Dillard’s Inc. reported comparable store sales decreased 24 percent in the third quarter, but earnings vaulted to $31.9 million, or $1.43 per share, from $5.5 million, or 22 cents, for the prior-year third quarter

Dillard’s CEO, William T. Dillard, II, stated, “We have worked hard on inventory and expense control in unpredictable conditions throughout the pandemic. We achieved a 249 basis point gross margin improvement for the third quarter with ending inventory down 22 percent. Additionally, we cut expenses $100 million. As we enter this holiday season, one thing we can predict is the dedication of our associates and their exceptional service to our customers.”

Included in net income for the 13 weeks ended October 31, 2020, is a $2.2 million pre-tax loss ($1.4 million after-tax, or $0.06 per share) primarily related to the sale of store property. The company expects to be in a net operating loss position for the fiscal year. The CARES Act, signed into law on March 27, 2020, allows for net operating loss carryback to years in which the federal tax rate was 35 percent. Included in net income for the 13 weeks ended October 31, 2020, is a net tax benefit related to this provision.

Included in net income for the prior year 13 weeks ended November 2, 2019, is a pretax loss of $0.3 million ($0.2 million after-tax, or $0.01 per share) primarily related to the sale of store property and $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.

Included in net income for the prior year 13 weeks ended November 2, 2019, is a pretax loss of $0.3 million ($0.2 million after-tax, or $0.01 per share) primarily related to the sale of store property and $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.

Net sales for the 13 weeks ended October 31, 2020, and the 13 weeks ended November 2, 2019, were $1,024.9 million and $1,388.3 million, respectively. Net sales include the operation of the company’s construction business, CDI Contractors, LLC (“CDI”).

Total retail sales, which excludes CDI, for the 13-week periods ended October 31, 2020, and November 2, 2019, were $994.6 million and $1,334.2 million, respectively. Total retail sales decreased by approximately 25 percent for the 13-week period ended October 31, 2020.

Sales of home and furniture significantly outperformed the other categories followed by ladies accessories and lingerie and cosmetics. Sales of ladies apparel were significantly below trend. Sales in the Eastern region moderately outperformed the Central and Western regions, respectively.

Gross Margin/Inventory
Consolidated gross margin, which includes CDI, for the 13 weeks ended October 31, 2020, improved 249 basis points of sales to 35.7 percent compared to 33.2 percent for the prior-year third quarter.

Retail gross margin for the 13 weeks ended October 31, 2020, improved 210 basis points of sales to 36.6 percent compared to 34.5 percent for the prior-year third quarter primarily due to decreased markdowns.

Inventory at October 31, 2020 decreased approximately 22 percent compared to November 2, 2019.

Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses (“operating expenses”) for the 13 weeks ended October 31, 2020, decreased $99.9 million to $318.2 million, 31.0 percent of sales, compared to $418.1 million, 30.1 percent of sales, for the prior-year third quarter primarily due to decreased payroll expense. While savings were realized in all expense categories, payroll expenses declined approximately 28 percent during the quarter partially as a result of the company’s reduced operating hours.

Retail operating expenses for the 13 weeks ended October 31, 2020, decreased $100.0 million to $316.7 million, 31.9 percent of sales, compared to $416.7 million, 31.2 percent of sales, for the prior-year third quarter.

39-Week Results
Dillard’s reported a net loss for the 39 weeks ended October 31, 2020 of $138.7 million, or $6.05 per share, compared to a net income of $43.4 million, or $1.69 per share, for the prior year 39-week period. Included in the net loss for the 39 weeks ended October 31, 2020, is a $2.2 million pre-tax loss ($1.4 million after-tax or $0.06 per share) primarily related to the sale of store property. The company expects to be in a net operating loss position for the fiscal year. The CARES Act, signed into law on March 27, 2020, allows for net operating loss carryback to years in which the federal tax rate was 35 percent. Included in net loss for the 39 weeks ended October 31, 2020, is a net tax benefit related to this provision.

Included in net income for the prior year 39 weeks ended November 2, 2019, is a pretax gain of $12.0 million, $9.4 million after-tax, or $0.37 per share, primarily related to the sale of four store properties and $2.8 million, $0.11 per share, in tax benefits related to amended state tax return filings.

Net sales for the 39 weeks ended October 31, 2020, and the 39 weeks ended November 2, 2019, were $2,730.6 million and $4,280.6 million, respectively. Net sales include the operations of the company’s construction business, CDI Contractors, LLC (“CDI”).

Total retail sales for the 39-week periods ended October 31, 2020, and November 2, 2019, were $2,638.8 million and $4,132.9 million, respectively. Total retail sales decreased approximately 36 percent for the 39-week period ended October 31, 2020.

Consolidated gross margin for the same 39-week periods was 27.2 percent and 32.6 percent of sales, respectively. Retail gross margin for the 39 weeks ended October 31, 2020, and November 2, 2019, was 28.0 percent and 33.7 percent of sales, respectively.

Consolidated operating expenses for the 39 weeks ended October 31, 2020, decreased $356.7 million to $875.7 million, 32.1 percent of sales, compared to $1,232.4 million, 28.8 percent of sales, for the prior-year 39-week period primarily due to decreased payroll expense. Payroll expense declined approximately 34 percent during the 39-week period ended October 31, 2020.

Retail operating expenses for the 39 weeks ended October 31, 2020, decreased $356.5 million to $871.1 million, 33.0 percent of sales, compared to $1,227.6 million, 29.7 percent of sales, for the prior-year 39-week period.

Store Information
Dillard’s announced the upcoming closure of its Paradise Valley Mall location in Phoenix, AZ, totaling 200,000 square feet. The company expects to close the location by the end of the fiscal year. Dillard’s operates 250 Dillard’s locations and 32 clearance centers spanning 29 states and an Internet store at dillards.com. Total store square footage at October 31, 2020 was 48.0 million square feet.

Photo courtesy Dillard’s