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Dillard's Shares Leap as Unhappy Shareholder Seeks Talks

Reuters
Thursday, 28 Jun 2007 | 12:43 PM ET

Dillard'sshares soared almost 12% on Thursday after an activist hedge fund unhappy with the department store operator's performance demanded talks with management, saying the stock is undervalued.

Barington Capital Group said it represents investors owning more than 3.2% of Dillard's shares. It said it is seeking meetings with management to discuss merchandising, inventory management, cost controls and measures to "unlock" value in the company's real estate portfolio.

The New York-based firm said it requested talks after being unable to reach Chief Executive William Dillard by phone.

Julie Bull, a Dillard's spokeswoman, was out of the office and unavailable for immediate comment, a company representative said.

Dillard's shares reached a nearly nine-year high of $40.56 on May 21 but through Wednesday had fallen 16.3% from that level amid disappointing profits and sales.

The Little Rock, Ark.-based retailer has struggled amid competition from discounters such as Wal-Mart Storesand Targetand growing department store competitors such as Macy's.

First-quarter profit fell 30% and May same-store sales dropped 2%. Dillard's last month said it operated 328 stores in 29 U.S. states. The market value of Dillard's was about $2.73 billion on Wednesday.

Dillard's shares were up $2.92, or 8.6%, to $36.85 on the New York Stock Exchange after rising to $37.96 in early Thursday trading. Through Wednesday, the shares were up 7.8% in the last year, lagging a 15.8% gain in the Standard & Poor's Retailing Index.

Barington said it has substantial experience in improving shareholder value at other retail, apparel and footwear companies. It said these include Maxwell Shoe, Nautica, Payless ShoeSource, Pep Boys--Manny, Moe & Jack, Steven Madden, Stride Rite, Syms Corp.and Warnaco Group.

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