular trading session at $13.33, down $0.05 on a volume of 1.15 million shares, higher than the three-month average volume of 0.79 million shares.
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