FLYING BLIND
Dillard’s Inc., a regional department store chain, has historically lagged behind its peers by almost every retailing measure, from same-store sales to merchandise margins.
That hasn’t stopped the Dillard family – which controls nearly all of the Class B voting shares and thus the right to elect two-thirds of the 12-member board – from enjoying corporate perks that would seem more appropriate for a larger, better-performing company.
Five corporate jets, including a Gulfstream V, are registered to Dillard’s or a subsidiary, giving it one of the fattest aircraft fleets in the industry, according to Federal Aviation Records. Though Dillard’s refers in federal filings to company-owned aircraft, it does not make public the number of planes, their make or model.
By contrast, Macy’s, which is more than double the size of Dillard’s in terms of number of stores and revenue, has three planes. Neiman Marcus, another major retailer, though smaller than Dillard’s, does not own any planes.
Dillard’s, through a person close to the company, said that it needs the planes to visit its 328 stores, which are often in rural towns. With its headquarters in Little Rock, Ark., Dillard’s executives have less access to commercial flights than do executives of other big retailers, this person said.
Dillard’s spokeswoman Julie Bull declined to comment.
Investors are increasingly impatient with such explanations, arguing that, at the least, Dillard’s should disclose more about the use and cost of the planes in its Securities and Exchange Commission filings.
“Five planes seems excessive,” said James Mitarotonda, whose Barington Capital Group has taken a 3 percent stake in Dillard’s with the hope of shaking up management.
Dillard’s proxy statement gives a brief explanation for plane ownership, explaining that the “benefit increases the level of safety and security for the executive officers as well as allowing them to make better use of their time by being able to travel more efficiently.”
Nordstrom’s proxy provides much more detail, explaining that it paid $724,510 last year to lease a Challenger 601 for 229 hours.Nordstrom also owns two planes, a Challenger 601 and Challenger 300, which it, in turn, leases out.
According to Conklin & de Decker, an aircraft-consulting firm, Dillard’s pays handsomely to operate its fleet. The Gulfstream V, which can seat 13 passengers and fly over 7,200 miles without refueling, carries a variable cost of $3,636 per hour and a fixed cost of as much as $1.2 million. Variable costs include fuel, maintenance and landing fees. Fixed costs cover pilot salaries and insurance.
Shareholders would care less about how Dillard’s spent its money if the company were performing up to par. According to UBS, Dillard’s merchandise margins lag its peers by 600 basis points, or one-hundredths of a percentage point, and inventory management is sluggish.