• Q1 profit drops to US$109.6m
  • Gross margin declines 50 bps
  • Sales up slightly at $1.57bn

US department store retailer Dillard's has booked disappointing first-quarter results as earnings and margins both fell.

In the three months ended 2 May, net income dropped to US$109.6m from $111.7m a year earlier.

Consolidated gross margin declined 50 basis points. Dillard's said the disparity between retail and gross margin performance was attributable to increased revenue at its CDI construction business, which is a substantially lower margin business.

Net sales, however, edged up slightly to $1.57bn from $1.55bn a year earlier. Sales trends were strongest in the juniors' and children's apparel category, and in the Eastern region, followed by the Central and Western regions, respectively.

Dillard’s CEO William Dillard, noted: "We are disappointed with our first quarter performance. Our 1% 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."

Neil Saunders, CEO of Conlumino, believes the current issue for Dillard's is one of getting customers into store and then getting them to spend when they are there.

He added: "Admittedly, the American consumer has been fairly sluggish over the first quarter of the calendar year, but Dillard's results are nevertheless disappointing when compared to some of its rivals and to other retailers. Moreover, this lack of traction with shoppers has resulted in higher inventory levels."