Discloses 3.7% Ownership Interest in the Company
NEW YORK, Aug. 3 /PRNewswire/ -- Barington Capital Group, L.P. sent a letter today to William T. Dillard, II, the Chairman and Chief Executive Officer of Dillard's, Inc. (NYSE:DDS). In the letter, Barington repeated its request to meet with Mr. Dillard and members of his management team to discuss a variety of measures which Barington believes will maximize shareholder value for the benefit of all of the Company's stockholders.
The letter was sent following Barington's receipt of a July 2007 letter from Mr. Dillard, in which Mr. Dillard did not consent to Barington's initial request to meet with him in order to present suggestions to improve the Company's profitability and better utilize its substantial asset base. Instead, Mr. Dillard stated that the Company's investor relations director "would be happy to speak with you regarding our corporate strategy and answer your questions." Barington hopes that Mr. Dillard, as a steward of a publicly-traded company, will reconsider its request and agree to meet with Barington, who is one of the larger owners of Dillard's. Barington has informed Mr. Dillard that it would be happy to meet at a time and location that is most convenient for him.
A copy of the Barington letter is attached to this press release.
About Barington Capital Group:
Barington Capital Group, L.P. is an investment firm that, through its affiliates, primarily invests in undervalued, small and mid-capitalization companies. Barington and its principals are experienced value-added investors who have taken active roles in assisting companies in creating or improving shareholder value. Barington represents a group of investors that owns more than 3 million shares of Class A Common Stock of Dillard's, Inc., constituting over 3.7% of the outstanding shares of the Company.
Barington Capital Group, L.P. 888 Seventh Avenue
New York, New York 10019 August 3, 2007 William T. Dillard, II
Chairman of the Board and Chief
Executive Officer
Dillard's, Inc. 1600 Cantrell Road
Little Rock, Arkansas 72201 Dear Mr. Dillard: Thank you for your letter. While we appreciate your offer to make Dillard's director of investor relations available to speak with us, our interest is to meet with you and members of your management team. As a steward of a publicly-traded company, we had expected that you would be receptive to meeting with one of your larger stockholders, especially one with substantial experience helping improve shareholder value as a long-term investor in a number of retail companies.
There is clearly room for improvement at Dillard's. As reported in Monday's New York Post, Dillard's "has historically lagged behind its peers by almost every retailing measure." Among other things, Dillard's suffers from sub-par operating margins(1) and sub-par same store sales growth(2) and trades at a valuation multiple that is considerably lower than the industry- average.(3) Furthermore, as noted in the July 15, 2007 research report of UBS Securities, the Company's Return on Invested Capital (ROIC) has been approximately 2 percentage points below its weighted average cost of capital. According to UBS, this is one of the main reasons the Company has typically traded at a lower multiple than its peers and implies that Dillard's is destroying value in its business.
While we strongly believe in the potential prospects of Dillard's, whose shares we believe are significantly undervalued, we hope you recognize that the status quo is not acceptable. We would therefore like to meet with you to discuss initiatives in areas such as inventory management, merchandising and cost containment that we believe the Company should implement to bridge these differences and substantially increase shareholder value. We would also like to discuss with you a number of measures to enhance the value of Dillard's real estate portfolio, including the conversion of certain properties into higher and better uses, the closure of unprofitable stores and the sale/leaseback of owned properties. Given the highly competitive nature of the retail industry, it is our belief that Dillard's needs to take advantage of every opportunity to improve its operations and realize its vast value potential.
As part owners of the Company and in light of our track record, we hope that you will reconsider our request. We would be happy to meet at a time and location that is most convenient for you.
Sincerely, /s/ James A. Mitarotonda James A. Mitarotonda
(1) Dillard's last twelve month earnings before interest, taxes,
depreciation, amortization and rent ("EBITDAR") margin is 9.0% versus
the industry average of 13.2%. Industry group comprised of Bon Ton
Stores Inc., Macy's, Inc., J.C. Penney Company, Inc., Nordstrom Inc.,
Kohl's Corp., Saks Inc., Stage Stores Inc. and Gottschalks Inc. (2) On average, Dillard's same store sales growth has lagged its
competitors by 3.9 percentage points per annum over the past 5 years. Dillard's has not posted an increase in annual same store sales since
1999. (3) Dillard's Adjusted Enterprise Value / EBITDAR is 5.6x versus the
industry average of 8.0x. Enterprise Value has been adjusted by
capitalizing rent expense at 8x. DATASOURCE: Barington Capital Group, L.P.
CONTACT: Somna Maraj of Edelman, +1-212-704-8175, for Barington Capital Group, L.P.
Web site: http://www.barington.com/
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