Dillard’s Inc. reported a strong rebound in earnings in the second quarter ended July 31 as sales grew 72 percent.
Dillard’s Chief Executive Officer William T. Dillard, II, stated, “The strong consumer demand we saw in the first quarter continued throughout the second quarter. This momentum, combined with our continuing focus on inventory and expense control, produced a sequential record performance. We ended the quarter with $670 million in cash even after repurchasing $112 million of stock.”
Due to the significant impact of COVID-19 on prior-year figures, this release will include certain comparisons to 2019 to provide additional context.
Selected Financial Metrics Of The Second Quarter
(compared to the prior year second quarter)
- Total retail sales increased 72 percent to $1.57 billion
- Net income of $185.7 million compared to a net loss of $8.6 million
- Net income of $8.81 per share compared to a net loss of $0.37 per share
- Retail gross margin of 41.7 percent compared to 31.1 percent
- Inventory decreased approximately 13 percent
- Operating expenses were $365.9 million (23.3 percent of sales) compared to $267.1 million (29.1 percent of sales)
- Share repurchases of $112.2 million during the quarter
- Cash flow provided by operations of $492.4 million compared to $294.5 million of cash used in operations (26 weeks)
- Ending cash of $669.5 million compared to $82.9 million with no short-term borrowings compared to $229.6 million
Earnings of $8.81 were well ahead of Wall Street’s consensus estimate of $2.45 per share. Sales of $1.57 billion were ahead of analysts’ consensus target of $1.26 billion.
Second Quarter Results
Dillard’s reported net income for the 13 weeks ended July 31, 2021 of $185.7 million, or $8.81 per share, compared to a net loss of $8.6 million, or $0.37 per share, for the prior-year second quarter. Included in net loss for the prior year’s second quarter is a net tax benefit of $17.4 million ($0.75 per share) related to the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
Sales | Second Quarter
Net sales for the 13 weeks ended July 31, 2021 and the 13 weeks ended August 1, 2020 were $1,570.4 million and $919.0 million, respectively. Net sales include the operations of the company’s construction business, CDI Contractors, LLC (“CDI”).
Total retail sales (which excludes CDI) for the 13-week periods ended July 31, 2021 and August 1, 2020 were $1,539.4 million and $893.2 million, respectively. Total retail sales increased 72 percent for the 13-week period ended July 31, 2021. Sales in ladies’ apparel and shoes significantly outperformed other merchandise categories during the quarter.
Compared to the second quarter of 2019, total retail sales for the 13-week periods ended July 31, 2021 and August 3, 2019 were $1,539.4 million and $1,378.2 million, respectively, an increase of 12 percent. Comparable store retail sales for the second quarter of 2021 compared to the second quarter of 2019 increased 14 percent.
Gross Margin | Inventory, Second Quarter
Consolidated gross margin (which includes CDI) for the 13 weeks ended July 31, 2021 improved significantly to 41.0 percent compared to 30.4 percent for the prior year’s second quarter.
Retail gross margin (which excludes CDI) for the 13 weeks ended July 31, 2021 improved significantly to 41.7 percent compared to 31.1 percent for the prior year’s second quarter.
Compared to the second quarter of 2019, retail gross margin improved 1,299 basis points of sales to 41.7 percent from 28.7 percent.
Management attributes the substantial improvement in gross margin to stronger consumer demand and better inventory management leading to decreased markdowns in the second quarter of 2021.
Inventory decreased approximately 13 percent at July 31, 2021 compared to August 1, 2020.
Selling, General & Administrative Expenses | Second Quarter
Consolidated selling, general and administrative expenses (“operating expenses”) for the 13 weeks ended July 31, 2021 were $365.9 million (23.3 percent of sales) compared to $267.1 million (29.1 percent of sales) for the prior year second quarter.
Compared to the second quarter of 2019, retail operating expenses for the 13 weeks ended July 31, 2021 and August 3, 2019 decreased 591 basis points of sales to $364.2 million (23.7 percent of sales) from $407.6 million (29.6 percent of sales), respectively.
The decrease is primarily due to decreased payroll and payroll-related expenses as the company continues to operate with reduced operating hours, requiring fewer associates.
26-Week Results
Dillard’s reported net income for the 26 weeks ended July 31, 2021 of $343.9 million, or $16.03 per share, compared to a net loss of $170.5 million, or $7.33 per share, for the prior year 26-week period. Included in net income for the 26 weeks ended July 31, 2021 is a pretax gain of $24.7 million ($19.2 million after-tax or $0.89 per share) primarily related to the sale of three store properties.
Included in net loss for the prior year 26-week period is a net tax benefit of $32.1 million ($1.38 per share) related to the CARES Act.
Net sales for the 26 weeks ended July 31, 2021 and the 26 weeks ended August 1, 2020 were $2,898.9 million and $1,705.7 million, respectively.
Total retail sales for the 26-week periods ended July 31, 2021 and August 1, 2020 were $2,836.1 million and $1,644.2 million, respectively. Total retail sales increased 72 percent for the 26-week period ended July 31, 2021.
Compared to the first half of 2019, total retail sales for the 26-week periods ended July 31, 2021 and August 3, 2019 were $2,836.1 million and $2,798.7 million, respectively, an increase of 1 percent. Comparable store retail sales for the first half of 2021 compared to the first half of 2019 increased 4 percent.
Consolidated gross margin for the 26 weeks ended July 31, 2021 improved significantly to 41.3 percent compared to 22.1 percent for the prior year 26-week period.
Retail gross margin for the 26 weeks ended July 31, 2021 improved significantly to 42.1 percent compared to 22.7 percent for the prior year 26-week period.
Compared to the first half of 2019, retail gross margin improved 883 basis points of sales to 42.1 percent from 33.3 percent.
Consolidated operating expenses for the 26 weeks ended July 31, 2021 were $702.5 million (24.2 percent of sales) compared to $557.5 million (32.7 percent of sales) for the prior year 26-week period.
Compared to the first half of 2019, retail operating expenses for the 26 weeks ended July 31, 2021 and August 3, 2019 decreased 431 basis points of sales to $699.4 million (24.7 percent of sales) from $810.9 million (29.0 percent of sales), respectively.
Share Repurchase
During the 13 weeks ended July 31, 2021, the company purchased $112.2 million (approximately 0.7 million shares) of Class A Common Stock under its March 2018 share repurchase program.
During the 26 weeks ended July 31, 2021, the company purchased $171.0 million (approximately 1.4 million shares) of Class A Common Stock under its March 2018 share repurchase program.
As of July 31, 2021, authorization of $2.1 million remained under the March 2018 program and $500.0 million remained under the May 2021 program. Total shares outstanding (Class A and Class B Common Stock) at July 31, 2021 and August 1, 2020 were 20.7 million and 22.6 million, respectively.
Store Information
During the second quarter, the company closed its Paradise Valley Mall location in Phoenix, Arizona (200,000 square feet). The company plans to close its clearance center at Valle Vista Mall in Harlingen, Texas (100,000 square feet) during the third quarter. Dillard’s plans to open its new location at Mesa Mall in Grand Junction, Colorado (100,000 square feet) during the third quarter.
The company operates 249 Dillard’s locations and 31 clearance centers in 29 states and an online store at dillards.com. Total square footage at July 31, 2021 was 47.7 million square feet.
Photo courtesy Dillard’s