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Dillard’s Profits Exceed Estimates

May 16, 2002

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LITTLE ROCK, Ark. (AP) _ Shares of Dillard’s Inc. surged 8 percent Thursday, after reporting that its first-quarter profits were more than double from a year ago, well exceeding Wall Street expectations.

The department store chain, which is reaping the benefits of selling Dillard’s-branded merchandise, said Thursday that it earned $58 million, or 68 cents per share, in the three months ended May 5, compared to $29 million, or 34 cents per share, in the year-ago period.

Analysts polled by Thomson Financial/First Call expected 38 cents per share.

Sales were relatively unchanged to $1.91 billion, compared to $1.92 billion in the year-ago period. Sales at stores open at least a year, known as same-store sales, were down 1 percent from a year earlier, the company said.

Same-store sales are the best indicator of a retailer’s health.

``Our merchandise changes produced extremely encouraging results in gross margin while we decreased our expenses,″ chief executive William Dillard said. ``It is great to see things come together nicely in the first quarter. We will continue to focus on developing our private brands and becoming a more successful retailer.″

The company reduced expenses and inventory in stores open a year by 11 percent, on top of a 6 percent decrease one year prior.

The company has spent two years making changes in the stores and in its back shop. Dillard’s has freshened its merchandise mix, improved its inventory practices and trimmed costs in administration and advertising. Dillard’s added focus on its own labels, which have a higher profit margin.

In trading Thursday on the New York Stock Exchange, Dillard’s shares continued on an upward trend that began earlier this week. The stock closed at $29.37 per share, up $2.18.

Merrill Lynch retail analyst Stacy Turnof said Dillard’s had been looking healthier due to changes it has made in the way it does business.

``The company does not provide concrete guidance in terms of earnings,″ she said. ``It was a very big upside surprise.″ Turnof said Dillard’s beat her firm’s earnings estimate by about 25 percent.

Had Dillard’s not already gone up in value earlier in the week, ``it may actually have gone up higher,″ she said.

Turnof said Merrill Lynch upgraded its rating of Dillard’s from ``sell″ to ``neutral″ Thursday. She said one element driving the share price is the continued sentiment that Dillard’s may come up for sale. The company has said it is not going on the block.

Dillard’s stock began a run after company patriarch William T. Dillard Sr. died Feb. 8, and some analysts thought the younger generation now running the company could put it in play.

``A lot of people out there feel they’re still going to sell,″ Turnof said.

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