Dillard's, Inc. Reports Record Second Quarter Earnings per Share

Dillard's, Inc. Reports Record Second Quarter Earnings per Share

LITTLE ROCK, Ark.--(BUSINESS WIRE)-- Dillard's, Inc. (NYS: DDS) (the "Company" or "Dillard's") announced operating results for the 13 and 26 weeks ended August 3, 2013. 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 Company's Second Quarter Performance

  • A 25% increase in second quarter earnings per share compared to the prior year

  • A 1% increase in comparable store sales

  • Merchandise gross margin improvement of 10 basis points of sales


Second Quarter Results

Dillard's reported net income for the 13 weeks ended August 3, 2013 of $36.5 million, or $0.79 per share compared to net income of $31.0 million, or $0.63 per share, for the prior year second quarter.

Dillard's Chief Executive Officer, William T. Dillard, II, stated, "Following a strong start to the year, we made further progress in the second quarter. Positive comparable store sales and gross margin expansion combined with continued expense control enabled us to report another quarter of year over year improvement at Dillard's."

26 Week Results

Dillard's reported net income for the 26 weeks ended August 3, 2013 of $153.7 million, or $3.30 per share compared to net income of $126.0 million, or $2.53 per share, for the prior year 26-week period. Included in net income for the 26-week period ended August 3, 2013 is a net after-tax credit totaling $4.4 million ($0.09 per share) comprised of the following three items:

  • A $7.6 million after tax gain ($0.16 per share) related to the sale of an investment

  • A $1.0 million after tax credit ($0.02 per share) related to a pension adjustment

  • After-tax asset impairment and store closing charges of $4.2 million ($0.09 per share)

Excluding this credit, Dillard's would have reported net income of $149.3 million ($3.20 per share) for the 26-week period ended August 3, 2013, a 26% earnings per share increase over the prior year 26-week performance.

Net Sales

Net sales for the 13 weeks ended August 3, 2013 were $1.480 billion and $1.488 billion for the 13 weeks ended July 28, 2012. Net sales include the operations of the Company's construction business, CDI Contractors, LLC ("CDI").

Total merchandise sales (which exclude CDI) for the 13-week period ended August 3, 2013 were $1.459 billion and $1.456 billion for the 13-week period ended July 28, 2012. Total merchandise sales were unchanged on a percentage basis for the 13-week period ended August 3, 2013. Sales in comparable stores for the period increased 1%.

Sales trends were notably strong in ladies' accessories and lingerie followed by juniors' and children's apparel. Sales were weakest in the home and furniture category followed by ladies' apparel. Sales trends were strongest in the Central region, followed by the Western and Eastern regions, respectively.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) improved 10 basis points of sales to 34.4% for the 13 weeks ended August 3, 2013 compared to 34.3% for the prior year second quarter. Consolidated gross margin for the 13 weeks ended August 3, 2013 improved 40 basis points of sales to 34.0% from 33.6% during the prior year second quarter. Inventory increased 7% at August 3, 2013 compared to July 28, 2012.

Selling, General & Administrative Expenses

Selling, general and administrative expenses ("operating expenses") were $398.2 million (26.9% of sales) and $398.8 million (26.8%) during the 13 weeks ended August 3, 2013 and the 13 weeks ended July 28, 2012, respectively. Decreases in advertising expense and services purchased were partially offset by increases in selling payroll expense and insurance.

Store Information

During the second quarter of 2013, the Company closed its Randolph Mall location in Asheboro, North Carolina (60,000 square feet).

At August 3, 2013, the Company operated 282 Dillard's locations and 18 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at August 3, 2013 was 50.9 million.

Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In Millions, Except Per Share Data)

13 Weeks Ended

13 Weeks Ended

August 3, 2013

July 28, 2012

% of

% of

Amount

Net

Sales

Amount

Net

Sales

Net sales

$

1,479.9

100.0.

%

$

1,487.9

100.0.

%

Service charges and other income

36.9

2.5

37.3

2.5

1,516.8

102.5

1,525.2

102.5

Cost of sales

976.8

66.0

987.8

66.4

Selling, general and administrative expenses

398.2

26.9

398.8

26.8

Depreciation and amortization

64.2

4.3

64.2

4.3

Rentals

5.5

0.4

8.6

0.6

Interest and debt expense, net

16.3

1.1

17.7

1.2

Gain on disposal of assets

-

0.0

0.1

0.0

Income before income taxes and income on and equity in losses of joint ventures

55.8

3.8

48.2

3.2

Income taxes

19.7

17.3

Income on and equity in losses of joint ventures

0.4

0.0

0.1

0.0

Net income

$

36.5

2.5

%

$

31.0

2.1

%

Basic earnings per share

$

0.79

$

0.64

Diluted earnings per share

$

0.79

$

0.63

Basic weighted average shares

46.3

48.3

Diluted weighted average shares

46.3

49.2

Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In Millions, Except Per Share Data)

26 Weeks Ended

26 Weeks Ended

August 3, 2013

July 28, 2012

% of

% of

Amount

Net

Sales

Amount

Net

Sales

Net sales

$

3,029.0

100.0

%

$

3,037.2

100.0

%

Service charges and other income

77.2

2.5

73.9

2.4

3,106.2

102.5

3,111.1

102.4

Cost of sales

1,914.6

63.2

1,944.7

64.0

Selling, general and administrative expenses

788.4

26.0

792.0

26.1

Depreciation and amortization

129.4

4.3

128.2

4.2

Rentals

11.1

0.4

16.9

0.6

Interest and debt expense, net

32.6

1.1

35.1

1.2

Gain on disposal of assets

12.4

0.4

1.1

0.0

Asset impairment and store closing charges

6.5

0.2

-

0.0

Income before income taxes and income on and equity in losses of joint ventures

236.0

7.8

195.3

6.4

Income taxes

83.1

70.3

Income on and equity in losses of joint ventures

0.8

0.0

1.0

0.0

Net income

$

153.7

5.1

%

$

126.0

4.1

%

Basic earnings per share

$

3.30

$

2.58

Diluted earnings per share

$

3.30

$

2.53

Basic weighted average shares

46.6

48.8

Diluted weighted average shares

46.6

49.8

Dillard's, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In Millions)

August 3,

July 28,

2013

2012

Assets

Current Assets:

Cash and cash equivalents

$

113.7

$

162.5

Accounts receivable

26.2

33.4

Merchandise inventories

1,459.3

1,362.1

Other current assets

50.1

44.6

Total current assets

1,649.3

1,602.6

Property and equipment, net

2,198.7

2,388.1

Other assets

259.5

270.8

Total Assets

$

4,107.5

$

4,261.5

Liabilities and Stockholders' Equity

Current Liabilities:

Trade accounts payable and accrued expenses

$

713.1

$

699.0

Other short term borrowings

-

24.0

Current portion of long-term debt and capital leases

0.9

78.2

Federal and state income taxes including current deferred taxes

83.5

74.3

Total current liabilities

797.5

875.5

Long-term debt and capital leases

621.9

622.8

Other liabilities

229.2

246.7

Deferred income taxes

248.0

295.0

Subordinated debentures

200.0

200.0

Stockholders' equity

2,010.9

2,021.5

Total Liabilities and Stockholders' Equity

$

4,107.5

$

4,261.5

Dillard's, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In Millions)

26 Weeks

Ended

August 3,


2013

26 Weeks

Ended

July 28,


2012

Operating activities:

Net income

$

153.7

$

126.0

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property and deferred financing cost

130.3

129.2

Gain on disposal of assets

(12.4

)

(1.1

)

Asset impairment and store closing charges

6.5

-

Excess tax benefits from share-based compensation

-

(2.0

)

Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable

5.3

(4.7

)

Increase in merchandise inventories

(164.7

)

(58.1

)

Increase in other current assets

(7.5

)

(9.9

)

Decrease in other assets

1.3

7.8

Increase in trade accounts payable and accrued expenses and other liabilities

54.9

44.4

Decrease in income taxes payable

(35.7

)

(78.8

)

Net cash provided by operating activities

131.7

152.8

Investing activities:

Purchase of property and equipment

(40.9

)

(86.7

)

Proceeds from disposal of assets

18.3

7.8

Net cash used in investing activities

(22.6

)

(78.9

)

Financing activities:

Principal payments on long-term debt and capital lease

obligations

(1.2

)

(2.0

)

Cash dividends paid

(2.3

)

(5.0

)

Purchase of treasury stock

(114.7

)

(153.1

)

Increase in short term borrowings

-

24.0

Excess tax benefits from share-based compensation

-

2.0

Proceeds from stock issuance

-

3.7

Issuance cost of line of credit

(1.3

)

(5.3

)

Net cash used in financing activities

(119.5

)

(135.7

)

Decrease in cash and cash equivalents

(10.4

)

(61.8

)

Cash and cash equivalents, beginning of period

124.1

224.3

Cash and cash equivalents, end of period

$

113.7