Dillard’s Inc. reported net income for the 13 weeks ended May 4, 2019, of $78.6 million, or $2.99 per share, compared to net income of $80.5 million, or $2.89 per share, for the prior-year first quarter.
Included in net income for the 13 weeks ended May 4, 2019, is a pretax gain of $7.4 million ($5.8 million after tax or $0.22 per share) related to the sale of two stores.
Net sales for the 13 weeks ended May 4, 2019, were $1.465 billion and $1.458 billion for the 13 weeks ended May 5, 2018. 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 May 4, 2019 were $1.421 billion and $1.411 billion for the 13-week period ended May 5, 2018. Total merchandise sales increased 1 percent for the 13-week period ended May 4, 2019. Sales in comparable stores for the period remained unchanged on a percentage basis. In relation to the total company sales performance, sales were strongest in juniors’ and children’s apparel followed by home and furniture and men’s apparel and accessories. Below-trend performances were noted in shoes and cosmetics. Sales were strongest in the Eastern region followed by the Central and Western regions, respectively.
Gross Margin/Inventory
Gross margin from retail operations (which excludes CDI) declined 141 basis points of sales for the 13 weeks ended May 4, 2019 compared to the prior year first quarter primarily due to increased markdowns. Consolidated gross margin for the 13 weeks ended May 4, 2019 declined 134 basis points of sales compared to the prior year first quarter. Inventory increased 3 percent at May 4, 2019 compared to May 5, 2018.
Selling, General & Administrative Expenses
Retail selling, general and administrative expenses (“operating expenses”) decreased 23 basis points of sales for the 13 weeks ended May 4, 2019 compared to the 13 weeks ended May 5, 2018. Retail operating expenses were $403.3 million (28.4 percent of sales) and $404 million (28.6 percent of sales) during the 13 weeks ended May 4, 2019 and May 5, 2018, respectively. Consolidated operating expenses were $405.1 million (27.6 percent of sales) and $406 million (27.8 percent of sales) during the 13 weeks ended May 4, 2019, and May 5, 2018, respectively.
Share Repurchase
During the 13 weeks ended May 4, 2019, the company purchased $17.4 million (approximately 0.2 million shares) of Class A Common Stock under its $500 million share repurchase program. Total shares outstanding (Class A and Class B Common Stock) at May 4, 2019 and May 5, 2018 were 26.1 million and 27.6 million, respectively. At May 4, 2019, $389 million authorization remained under the share repurchase program.
Store Information
Dillard’s operates 261 Dillard’s locations and 28 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total store square footage is 48.7 million.
Lease Accounting
During the first quarter of fiscal 2019, the company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification (“ASU 2016-02”) using the optional effective date transition method. Under this method, the company applied the new standard as of February 3, 2019 with no adjustments to the comparative period presented. The condensed consolidated balance sheet at May 4, 2019 reflects the impact of recording operating lease assets and operating lease liabilities for existing operating leases. At May 4, 2019, the operating lease assets totaled $52.8 million, and the operating lease liabilities totaled $52.0 million. The impact of the adoption was immaterial to the condensed consolidated statements of income for the 13 weeks ended May 4, 2019.
