Dillard’s Inc. reported total retail sales for the 13-week periods ended August 1 fell 35.2 percent to $893.2 million from $1.38 billion a year ago.

Net sales were $919.0 million and $1,426.8 million, respectively. Net sales include the operations of the company’s construction business, CDI Contractors, LLC (CDI).

All of Dillard’s store locations were reopened by June 2, 2020. All stores remain open and operating under reduced hours with the exception of one location. While no indication of future performance, sales performance in the stores since re-opening through August 1, 2020 was approximately 72 percent of prior year sales on corresponding days.

Dillard’s reported a net loss for the 13 weeks ended August 1, 2020 of $8.6 million or 37 cents per share, compared to a net loss of $40.7 million, or $1.59 per share, for the prior-year second quarter. Included in net loss for the prior year 13 weeks ended August 3, 2019 was a pretax gain of $4.9 million ($3.8 million after-tax or 15 cents per share) 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 13 weeks ended August 1, 2020 is a net tax benefit related to this provision.

Dillard’s Chief Executive Officer William T. Dillard, II stated, “We thank our dedicated associates for their outstanding service to our customers as we continue to navigate the pandemic. During the quarter, we worked hard to control inventory and expenses. These measures allowed us to improve gross margin and substantially narrow the loss from the prior year second quarter. We will maintain this conservative financial approach as we move forward.”

Gross Margin/Inventory
As insight into consumer behavior grows, management continues to execute inventory control measures with the continual goal of aligning purchases with sales. Second-quarter purchases decreased by 62 percent. Retail gross margin for the 13 weeks ended August 1, 2020 improved 239 basis points of sales compared to the prior year second quarter primarily due to decreased markdowns. Consolidated gross margin for the 13 weeks ended August 1, 2020 improved 271 basis points of sales compared to the prior year second quarter.

Retail gross margin for the 26 weeks ended August 1, 2020 and August 3, 2019 was 22.7 percent and 33.3 percent of sales, respectively. Consolidated gross margin for the same 26-week periods was 22.1 percent and 32.2 percent of sales, respectively.

Inventory at August 1, 2020 decreased 20 percent compared to August 3, 2019.

Selling, General and Administrative Expenses
Retail selling, general and administrative expenses (“operating expenses”) for the 13 weeks ended August 1, 2020 decreased $141.8 million to $265.8 million (29.8 percent of sales) compared to $407.6 million (29.6 percent of sales) for the prior year second quarter.

Consolidated operating expenses for the 13 weeks ended August 1, 2020 decreased $142.0 million to $267.1 million (29.1 percent of sales) compared to $409.1 million (28.7 percent of sales) for the prior year second quarter primarily due to decreased payroll expense. While significant savings were realized in all expense categories, payroll expenses declined approximately 41 percent during the quarter.

Retail operating expenses for the 26 weeks ended August 1, 2020 decreased $256.5 million to $554.4 million (33.7 percent of sales) compared to $810.9 million (29.0 percent of sales) for the prior year 26-week period.

Consolidated operating expenses for the 26 weeks ended August 1, 2020 decreased $256.8 million to $557.5 million (32.7 percent of sales) compared to $814.3 million (28.2 percent of sales) for the prior year 26-week period primarily due to decreased payroll expense. Payroll expense declined approximately 38 percent during the 26-week period ended August 1, 2020.

Share Repurchase
During the 13 weeks ended August 1, 2020, the company purchased $14.3 million (approximately 0.6 million shares) of Class A Common Stock under its $500 million share repurchase program. As of August 1, 2020, authorization of $192.6 million remained under the program.

During the 26 weeks ended August 1, 2020, the company purchased $76.1 million (approximately 1.6 million shares) of Class A Common Stock. Total shares outstanding (Class A and Class B Common Stock) at August 1, 2020 and August 3, 2019 were 22.6 million and 25.3 million, respectively.

26-Week Results
Dillard’s reported a net loss for the 26 weeks ended August 1, 2020 of $170.5 million or $7.33 per share, compared to net income of $37.9 million, or $1.46 per share, for the prior year 26-week period. Included in net income for the prior year 26 weeks ended August 3, 2019 was a pretax gain of $12.3 million ($9.6 million after-tax or $0.37 per share) related to the sale of three store properties. 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 26 weeks ended August 1, 2020 is a net tax benefit related to this provision.

Net sales for the 26 weeks ended August 1, 2020 and the 26 weeks ended August 3, 2019 were $1,705.7 million and $2,892.3 million, respectively. Net sales include the operations of the company’s construction business, CDI Contractors, LLC (“CDI”).

Total retail sales for the 26-week periods ended August 1, 2020 and August 3, 2019 were $1,644.2 million and $2,798.7 million, respectively. Total retail sales decreased by approximately 41 percent for the 26-week period ended August 1, 2020.

Strengths
Management reiterates its belief that Dillard’s is uniquely positioned, among U.S. department store retailers, to weather COVID-19:

  • The company owns 90 percent of its retail store square footage and 100 percent of its corporate headquarters, distribution and fulfillment facilities;
  • Store rent obligations are small compared to the industry;
  • Low long-term debt position with the next payment due January 2023 ($45 million);
  • Amended $800 million revolving credit facility with no financial covenants as long as availability exceeds $100 million and no event of default occurs and is continuing; and
  • Strong eCommerce business at dillards.com which includes ship-from-store capability.

Store Information
The company’s El Centro, CA location has temporarily closed again under a local government mandate. During the second quarter, the company permanently closed store locations in Waterloo, IA (150,000 square feet), Clovis, NM (62,000 square feet) and Lawton, OK (100,000 square feet). The company operates 251 Dillard locations and 31 clearance centers spanning 29 states and an Internet store at dillards.com. Total store square footage at August 1, 2020 was 48.0 million square feet.

Photo courtesy Dillard’s