Dillard’s Inc. reported net income for the 52 weeks ended February 2 of $170.3 million, or $6.23 per share, compared to net income of $221.3 million, or $7.51 per share, for the 53 weeks ended February 3, 2018.

Included in net income for the 52-week period ended February 2, 2019 is $2.9 million ($0.11 per share) in tax benefits related to additional federal tax credits and an update of the provisional amounts recorded for the income tax effects of the Tax Cuts and Jobs Act of 2017.

Included in net income for the prior year 53-week period ended February 3, 2018 is a pretax gain on disposal of assets of $4.9 million ($3.2 million after tax or $0.11 per share) and a $0.8 million pretax loss on extinguishment of debt ($0.5 million after tax or $0.02 per share). Also included in net income for the prior fiscal year is an estimated tax benefit of approximately $77.4 million ($2.62 per share) related to the Tax Cuts and Jobs Act of 2017.

Net sales were $6.356 billion for the 52 weeks ended February 2, 2019 and $6.262 billion for the 53 weeks ended February 3, 2018. Net sales include the operations of the company’s construction business, CDI Contractors, LLC (“CDI”).

Total merchandise sales (which exclude CDI) were $6.121 billion for the 52-week period ended February 2, 2019 and $6.108 billion for the 53-week period ended February 3, 2018. Based upon comparable 52-week periods ended February 2, 2019 and February 3, 2018, total merchandise sales increased 2 percent and sales in comparable stores increased 2 percent.

Dillard’s CEO William T. Dillard II said, “Our 2 percent comparable store sales increase for 2018 is comprised of four quarters of positive sales. For the year, we held retail gross margin and operating expenses flat as a percent of sales. Additionally, during 2018, we returned $139 million to shareholders through share repurchases and dividends.”

During the year, the company purchased $127.9 million of Class A Common Stock under its share repurchase authorization.

Fourth Quarter Results

Dillard’s reported net income for the 13 weeks ended February 2, 2019 of $85.1 million, or $3.22 per share, compared to net income of $157.6 million, or $5.55 per share, for the 14 weeks ended February 3, 2018.

Included in net income for the prior year fourth quarter ended February 3, 2018 is an estimated tax benefit of approximately $77.4 million ($2.73 per share) related to the Tax Cuts and Jobs Act of 2017.

Net sales for the 13 weeks ended February 2, 2019 were $2.011 billion and $2.061 billion for the 14 weeks ended February 3, 2018.

Total merchandise sales were $1.959 billion for the 13-week period ended February 2, 2019 and $2.024 billion for the 14-week period ended February 3, 2018. Based upon comparable 13-week periods ended February 2, 2019 and February 3, 2018, total merchandise sales increased 1 percent and sales in comparable stores increased 2 percent.

Sales trends for the fourth quarter were strongest in home and furniture followed by cosmetics and men’s clothing and accessories. Sales were strongest in the Eastern region followed by the Western and Central regions, respectively.

During the quarter, the company purchased $36.0 million of Class A Common Stock under its share repurchase authorization.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) was flat as a percentage of sales at 33.6 percent for the 52 weeks ended February 2, 2019 compared to the 53 weeks ended February 3, 2018. Consolidated gross margin for the 52 weeks ended February 2, 2019 declined 45 basis points of sales to 32.5 percent compared to 32.9 percent for the 53 weeks ended February 3, 2018. The disparity between retail and consolidated gross margin performance is attributable to increased operations at CDI, which is a substantially lower margin business.

Gross margin from retail operations declined 69 basis points of sales to 30.3 percent for the 13 weeks ended February 2, 2019 compared to 31.0 percent for the 14 weeks ended February 3, 2018 primarily due to increased markdowns. Consolidated gross margin for the 13 weeks ended February 2, 2019 declined 90 basis points of sales to 29.6 percent compared to the prior year fourth quarter of 30.5 percent.

Inventory increased 4 percent at February 2, 2019 compared to February 3, 2018.

Selling, General & Administrative Expenses

Retail selling, general and administrative expenses (“operating expenses”) were flat as a percentage of sales for the 52 weeks ended February 2, 2019 compared to the 53 weeks ended February 3, 2018. Retail operating expenses were $1.682 billion (27.5 percent of sales) and $1.678 billion (27.5 percent of sales) during the 52 weeks ended February 2, 2019 and 53 weeks ended February 3, 2018, respectively. Consolidated operating expenses (which include CDI) were $1.691 billion (26.6 percent of sales) and $1.685 billion (26.9 percent of sales) during the 52 weeks ended February 2, 2019 and 53 weeks ended February 3, 2018, respectively.

Retail operating expenses decreased 32 basis points of sales for the 13 weeks ended February 2, 2019 compared to the 14 weeks ended February 3, 2018. Retail operating expenses were $455.1 million (23.2 percent of sales) and $476.9 million (23.6 percent of sales) during the 13 weeks ended February 2, 2019 and 14 weeks ended February 3, 2018, respectively. Consolidated operating expenses were $458.0 million (22.8 percent of sales) and $479.0 million (23.2 percent of sales) during the 13 weeks ended February 2, 2019 and the 14 weeks ended February 3, 2018, respectively. The decrease in operating expenses of $21.0 million is due to the additional week of operations during the prior year fourth quarter.

Share Repurchase

During the 13 weeks ended February 2, 2019, the company purchased $36.0 million (0.6 million shares) of Class A Common Stock under its $500 million share repurchase program. During the 52 weeks ended February 2, 2019, the company purchased $127.9 million (1.8 million shares) of Class A Common Stock. Total shares outstanding (Class A and Class B Common Stock) at February 2, 2019 and February 3, 2018 were 26.3 million and 28.1 million, respectively. At February 2, 2019, authorization of $406.9 million remained under the plan.

Store Information

During the fourth quarter of 2018, Dillard’s closed its West Town Center clearance location in Cincinnati, Ohio (115,000 square feet). Dillard’s has announced the upcoming closure of its Southern Park Mall location in Boardman, Ohio (186,000 square feet). The store is expected to close during the first quarter of 2019. At February 2, 2019, the company operated 265 Dillard’s locations and 26 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at February 2, 2019 was 49.0 million.