Earnings Release
Dillard’s, Inc. Reports Second Quarter Results
Dillard’s, Inc. (DDS) (the "Company" or "Dillard’s") announced
operating results for the 13 and 26 weeks ended July 30, 2016. 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."
Second Quarter Results
Dillard’s reported net income for the 13 weeks ended July 30, 2016 of
$12.1 million, or $0.35 per share, compared to net income of $29.9
million, or $0.75 per share, for the prior year second quarter.
Net sales for the 13 weeks ended July 30, 2016 and the 13 weeks ended
August 1, 2015 were $1.452 billion and $1.514 billion, respectively. 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 July 30, 2016 were $1.403 billion and $1.468 billion for the
13-week period ended August 1, 2015. Total merchandise sales decreased
4% for the 13-week period ended July 30, 2016. Sales in comparable
stores for the period decreased 5%. Although all sales categories
declined, stronger performing categories were ladies’ apparel and men’s
apparel and accessories. Sales of home and furniture were significantly
weaker. Sales trends were strongest in the Eastern region, followed by
the Western and Central regions, respectively.
Dillard’s Chief Executive Officer, William T. Dillard, II, stated, "The
challenges facing apparel retailers continued through the second
quarter, and our poor results reflect this. In spite of weak sales, we
returned $57 million to shareholders through stock repurchase and
dividends. While we continue to deal with weakness in the fashion retail
industry, we believe we are in good financial shape for the long term."
26 Week Results
Dillard’s reported net income for the 26 weeks ended July 30, 2016 of
$89.5 million, or $2.55 per share, compared to net income of $139.5
million, or $3.43 per share, for the prior year 26-week period.
Net sales for the 26 weeks ended July 30, 2016 and the 26 weeks ended
August 1, 2015 were $2.956 billion and $3.087 billion, respectively.
Total merchandise sales for the 26-week period ended July 30, 2016 were
$2.853 billion and $2.986 billion for the 26-week period ended August 1,
2015. Total merchandise sales decreased 4% for the 26-week period ended
July 30, 2016. Sales in comparable stores for the period decreased 5%.
Gross Margin/Inventory
Gross margin from retail operations (which excludes CDI) declined 92
basis points of sales for the 13 weeks ended July 30, 2016 compared to
the prior year second quarter. Consolidated gross margin for the 13
weeks ended July 30, 2016 declined 99 basis points of sales compared to
the prior year second quarter. Inventory increased 1% at July 30, 2016
compared to August 1, 2015.
Selling, General & Administrative Expenses
Selling, general and administrative expenses ("operating expenses") were
$395.0 million (27.2% of sales) and $404.3 million (26.7% of sales)
during the 13 weeks ended July 30, 2016 and August 1, 2015,
respectively. Operating expenses from retail operations declined $9.2
million during the quarter to $393.8 million (28.1%) from $403.0 million
(27.5%) but increased 60 basis points of sales due to lack of leverage.
The expense decline was attributable to decreases in supplies,
advertising, services purchased, utilities and payroll expense partially
offset by increased insurance expense.
Share Repurchase
During the 13 weeks ended July 30, 2016, the Company purchased $54.1
million (0.9 million shares) of Class A Common Stock under its $500
million share repurchase program. During the year-to-date period ended
July 30, 2016, the Company purchased $112.5 million (1.6 million shares)
under the program. As of July 30, 2016, authorization of $387.5 million
remained under the program. Total shares outstanding (Class A and Class
B Common Stock) at July 30, 2016 and August 1, 2015 were 34.3 million
and 39.4 million, respectively.
Store Information
The Company has closed its clearance centers at South Towne Center in
Sandy, Utah (100,000 square feet) and Plaza Central, formerly Six Flags
Mall, in Arlington, Texas (85,000 square feet). The Company operates 272
Dillard’s locations and 22 clearance centers spanning 29 states and an
Internet store at www.dillards.com.
Total square footage is 49.6 million square feet.
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In Millions, Except Per Share Data)
13 Weeks Ended
26 Weeks Ended
July 30, 2016
August 1, 2015
July 30, 2016
August 1, 2015
Amount
% of
Amount
% of
Amount
% of
Amount
% of
Net sales
$
1,452.4
100.0 %
$ 1,513.8
100.0 %
$
2,955.7
100.0 %
$ 3,087.3
100.0 %
Service charges and other income
36.3
2.5
37.0
2.4
71.8
2.4
77.0
2.5
1,488.7
102.5
1,550.8
102.4
3,027.5
102.4
3,164.3
102.5
Cost of sales
993.4
68.4
1,020.3
67.4
1,931.9
65.4
1,980.8
64.2
Selling, general and administrative expenses
395.0
27.2
404.3
26.7
793.5
26.8
807.8
26.2
Depreciation and amortization
60.6
4.2
60.5
4.0
121.2
4.1
121.7
3.9
Rentals
5.9
0.4
5.7
0.4
11.9
0.4
11.5
0.4
Interest and debt expense, net
16.0
1.1
14.8
1.0
31.7
1.1
30.0
1.0
Gain on disposal of assets
0.8
0.1
0.1
0.0
0.9
0.0
0.1
0.0
Income before income taxes and income on and equity in losses of
18.6
1.3
45.3
3.0
138.2
4.7
212.6
6.9
Income taxes
6.5
15.7
48.7
73.7
Income on and equity in losses of joint ventures
--
0.0
0.3
0.0
--
0.0
0.6
0.0
Net income
$
12.1
0.8 %
$
29.9
2.0 %
$
89.5
3.0 %
$
139.5
4.5 %
Basic and diluted earnings per share
$
0.35
$
0.75
$
2.55
$
3.43
Basic and diluted weighted average shares
34.5
40.1
35.1
40.6
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
July 30, 2016
August 1, 2015
Cash and cash equivalents
$
128.3
$
175.1
Accounts receivable
41.2
48.8
Merchandise inventories
1,499.3
1,477.2
Federal and state income taxes
22.0
15.1
Other current assets
45.9
47.8
Total current assets
1,736.7
1,764.0
Property and equipment, net
1,851.8
1,998.9
Total Assets
$ 3,843.0
$
4,015.6
Liabilities and Stockholders’ Equity
Trade accounts payable and accrued expenses
$
760.6
$
733.8
Current portion of long-term debt and capital leases
3.2
7.7
Total current liabilities
763.8
741.5
Long-term debt and capital leases
617.7
620.6
Other liabilities
242.1
252.0
Deferred income taxes
250.7
253.4
Subordinated debentures
200.0
200.0
Stockholders’ equity
1,768.7
1,948.1
Total Liabilities and Stockholders’ Equity
$ 3,843.0
$
4,015.6
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
July 30, 2016
August 1, 2015
Adjustments to reconcile net income to net cash provided by
Depreciation and amortization of property and other deferred cost
122.4
122.6
Gain on disposal of assets
(0.9 )
(0.1 )
Changes in operating assets and liabilities:
Decrease in accounts receivable
5.9
7.7
Increase in merchandise inventories
(124.8 )
(102.8 )
Increase in other current assets
(0.7 )
(0.5 )
Decrease (increase) in other assets
1.0
(0.1 )
Increase in trade accounts payable and accrued expenses and other
77.1
2.2
Decrease in income taxes
(82.8 )
(106.6 )
Net cash provided by operating activities
86.7
61.9
Purchase of property and equipment
(42.0 )
(87.0 )
Proceeds from disposal of assets
1.0
0.2
Decrease in restricted cash
--
7.3
Net cash used in investing activities
(41.0 )
(79.5 )
Principal payments on long-term debt and capital lease obligations
(2.8 )
(0.4 )
Cash dividends paid
(5.0 )
(4.9 )
Purchase of treasury stock
(112.5 )
(202.9 )
Issuance cost of line of credit
--
(2.9 )
Net cash used in financing activities
(120.3 )
(211.1 )
Decrease in cash and cash equivalents
(74.6 )
(228.7 )
Cash and cash equivalents, beginning of period
202.9
403.8
Cash and cash equivalents, end of period
$
128.3
$
175.1
Accrued capital expenditures
$
3.6
$
7.5
Capital lease transactions
--
9.1
Estimates for 2016
The Company is providing the following estimates for certain financial
statement items for the fiscal year ending January 28, 2017 based upon
current conditions. Actual results may differ significantly from these
estimates as conditions and factors change - See "Forward-Looking
Information."
Depreciation and amortization
$
245
$
250
Interest and debt expense, net
61
61
Capital expenditures
120
166
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 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 January 30, 2016,
contain other information on factors that may affect financial results
or cause actual results to differ materially from forward-looking
statements.
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SOURCE: Dillard’s, Inc.
Julie Johnson Bull, 501-376-5965
