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Dillard's plans to close under-performing stores

23 May '08
4 min read

During the 13 weeks ended May 3, 2008, net sales were slightly above the Company's average performance trend in the Central region, consistent with trend in the Western region and slightly below trend in the Eastern region. Sales of home merchandise and furniture declined more than the average performance trend during the period.

Gross Margin/Cost of Sales:
Cost of sales as a percentage of sales increased to 66.7% during the 13 weeks ended May 3, 2008 compared to 63.9% for the 13 weeks ended May 5, 2007 resulting in gross margin decline of 280 basis points of sales. Excluding the hurricane recovery gain of $4.1 million during the first quarter of 2007, the gross margin decline was 260 basis points of sales.

The decline was primarily due to the Company's response to weak sales as it worked to control inventory levels with significantly higher markdown activity compared to the prior year first quarter. Inventory in comparable stores declined 3% as of May 3, 2008 compared to May 5, 2007.

Advertising, Selling, Administrative and General Expenses: S G & A expenses declined $17.8 million during the first quarter as the Company implemented expense saving measures. S G & A expenses were $480.9 million and $498.7 million during the 13 weeks ended May 3, 2008 and May 5, 2007, respectively. Notable savings in payroll, advertising, insurance, supplies and services purchased were partially offset by increases in utilities and pre-opening expenses.

Interest and Debt Expense:
Net interest and debt expense increased $1.4 million for the 13 weeks ended May 3, 2008 compared to the 13 weeks ended May 5, 2007 as a result of lower short term investment income. Interest and debt expense was $22.1 million and $20.7 million during the 13 weeks ended May 3, 2008 and May 5, 2007, respectively. As of May 3, 2008, short-term borrowings of $300 million and letters of credit totaling $67.5 million were outstanding under the Company's $1.2 billion revolving credit facility.

Closure of Distribution Center:
During the 13 weeks ended May 3, 2008, Dillard's closed its distribution center in Louisville, Kentucky. In connection with the closure, the Company recorded $0.9 million ($0.6 million after tax or $0.01 per share) of asset impairment and store closing charges.

Dillard's Inc

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