Dillard’s Inc. reported earnings fell 25.7 percent in the third quarter but came in well ahead of Wall Street’s expectations. Same-store sales were flat.

Highlights of the Third Quarter:

  • Net income of $5.5 million compared to net income of $7.4 million for the prior year third quarter
  • Earnings per share of $0.22 compared to $0.27
  • Flat comparable store sales against a 3 percent increase in prior year third quarter
  • Retail gross margin improved 13 basis points of sales
  • Inventory level decreased 4 percent
  • Operating expenses were $418.1 million compared to $418.9 million
  • Share repurchase of $35.2 million

The 22 cents earnings per share compares to a loss expected by Wall Street on average of 29 cents. Revenues of $1.42 billion just topped analysts’ target of $1.42 billion,

Highlights of the 39 Weeks:

  • Net income of $43.4 million compared to net income of $85.1 million for the prior year 39-week period
  • Earnings per share of $1.69 compared to $3.08
  • Flat comparable store sales against a 2 percent increase in prior year 39-week period
  • Retail gross margin declined 148 basis points of sales
  • Operating expenses were $1,232.4 million compared to $1,233.1 million
  • Share repurchase of $101.5 million

Dillard’s Chief Executive Officer William T. Dillard, II, stated, “While we were not satisfied with the third quarter, it was a substantial improvement over the second quarter. We were pleased with our retail gross margin improvement (13 basis points) following a second quarter decline of 319 basis points. We managed inventory to a 4 percent decrease from flat at the end of the second quarter. Our flat comparable sales performance improved from the 2 percent second quarter sales decline.”

Third Quarter Results

Dillard’s reported net income for the 13 weeks ended November 2, 2019 of $5.5 million, or $0.22 per share, compared to net income of $7.4 million, or $0.27 per share, for the prior year third quarter. Included in net income for the 13 weeks ended November 2, 2019 is a pretax loss of $0.3 million ($0.2 million after tax or $0.01 per share) primarily related to the sale of a store property. Also included in net income for the 13-week period is $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.

Included in net income for the 13-week period ended November 3, 2018 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 13 weeks ended November 2, 2019 and the 13 weeks ended November 3, 2018 were $1.388 billion and $1.419 billion, respectively. Net sales includes the operations of the Company’s construction business, CDI Contractors, LLC (“CDI”).

Total merchandise sales (which excludes CDI) for the 13-week period ended November 2, 2019 and the 13-week period ended November 3, 2018 were $1.334 billion and $1.342 billion, respectively. Total merchandise sales decreased 1  percent for the 13-week period ended November 2, 2019. Sales in comparable stores for the period remained unchanged on a percentage basis. Sales were strongest in the Eastern region followed by the Western and Central regions, respectively.

39-Week Results

Dillard’s reported net income for the 39 weeks ended November 2, 2019 of $43.4 million, or $1.69 per share, compared to net income of $85.1 million, or $3.08 per share, for the prior year 39-week period. Included in net income for the 39 weeks ended November 2, 2019 is a pretax gain of $12.0 million ($9.4 million after tax or $0.37 per share) primarily related to the sale of four store properties. Included in net income for the 39-week period is $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.

Included in net income for the 39-week period ended November 3, 2018 is $2.9 million ($0.10 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 39 weeks ended November 2, 2019 and the 39 weeks ended November 3, 2018 were $4.281 billion and $4.346 billion, respectively.

Total merchandise sales for the 39-week period ended November 2, 2019 and the 39-week period ended November 3, 2018 were $4.133 billion and $4.162 billion, respectively. Total merchandise sales decreased 1 percent for the 39-week period ended November 2, 2019. Sales in comparable stores for the period remained unchanged on a percentage basis.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) improved 13 basis points of sales for the 13 weeks ended November 2, 2019 compared to the prior year third quarter. Consolidated gross margin for the 13 weeks ended November 2, 2019 improved 53 basis points of sales compared to the prior year third quarter.

Gross margin from retail operations declined 148 basis points of sales for the 39 weeks ended November 2, 2019 compared to the 39 weeks ended November 3, 2018 primarily due to increased markdowns. Consolidated gross margin for the 39 weeks ended November 2, 2019 declined 125 basis points of sales compared to the prior year-to-date period.

Inventory decreased 4 percent at November 2, 2019 compared to November 3, 2018.

Selling, General & Administrative Expenses

Selling, general and administrative expenses (“operating expenses”) were $418.1 million (30.1 percent of sales) and $418.9 million (29.5 percent of sales) during the 13 weeks ended November 2, 2019 and November 3, 2018, respectively. Retail operating expenses for the same 13-week periods were $416.7 million (31.2 percent of sales) and $416.6 million (31.1 percent of sales), respectively.

Operating expenses were $1,232.4 million (28.8 percent of sales) and $1,233.1 million (28.4 percent of sales) during the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. Retail operating expenses for the same 39-week periods were $1,227.6 million (29.7 percent of sales) and $1,227.1 million (29.5 percent of sales), respectively.

Share Repurchase

During the 13 weeks ended November 2, 2019, the Company purchased $35.2 million (approximately 0.6 million shares) of Class A Common Stock under its $500 million share repurchase program. During the year-to-date period ended November 2, 2019, the Company purchased $101.5 million (approximately 1.7 million shares). As of November 2, 2019, authorization of $305.4 million remained under the program. Total shares outstanding (Class A and Class B Common Stock) at November 2, 2019 and November 3, 2018 were 24.7 million and 26.9 million, respectively.

Store Information

Dillard’s plans to open an expansion at Killeen Mall in Killeen, Texas by the end of the fiscal year, replacing a 70,000 square foot leased facility with a 75,000 square foot owned facility at this dual anchor location totaling 110,000 square feet. During the first quarter of 2020, the Company will open an 85,000 square foot expansion at Columbia Mall in Columbia, Missouri (dual anchor location totaling 185,000 square feet). Also in early 2020, Dillard’s will replace a 100,000 square foot leased facility at Richland Fashion Mall in Waco, Texas with a 125,000 square foot owned facility (dual anchor location totaling 190,000 square feet).

Dillard’s has announced the upcoming closure of its Fiesta Mall Clearance Center in Mesa, Arizona (100,000 square feet). The location is expected to close in January, 2020. The Company operates 259 Dillard’s locations and 30 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at November 2, 2019 was 48.9 million square feet.