Conversion of Mercantile Stores wrecks Dillard's stock.Since July 15, Dillard's Inc. stock has made a precipitous nose dive nose dive Noun 1. (of an aircraft) a sudden plunge with the nose pointing downwards 2. Informal a sudden drop: when we fail our self-confidence takes a nose dive Verb , falling 44 percent from $36.25 to $20.50 on Sept. 23. There are at least two reasons for the fall: * the conversion of the 73 Mercantile Stores Mercantile Stores Company Inc. was a traditional department store retailer, founded in 1914, that operated 102 fashion apparel stores and 16 home fashion stores in 17 states. bought and retained last year has been much slower and more troublesome than expected: and * most analysts simply are unable to get a good grasp on Dillard's anticipated quarterly earnings, leaving the investment community open to surprising news. That happened last month when Dillard's announced second-quarter earnings of 34 cents a share, well below the 48 cents a share analysts had guessed for the company. On Aug. 20, a day after the announcement, Dillard's stock fell almost 20 percent ($5.75 a share) to $23.75. Julie Bull, Dillard's director of investor relations Investor relations The process by which the corporation communicates with its investors. , says the company has had several conference calls with the investment community since the Mercantile acquisition. But when Dillard's talks with analysts, she says it avoids "at all costs" selective dissemination, a Securities and Exchange Commission term for the forbidden practice of giving any party information that isn't announced publicly. "And as part of our investor relations program now, we take the approach of not endorsing analysts' estimates," Bull says. "Since we don't say, 'We are comfortable with this Wall Street estimate,' we do not have a resulting duty to update those estimates. Because we never endorse them in the first place." In its second-quarter report, Dillard's admitted that the Mercantile stores are operating at 19 percent below last year's sales. Dillard's had expected a 10 percent decline while bringing the Mercantile stores in line. And Dillard's was blind-sided when it received a large shipment in the second quarter of Mercantile merchandise, below Dillard's standards, that it did not realize was still on order. "We've had some road bumps with the Mercantile acquisition and the integration of it," Bull says. "Overall, we're happy with the Mercantile integration. The size of this one is far greater than many we've done, and we've stumped our toe in some areas. But we are happy we bought Mercantile." No analysts would comment directly about Dillard's recent troubles, but in an analyst report on Dillard's last month, Salomon Smith Barney Smith Barney is a division of Citigroup Global Capital Markets Inc., a global, full-service financial firm, that provides brokerage, investment banking and asset management services to corporations, governments and individuals around the world. found it "perplexing per·plex tr.v. per·plexed, per·plex·ing, per·plex·es 1. To confuse or trouble with uncertainty or doubt. See Synonyms at puzzle. 2. To make confusedly intricate; complicate. " that Dillard's management was shocked by the amount of Mercantile private label goods on the sales floor. "[This] suggest perquisite per·qui·site n. 1. A payment or profit received in addition to a regular wage or salary, especially a benefit expected as one's due. See Synonyms at right. 2. A tip; a gratuity. 3. controls are lacking which could pose risk to future results as well," the Salomon Smith Barney report says. "The former Mercantile stores will likely continue to fall short of expectations and therefore serve to contribute to the lack of earnings predictability over the near-term. "In our opinion, unless [Dillard's] takes steps to accelerate the conversion process and step up promotional activity to rebuild store traffic at the former Mercantile stores, it will take some time before the acquired stores begin operating at margins similar to the core department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. ." Salomon Smith Barney does note, however, that at the current bargain-basement price, the company's stock could be a good investment for investors willing to hold it for the long-term. "Of course we don't feel good about our stock price right now," Bull says. "What we have done to turn it around is our share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. We view that as a good investment for us and a positive for the shareholders." Dillard's announced last month a $250 million stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program about 10 percent of Dillard's outstanding shares - which should improve the stock price and likely will improve quarterly earnings per share. Bill Dillard Bill Dillard (born July 20, 1911–1995) was an American swing music jazz trumpeter, actor and singer born in Pennsylvania, probably better known for his work with the big bands of Benny Carter, Luis Russell and Teddy Hill, among others. He also had an acting career on Broadway. II said in the second-quarter press release last month that Dillard's was concerned that the trend of low performance at the Mercantile stores would continue into the third quarter. Bull says that the company now believes that will not happen. Dillard's Inc. Headquarters: 1600 Cantrell Road, Little Rock Business: Dillard's operates 337 retail department stores in 29 states, primarily in the Southwest, Southeast and Midwest. It features branded and private-label apparel as well as home furnishings. History: William Dillard founded the company in 1938 in Nashville (Howard County Howard County is the name of seven counties in the United States of America:
Chairman: William Dillard CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. : William Dillard II 1998 revenue: $7.8 billion 1998 net income: $135 million 1998 assets: $3:4 billion Sept. 21, 1999 stock price: $20.19 52-week high: $37.44 52-week low: $20.12 Price-to-earnings ratio: 17.02 Book value: $28.50 (per share) Price-to-book value: 07 Market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. : $2.1 billion Shares outstanding: 115 million Number of institutional shareholders: 558 Class A shares owned by institutions: 86.5 million Percentage of shares owned by institutions: 84 percent Analysts' rating: One buy, 11 hold, one sell |
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