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

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

Doubles last year's record performance excluding items


LITTLE ROCK, Ark.--(BUSINESS WIRE)-- Dillard's, Inc. (NYS: DDS) (the "Company" or "Dillard's") announced operating results for the 13 weeks ended October 27, 2012. 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 performance included:

  • A 100% increase in third quarter earnings per share compared to the prior year (excluding certain items described below)
  • A 5% increase in comparable store sales for the third quarter
  • Third quarter merchandise gross margin improvement of 40 basis points of sales
  • Operating expense leverage of 140 basis points of sales for the third quarter
  • Cash flow from operations of $219.9 million compared to $135.6 million for the year to date period

Third Quarter Results
Dillard's reported pretax income for the 13 weeks ended October 27, 2012 of $72.7 million, an 84% increase over the pretax income for the 13 weeks ended October 29, 2011 of $39.5 million.

Dillard's reported net income for the 13 weeks ended October 27, 2012 of $48.5 million, or $1.01 per share. Included in net income are the following items:

  • a $0.7 million after tax gain ($0.01 per share) related to the sale of two former retail store locations
  • approximately $1.7 million ($0.04 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward

Excluding these items, Dillard's would have reported $46.1 million ($0.96 per share) for the 13 weeks ended October 27, 2012.

Dillard's reported net income for the prior year third quarter, the 13 weeks ended October 29, 2011, of $228.2 million, or $4.31 per share. Included in net income for the prior year third quarter is a net after-tax credit totaling $202.5 million ($3.83 per share) comprised of the following items:

  • approximately $201.6 million ($3.81 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward
  • a $0.9 million after tax gain ($0.02 per share) related to the sale of two former retail store locations

Excluding this net after-tax credit, the Company would have recorded net income of $25.7 million ($0.48 per share) for the prior year third quarter. Excluding all non-routine items, Dillard's earnings per share for the 13-weeks ended October 27, 2012 increased 100% compared to the prior year third quarter.

Dillard's Chief Executive Officer, William T. Dillard, II, stated, "Driven by a strong 5% sales increase, we were able to double our earnings per share for the third quarter on top of a record performance last year (after non-routine items). We are pleased with our gross margin improvement and expense control during the quarter as well as with our ending inventory level. We are entering the holiday season confidently based on these strong results and we look forward to serving our customers at the highest possible level in the coming weeks."

39-Week Results
Dillard's reported pretax income for the 39 weeks ended October 27, 2012 of $268.0 million, a 49% increase over the pretax income for the 39 weeks ended October 29, 2011 of $179.5 million.

Dillard's reported net income for the 39 weeks ended October 27, 2012 of $174.5 million, or $3.55 per share. Included in net income are the following items:

  • a $0.7 million after tax gain ($0.01 per share) related to the sale of two former retail store locations
  • approximately $1.7 million ($0.03 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward

Excluding these items, Dillard's would have reported $172.1 million ($3.51 per share) for the 39 weeks ended October 27, 2012.

Dillard's reported net income for the prior year 39-week period ended October 29, 2011, of $322.4 million, or $5.80 per share. Included in net income for the prior year 39-week period is a net after-tax credit totaling $205.8 million ($3.90 per share) comprised of the following items:

  • approximately $201.6 million ($3.81 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward
  • a $0.9 million after tax gain ($0.02 per share) related to the sale of two former retail store locations
  • a $2.7 million after tax gain ($0.05 per share) related to a distribution from a mall joint venture
  • a $1.4 million after tax gain ($0.03 per share) relating to the sale of an interest in a mall joint venture
  • asset impairment and store closing charges of $0.8 million after-tax ($0.01 per share)

Excluding this net after-tax credit, the Company would have recorded net income of $116.6 million ($1.90 per share) for the prior year 39-week period. Excluding all non-routine items, Dillard's earnings per share for the 39 weeks ended October 27, 2012 increased 85% compared to the prior year 39-week period.

Net Sales - 13 Weeks
Net sales for the 13 weeks ended October 27, 2012 were $1.450 billion compared to net sales for the 13 weeks ended October 29, 2011 of $1.383 billion. 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 October 27, 2012 were $1.425 billion compared to $1.366 billion for the 13-week period ended October 29, 2011. Total merchandise sales increased 4% during the third quarter. Sales in comparable stores increased 5%.

Sales trends were strongest in men's apparel and accessories, ladies accessories and lingerie and shoes. Home and furniture was the weakest performing category. Sales trends were strongest in the Central region, followed by the Western and Eastern regions, respectively.

Net Sales - 39 Weeks
Net sales for the 39 weeks ended October 27, 2012 were $4.487 billion compared to net sales for the 39 weeks ended October 29, 2011 of $4.294 billion. Total merchandise sales for the 39-week period ended October 27, 2012 were $4.403 billion compared to $4.247 billion for the 39-week period ended October 29, 2011. Total merchandise sales increased 4% during the 39-week period. Sales in comparable stores increased 4%.

Gross Margin/Inventory
Gross margin from retail operations (which excludes CDI) was 37.1% (of sales) for the 13 weeks ended October 27, 2012 compared to 36.7% for the prior year third quarter. Consolidated gross margin for the 13 weeks ended October 27, 2012 was 36.6% compared to 36.3% during the prior year third quarter. Inventory in comparable stores decreased 1% at October 27, 2012 compared to October 29, 2011.

Advertising, Selling, Administrative and General Expenses
Advertising, selling, administrative and general expenses ("operating expenses") decreased approximately 140 basis points of sales during the 13 weeks ended October 27, 2012 compared to the 13 weeks ended October 29, 2011. Operating expenses were $404.6 million (27.9% of sales) and $404.8 million (29.3% of sales), respectively.

During the third quarter, cost savings in advertising were mostly offset by increases in payroll and services purchased.

Store Information
During the third quarter of 2012, the Company closed its Southpark Mall location in Colonial Heights, Virginia (85,000 square feet).

At October 27, 2012, the Company operated 284 Dillard's locations and 18 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at October 27, 2012 was 52.3 million.

 
 
 

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

 
    13-Week Period Ended
 

October 27, 2012

 

October 29, 2011

   
% of % of

Amount

Net

Sales

Amount

Net

Sales

 
Net sales $ 1,449.6

100.0

%

$ 1,382.6

100.0

%

Service charges and other income   36.7 2.5   35.0   2.6
1,486.3 102.5 1,417.6 102.6
 
Cost of sales 919.6 63.4 881.1 63.7
Advertising, selling, administrative and general expenses 404.6 27.9 404.8 29.3
Depreciation and amortization 65.8 4.5 64.7 4.7
Rentals 7.6 0.5 11.2 0.8
Interest and debt expense, net 17.0 1.2 17.8 1.3
Gain on disposal of assets   1.0 0.0   1.5   0.1

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

72.7 5.0 39.5 2.9
Income taxes (benefit) 24.2 (188.4 )
Income on and equity in losses of joint ventures   0.0 0.0     0.3   0.0  
Net income $ 48.5 3.3 % $ 228.2   16.5 %
 
Basic earnings per share $ 1.03 $ 4.38  
Diluted earnings per share $ 1.01 $ 4.31  
Basic weighted average shares   47.1   52.1  
Diluted weighted average shares   48.1   53.0  

 
 
 

Dillard's, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In Millions, Except Per Share Data)

 
  39-Week Period Ended
 

October 27, 2012

 

October 29, 2011

   
% of % of

Amount

Net

Sales

Amount

Net

Sales

 
Net sales $ 4,486.9

100.0

%

$ 4,293.6

100.0

%

Service charges and other income   110.6 2.5   100.1   2.3
4,597.5 102.5 4,393.7 102.3
 
Cost of sales 2,864.3 63.8 2,744.6 63.9
Advertising, selling, administrative and general expenses 1,196.7 26.7 1,190.1 27.7
Depreciation and amortization 194.1 4.3 192.9 4.5
Rentals 24.5 0.5 34.8 0.8
Interest and debt expense, net 52.1 1.2 54.4 1.3
Gain on disposal of assets 2.2 0.0 3.8 0.1
Asset impairment and store closing charges   - -   1.2   0.0

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

268.0 6.0 179.5 4.2
Income taxes (benefit) 94.5 (138.7 )
Income on and equity in losses of joint ventures   1.0 0.0     4.2   0.1  
Net income $ 174.5 3.9 % $ 322.4   7.5 %
 
Basic earnings per share $ 3.62 $ 5.90  
Diluted earnings per share $ 3.55 $ 5.80  
Basic weighted average shares   48.3   54.6  
Diluted weighted average shares   49.2   55.6  

 
 
 
Dillard's, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In Millions)
   
October 27, October 29,
2012 2011
Assets
Current Assets:
Cash and cash equivalents $ 124.8 $ 106.4
Restricted cash - 24.9
Accounts receivable 30.8 20.3
Merchandise inventories 1,722.4 1,756.5
Other current assets   66.6   63.1
Total current assets 1,944.6 1,971.2
 
Property and equipment, net 2,345.9 2,476.3
Other assets   268.9   269.6
 
Total Assets $ 4,559.4 $ 4,717.1
 
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and accrued expenses $ 1,028.2 $ 1,028.6
Other short-term borrowings 27.0 142.0
Current portion of long-term debt and capital leases 2.4 59.5

Federal and state income taxes including current deferred taxes

  80.0   68.9
Total current liabilities 1,137.6 1,299.0
 
Long-term debt and capital leases 622.5 644.5
Other liabilities 247.6 206.5
Deferred income taxes 282.3 333.1
Subordinated debentures 200.0 200.0
Stockholders' equity   2,069.4   2,034.0
 
Total Liabilities and Stockholders' Equity $ 4,559.4 $ 4,717.1

 
 
Dillard's, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In Millions)

 
  39-week Period Ended
    October 27,

2012

  October 29,

2011

Operating activities:  
Net income $ 174.5 $ 322.4

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

Depreciation and amortization of property and deferred financing cost

195.5

194.3

Gain on disposal of assets (2.2 ) (3.8 )
Gain on repurchase of debt - (0.2 )
Asset impairment and store closing charges - 1.2
Excess tax benefits from share-based compensation (2.4 ) (10.2 )
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable

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