Dillard’s Inc. reported earnings per share of $2.75 for the fiscal fourth quarter ended February 1, down from $3.22 in the year-ago period and shy of Wall Street’s consensus expectation of $3.01.
Revenue of $1.92 billion marked a 4.5 percent year-over-year decline and fell short of estimates by $110 million. Comparable store sales decreased 3 percent against a 2 percent increase in the prior-year fourth quarter.
Dillard’s CEO William T. Dillard II, said, “A weak top-line weighed heavily on the bottom line in the fourth quarter. However, we achieved a consecutive 4 percent decline in inventory while maintaining a flat gross margin rate. As U.S. department store retailing continues to right-size, our conservative financial approach supports our long-term view. We continue to focus on improving our results and on shareholder return.”
Fourth-Quarter Results
Dillard’s reported net income for the 13 weeks ended February 1, 2020, of $67.7 million, or $2.75 per share, compared to net income of $85.1 million, or $3.22 per share, for the prior-year fourth quarter. Included in net income for the 13 weeks ended February 1, 2020, is a pretax gain of $8.3 million ($6.5 million after-tax or $0.26 per share) primarily related to the sale of two store properties and $2.3 million ($0.09 per share) in tax benefits provided in the Taxpayer Certainty and Disaster Tax Relief Act of 2019 signed into law on December 20, 2019.
Net sales for the 13 weeks ended February 1, 2020, and the 13 weeks ended February 2, 2019, were $1.923 billion and $2.011 billion, respectively. Net sales include the operations of the company’s construction business, CDI Contractors, LLC (“CDI”).
Total merchandise sales, (which excludes CDI) for the 13-week period, ended February 1, 2020, and the 13-week period ended February 2, 2019, were $1.879 billion and $1.959 billion, respectively. Total merchandise sales decreased 4 percent for the 13-week period ended February 1, 2020. Sales in comparable stores for the period decreased 3 percent. Sales were strongest in the Eastern and Western regions and weakest in the Central region. By category, sales were strongest in ladies’ apparel and cosmetics with weaker performances in ladies’ accessories and lingerie and home and furniture.
52-Week Results
Dillard’s reported net income for the 52 weeks ended February 1, 2020, of $111.1 million, or $4.38 per share, compared to net income of $170.3 million, or $6.23 per share, for the prior year 52-week period. Included in net income for the 52 weeks ended February 1, 2020, is a pretax gain of $20.3 million ($15.8 million after-tax or $0.62 per share) primarily related to the sale of six store properties. Also included in net income for the 52-week period is $5.1 million ($0.20 per share) in tax benefits related to amended state tax return filings and the Taxpayer Certainty and Disaster Tax Relief Act of 2019.
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.
Net sales for the 52 weeks ended February 1, 2020, and the 52 weeks ended February 2, 2019, were $6.204 billion and $6.356 billion, respectively.
Total merchandise sales for the 52-week period ended February 1, 2020, and the 52-week period ended February 2, 2019, were $6.012 billion and $6.121 billion, respectively. Total merchandise sales decreased 2 percent for the 52-week period ended February 1, 2020. Sales in comparable stores for the period decreased 1 percent.
Gross Margin/Inventory
Gross margin from retail operations, (which excludes CDI), was flat as a percent of sales for the 13 weeks ended February 1, 2020 compared to the prior-year fourth quarter. Consolidated gross margin for the 13 weeks ended February 1, 2020 was also flat as a percent of sales compared to the prior-year fourth quarter.
Gross margin from retail operations declined 99 basis points of sales for the 52 weeks ended February 1, 2020, compared to the 52 weeks ended February 2, 2019, primarily due to increased markdowns. Consolidated gross margin for the 52 weeks ended February 1, 2020, declined 84 basis points of sales compared to the prior year.
Inventory decreased 4 percent on February 1, 2020, compared to February 2, 2019.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“operating expenses”) were $458.6 million (23.8 percent of sales) and $458.0 million (22.8 percent of sales) during the 13 weeks ended February 1, 2020 and February 2, 2019, respectively. Retail operating expenses for the same 13-week period were $456.7 million (24.3 percent of sales) and $455.1 million (23.2 percent of sales), respectively.
Operating expenses were $1,691.0 million (27.3 percent of sales) and $1,691.2 million (26.6 percent of sales) during the 52 weeks ended February 1, 2020 and February 2, 2019, respectively. Retail operating expenses for the same 52-week periods were $1,684.3 million (28.0 percent of sales) and $1,682.2 million (27.5 percent of sales), respectively.
Share Repurchase
During the 13 weeks ended February 1, 2020, the company purchased $36.7 million (approximately 0.5 million shares) of Class A Common Stock under its $500 million share repurchase program. During the 52 weeks ended February 1, 2020, the company purchased $138.3 million (approximately 2.2 million shares). Subsequent to February 1, 2020, the company had purchased $52.8 million (0.8 million shares) of Class A Common Stock. Total shares outstanding (Class A and Class B Common Stock) on February 24, 2020, and February 2, 2019, were $23.4 million and 26.3 million, respectively. As of February 24, 2020, authorization of $215.9 million remained under the program.
Store Information
Dillard’s has announced plans to open a new store at Mesa Mall in Grand Junction, CO, during the third quarter of 2020 (105,000 square feet). The company has also announced plans to open a new store at University Place in Orem, UT in Spring 2021 (160,000 square feet). Both opportunities arose from peer closures at those centers.
The company operates 257 Dillard’s locations and 28 clearance centers in 29 states and an Internet store at dillards.com. Total square footage on February 1, 2020, was 48.4 million square feet.
Photo courtesy Dillard’s