Dillard’s, Inc. Reports First Quarter Results

LITTLE ROCK, Ark.–(BUSINESS WIRE)–Dillard’s, Inc. (NYSE: DDS) (the “Company” or “Dillard’s”) announced
operating results for the 13 weeks ended May 4, 2019. This release
contains certain forward-looking statements. Please refer to the
Company’s cautionary statements regarding forward-looking information
included below under “Forward-Looking Information.”

Highlights of the First Quarter:

  • Earnings per share of $2.99 compared to $2.89 for the prior year
    first quarter
  • Net Income of $78.6 million compared to $80.5 million
  • Merchandise sales:

    • Total sales increased 1% on top of a 2% increase in the prior
      year first quarter
    • Comparable sales were flat on top of a 2% increase
  • Retail gross margin declined 141 basis points of sales
  • Retail operating expenses decreased 23 basis points of sales
  • Share repurchase of $17.4 million (0.2 million shares)

First Quarter Results

Dillard’s reported net income for the 13 weeks ended May 4, 2019 of
$78.6 million, or $2.99 per share, compared to net income of $80.5
million, or $2.89 per share, for the prior year first quarter. Included
in net income for the 13 weeks ended May 4, 2019 is a pretax gain of
$7.4 million ($5.8 million after tax or $0.22 per share) related to the
sale of two stores.

Net sales for the 13 weeks ended May 4, 2019 were $1.465 billion and
$1.458 billion for the 13 weeks ended May 5, 2018. Net sales includes
the operations of the Company’s construction business, CDI Contractors,
LLC (“CDI”).

Total merchandise sales (which excludes CDI) for the 13-week period
ended May 4, 2019 were $1.421 billion and $1.411 billion for the 13-week
period ended May 5, 2018. Total merchandise sales increased 1% for the
13-week period ended May 4, 2019. Sales in comparable stores for the
period remained unchanged on a percentage basis. In relation to the
total Company sales performance, sales were strongest in juniors’ and
children’s apparel followed by home and furniture and men’s apparel and
accessories. Below-trend performances were noted in shoes and cosmetics.
Sales were strongest in the Eastern region followed by the Central and
Western regions, respectively.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) declined 141
basis points of sales for the 13 weeks ended May 4, 2019 compared to the
prior year first quarter primarily due to increased markdowns.
Consolidated gross margin for the 13 weeks ended May 4, 2019 declined
134 basis points of sales compared to the prior year first quarter.
Inventory increased 3% at May 4, 2019 compared to May 5, 2018.

Selling, General & Administrative Expenses

Retail selling, general and administrative expenses (“operating
expenses”) decreased 23 basis points of sales for the 13 weeks ended
May 4, 2019 compared to the 13 weeks ended May 5, 2018. Retail operating
expenses were $403.3 million (28.4% of sales) and $404.0 million (28.6%
of sales) during the 13 weeks ended May 4, 2019 and May 5, 2018,
respectively. Consolidated operating expenses were $405.1 million (27.6%
of sales) and $406.0 million (27.8% of sales) during the 13 weeks ended
May 4, 2019 and May 5, 2018, respectively.

Share Repurchase

During the 13 weeks ended May 4, 2019, the Company purchased $17.4
million (approximately 0.2 million shares) of Class A Common Stock under
its $500 million share repurchase program. Total shares outstanding
(Class A and Class B Common Stock) at May 4, 2019 and May 5, 2018 were
26.1 million and 27.6 million, respectively. At May 4, 2019, $389
million authorization remained under the share repurchase program.

Store Information

Dillard’s operates 261 Dillard’s locations and 28 clearance centers
spanning 29 states and an Internet store at www.dillards.com.
Total store square footage is 48.7 million.

Lease Accounting

During the first quarter of fiscal 2019, the Company adopted Accounting
Standards Update (“ASU”) No. 2016-02, Leases (Topic 842):
Amendments to the FASB Accounting Standards Codification (“ASU 2016-02”)
using
the optional effective date transition method. Under this method, the
Company applied the new standard as of February 3, 2019 with no
adjustments to the comparative period presented. The condensed
consolidated balance sheet at May 4, 2019 reflects the impact of
recording operating lease assets and operating lease liabilities for
existing operating leases. At May 4, 2019, the operating lease assets
totaled $52.8 million, and the operating lease liabilities totaled $52.0
million. The impact of the adoption was immaterial to the condensed
consolidated statements of income for the 13 weeks ended May 4, 2019.

 
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In Millions, Except Per Share Data)
               
13 Weeks Ended
May 4, 2019 May 5, 2018
Amount    

% of

Net

Sales

Amount    

% of

Net

Sales

Net sales $ 1,465.4 100.0 % $ 1,458.2 100.0 %
Service charges and other income 32.5   2.2 33.2   2.3
1,497.9 102.2 1,491.4 102.3
 
Cost of sales 927.8 63.3 903.7 62.0
Selling, general and administrative expenses 405.1 27.6 406.0 27.8
Depreciation and amortization 52.4 3.6 56.0 3.8
Rentals 6.1 0.4 6.5 0.4
Interest and debt expense, net 11.2 0.8 14.0 1.0
Other expense 1.9 0.1 1.9 0.1
Gain (loss) on disposal of assets 7.4   0.5 (0.1 ) 0.0
Income before income taxes 100.8 6.9 103.2 7.1
Income taxes 22.2   22.7  
Net income $ 78.6   5.4 % $ 80.5   5.5 %
 
Basic and diluted earnings per share $ 2.99 $ 2.89
Basic and diluted weighted average shares 26.3 27.8
 
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In Millions)
       
May 4, 2019 May 5, 2018
Assets
Current Assets:
Cash and cash equivalents $ 139.8 $ 164.1
Restricted cash 8.7 1.9
Accounts receivable 47.9 43.1
Merchandise inventories 1,832.6 1,780.8
Other current assets 66.0   55.5
Total current assets 2,095.0 2,045.4
 
Property and equipment, net 1,551.8 1,662.9
Operating lease assets 52.8
Other assets 79.4     73.2
 
Total Assets $ 3,779.0   $ 3,781.5
 
Liabilities and Stockholders’ Equity
Current Liabilities:
Trade accounts payable and accrued expenses $ 1,134.3 $ 1,052.3
Current portion of long-term debt and finance leases 1.0 162.1
Current portion of operating lease liabilities 15.1
Federal and state income taxes 29.0   63.9
Total current liabilities 1,179.4 1,278.3
 
Long-term debt and finance leases 367.2 368.0
Long-term operating lease liabilities 36.9
Other liabilities 241.0 240.5
Deferred income taxes 17.6 12.6
Subordinated debentures 200.0 200.0
Stockholders’ equity 1,736.9   1,682.1
 
Total Liabilities and Stockholders’ Equity $ 3,779.0   $ 3,781.5
 
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Millions)
       
13 Weeks Ended
May 4, 2019 May 5, 2018
Operating activities:
Net income $ 78.6 $ 80.5
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and other deferred cost 52.5 56.5
(Gain) loss on disposal of assets (7.4 ) 0.1
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 2.0 (4.6 )
Increase in merchandise inventories (304.2 ) (317.2 )
Decrease (increase) in other current assets 2.7 (5.2 )
Increase in other assets (2.1 ) (1.4 )
Increase in trade accounts payable and accrued expenses and other
liabilities
204.3 224.4
Increase in income taxes payable 21.9   22.3  
Net cash provided by operating activities 48.3   55.4  
 
Investing activities:
Purchase of property and equipment (18.7 ) (39.2 )
Proceeds from disposal of assets 13.4 1.9
Distribution from joint venture 0.2   0.8  
Net cash used in investing activities (5.1 ) (36.5 )
 
Financing activities:
Principal payments on long-term debt and finance lease liabilities (0.2 ) (0.3 )
Cash dividends paid (2.6 ) (2.8 )
Purchase of treasury stock (15.4 ) (36.8 )
Net cash used in financing activities (18.2 ) (39.9 )
 
Increase (decrease) in cash, cash equivalents and restricted cash 25.0 (21.0 )
Cash, cash equivalents and restricted cash, beginning of period 123.5   187.0  
Cash, cash equivalents and restricted cash, end of period $ 148.5   $ 166.0  
 
Non-cash transactions:
Accrued capital expenditures $ 6.7 $ 8.1
Accrued purchases of treasury stock 2.0
Lease assets obtained in exchange for new operating lease liabilities 57.0
 

Estimates for 2019

The Company is providing the following estimates for certain financial
statement items for the fiscal year ending February 1, 2020 based upon
current conditions. Actual results may differ significantly from these
estimates as conditions and factors change – See “Forward-Looking
Information.”

 
In Millions
2019   2018
Estimated Actual
Depreciation and amortization $ 225 $ 224
Rentals 29 29
Interest and debt expense, net 46 53
Capital expenditures 140 137
 

Forward-Looking Information

The foregoing contains certain “forward-looking statements” within the
definition of federal securities laws. The following are or may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995: statements including (a) words
such as “may,” “will,” “could,” “believe,” “expect,” “future,”
“potential,” “anticipate,” “intend,” “plan,” “estimate,” “continue,” or
the negative or other variations thereof, and (b) statements regarding
matters that are not historical facts. The Company cautions that
forward-looking statements contained in this report are based on
estimates, projections, beliefs and assumptions of management and
information available to management at the time of such statements and
are not guarantees of future performance. The Company disclaims any
obligation to update or revise any forward-looking statements based on
the occurrence of future events, the receipt of new information, or
otherwise. Forward-looking statements of the Company involve risks and
uncertainties and are subject to change based on various important
factors. Actual future performance, outcomes and results may differ
materially from those expressed in forward-looking statements made by
the Company and its management as a result of a number of risks,
uncertainties and assumptions. Representative examples of those factors
include (without limitation) general retail industry conditions and
macro-economic conditions; economic and weather conditions for regions
in which the Company’s stores are located and the effect of these
factors on the buying patterns of the Company’s customers, including the
effect of changes in prices and availability of oil and natural gas; the
availability of consumer credit; the impact of competitive pressures in
the department store industry and other retail channels including
specialty, off-price, discount and Internet retailers; changes in
consumer spending patterns, debt levels and their ability to meet credit
obligations; changes in tax legislation; changes in legislation,
affecting such matters as the cost of employee benefits or credit card
income; adequate and stable availability and pricing of materials,
production facilities and labor from which the Company sources its
merchandise; changes in operating expenses, including employee wages,
commission structures and related benefits; system failures or data
security breaches; possible future acquisitions of store properties from
other department store operators; the continued availability of
financing in amounts and at the terms necessary to support the Company’s
future business; fluctuations in LIBOR and other base borrowing rates;
potential disruption from terrorist activity and the effect on ongoing
consumer confidence; epidemic, pandemic or other public health issues;
potential disruption of international trade and supply chain
efficiencies; world conflict and the possible impact on consumer
spending patterns and other economic and demographic changes of similar
or dissimilar nature. The Company’s filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for the
fiscal year ended February 2, 2019, contain other information on factors
that may affect financial results or cause actual results to differ
materially from forward-looking statements.

Contacts

Dillard’s, Inc.
Julie Johnson Guymon
501-376-5965
julie.bull@dillards.com

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