Dillard's ( DDS) said Wednesday that it posted a narrower second-quarter loss, but results fell well short of analysts' expectations.

The family-run company lost $26 million, or 31 cents a share, in the three months ended July 31, vs. a loss of $50.4 million, or 60 cents a share, in the year-ago period. Total revenue was $1.67 billion, down 3% from last year's $1.72 billion. Same-store sales dropped 3%.

Eight analysts polled by Thomson First Call were expecting a loss of 16 cents a share on sales of $1.77 billion. It is unsurprising that Dillard's results can diverge widely from analysts' estimates, however, because the company does not provide its own quarterly estimates and is reluctant to communicate with Wall Street .

Dillard's said gross margin in the quarter improved 30 basis points, helped by improved merchandise markup levels and more markdowns. Advertising, selling, administrative and general expenses dropped $7.7 million to $500.1 million compared with the prior-year quarter.

The company noted that it continues to improve its merchandise mix, in part by offering an increased amount of exclusive brands. In the just-completed quarter, exclusive brand merchandise was 22.1% of storewide merchandise vs. 18.8% in the same period last year.

Meanwhile, the company said 14 of its 43 stores in Florida were closed on Friday, Aug. 13, because of Hurricane Charley. One store remains closed because of minimal roof and water damage.

On Aug. 8, Dillard's agreed to sell its private-label credit card business to General Electric's ( GE) consumer finance division for $1.25 billion. The two companies plan to enter into at least a 10-year marketing and service alliance. Dillard's believes income from the alliance could be comparable to the earnings currently generated by its private-label credit card division.

Dillard's plans to use the proceeds to reduce debt and buy back shares of its common stock. It expects the transaction, expected to close in the current third quarter, to be be accretive to full-year 2005 earnings.

The Little Rock, Ark.-based company operates 329 stores in 29 states. Shares of Dillard's closed Tuesday at $23.08, just off their 52-week high of $24.98 reached on Aug. 9. The shares are up about 28% year over year.

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