Dillard’s Inc. reported that footwear was a standout performer in its fiscal second quarter, but profits were hurt by declining margins and weak comp store sales gains. Profits still came in better than analysts had expected but the top-line missed expectations.

Dillard’s Inc. reported net income for the 13 weeks ended August 1, 2015 of $29.9 million, or 75 cents per share, compared to net income of $34.5 million, or 80 cents per share, for the prior year second quarter. Net sales for the 13 weeks ended August 1, 2015 were $1.51 billion and
$1.48 billion for the 13 weeks ended August 2, 2014. Net sales includes
the operations of the company’s construction business, CDI Contractors,
LLC.

Total merchandise sales (which excludes CDI) for the 13-week period
ended August 1, 2015 were $1.47 billion, compared to $1.46 billion for the
13-week period ended August 2, 2014. Total merchandise sales remained
unchanged on a percentage basis for the 13-week period ended August 1,
2015. Sales in comparable stores for the period increased 1 percent.

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

Dillard’s Chief Executive Officer, William T. Dillard, II, stated, “While we achieved positive comparable store sales, we were disappointed with our overall performance compared to the prior year. However, from our strong cash position, we returned $208 million to shareholders under our share repurchase program.”

26 Week Results
Dillard’s reported net income for the 26 weeks ended August 1, 2015 of $139.5 million, or $3.43 per share, compared to net income of $146.1 million, or $3.36 per share, for the prior year 26-week period.

Net sales for the 26 weeks ended August 1, 2015 were $3.09 billion and $3.03 billion for the 26 weeks ended August 2, 2014. Total merchandise sales for the 26-week period ended August 1, 2015 were $2.99 billion and $3.00 billion for the 26-week period ended August 2, 2014. Total merchandise sales remained unchanged on a percentage basis for the 26-week period ended August 1, 2015. Sales in comparable stores for the period also remained unchanged on a percentage basis.

Gross Margin/Inventory
Gross margin from retail operations (which excludes CDI) declined 54 basis points of sales for the 13 weeks ended August 1, 2015 compared to the prior year second quarter. Consolidated gross margin for the 13 weeks ended August 1, 2015 declined 119 basis points of sales compared to the prior year second quarter. The disparity between retail and consolidated gross margin performance is attributable to increased revenue at CDI, which is a substantially lower margin business. Inventory increased 3% at August 1, 2015 compared to August 2, 2014.

Selling, General & Administrative Expenses
Selling, general and administrative expenses (“operating expenses”) were $404.3 million (26.7% of sales) and $400.5 million (27.2% of sales) during the 13 weeks ended August 1, 2015 and August 2, 2014, respectively. Operating expenses from retail operations increased 15 basis points of sales to $403.0 million (27.5%) during the 13 weeks ended August 1, 2015 from $399.0 million (27.3%) during the 13 weeks ended August 2, 2014. The increase was driven by increased selling payroll and insurance expense partially offset by decreased advertising expense.

Share Repurchase
During the 13 weeks ended August 1, 2015, the company purchased $207.9 million (1.8 million shares) of Class A Common Stock under its $500 million share repurchase program. As of August 1, 2015, authorization of $292.1 million remained under the program. Total shares outstanding (Class A and Class B Common Stock) at August 1, 2015 and August 2, 2014 were 39.4 million and 43.2 million, respectively.

Store Information
Dillard's opened its new 200,000 square foot location at Fashion Place in Murray, Utah on Saturday, August 8. The store replaces a 190,000 square foot location at the same center.

Dillard's plans to open these locations during the third quarter of 2015:
Fremaux Town Center    Slidell, Louisiana
Liberty Center        Cincinnati, Ohio
                        
At August 1, 2015, the company operated 272 Dillard’s locations and 25 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at August 1, 2015 was 50.2 million square feet.