Dillard’s Sees Decline in Q2 Profits as Comp Decline 3 Percent

Dillard’s, Inc.’s earnings declined 19.5 percent in the second quarter as same-store sales decreased 3 percent

Dillard’s Chief Executive Officer William T. Dillard, II stated, “The cautious consumer we noted in the first quarter continued in the first few weeks of the second, leading to a sales decline of 3 percent. We exited the quarter with inventory flat year over year while maintaining a strong retail gross margin of 40.4 percent. We repurchased $103 million of stock and ended the quarter with $924 million in cash and short-term investments.”

Second Quarter Results
Dillard’s reported net income for the 13 weeks ended July 29, 2023, of $131.5 million, or $7.98 per share compared to $163.4 million, or $9.30 per share, for the prior year’s second quarter.

Net sales for the 13 weeks ended July 29, 2023, and July 30, 2022, were $1.57 billion and $1.59 billion, 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 weeks ended July 29, 2023, and July 30, 2022, were $1.499 billion and $1.553 billion, respectively. Total retail sales decreased by 3 percent for the 13-week period ended July 29, 2023, compared to the prior year’s second quarter. Sales in comparable stores decreased by 3 percent. The company noted continuing consumer caution, particularly in the first few weeks of the second quarter. Cosmetics was the strongest performing category followed by home and furniture. Ladies’ accessories and lingerie, ladies’ apparel, and shoes were the weakest categories.

Consolidated gross margin for the 13 weeks ended July 29, 2023, was 38.8 percent of sales compared to 40.8 percent of sales for the prior year’s second quarter.

Retail gross margin (which excludes CDI) for the 13 weeks ended July 29, 2023, was 40.4 percent of sales compared to 41.5 percent of sales for the prior year’s second quarter. Gross margin increased significantly in home and furniture and increased moderately in ladies’ accessories and lingerie compared to the prior year’s second quarter. Gross margin decreased significantly in men’s apparel and accessories and decreased moderately in juniors’ and children’s apparel.

Inventory remained unchanged (as a percentage) for the 13 weeks ended July 29, 2023 compared to the 13 weeks ended July 30, 2022.

Consolidated selling, general and administrative expenses (“operating expenses”) for the 13 weeks ended July 29, 2023, were $412.6 million (26.3 percent of sales) compared to $401.3 million (25.3 percent of sales) for the prior year’s second quarter. The increase in operating expenses is primarily due to increased payroll and payroll-related expenses.

26-Week Results
Dillard’s reported net income for the 26 weeks ended July 29, 2023, of $333.0 million, or $19.89 per share. This compares to $414.5 million, or $23.07 per share, for the prior year’s 26-week period. Included in net income for the 26 weeks ended July 29, 2023, is a pretax gain of $2.0 million ($1.5 million after-tax or $0.09 per share) primarily related to the sale of store property.

Included in net income for the prior year 26-week period ended July 30, 2022, is a pretax gain of $7.2 million ($5.6 million after-tax or $0.31 per share) primarily related to the sale of store property.

Net sales for the 26 weeks ended July 29, 2023, and July 30, 2022, were $3.151 billion and $3.200 billion, respectively.

Total retail sales for the 26 weeks ended July 29, 2023, and July 30, 2022, were $3.013 billion and $3.133 billion, respectively. Total retail sales decreased 4 percent for the 26-week period ended July 29, 2023, compared to the prior year 26-week period. Sales in comparable stores decreased by 4 percent.

Consolidated gross margin for the 26 weeks ended July 29, 2023, was 41.3 percent of sales compared to 43.7 percent of sales for the prior year’s 26-week period.

Retail gross margin for the 26 weeks ended July 29, 2023, was 43.0 percent of sales compared to 44.5 percent of sales for the prior year’s 26-week period.

Operating expenses for the 26 weeks ended July 29, 2023, were $818.9 million (26.0 percent of sales) compared to $802.1 million (25.1 percent of sales) for the prior year’s 26-week period. The increase in operating expenses is primarily due to increased payroll and payroll-related expenses.

Share Repurchase
During the 13 weeks ended July 29, 2023, the company purchased $103.4 million (approximately 358,000 shares) of Class A Common Stock at an average price of $289.32 per share. During the 26 weeks ended July 29, 2023, the company purchased $217.3 million (approximately 715,000 shares) at an average price of $303.98 per share. As of July 29, 2023, authorization of $458.1 million remained under the May 2023 program.

Total shares outstanding (Class A and Class B Common Stock) at July 29, 2023 and July 30, 2022 were 16.4 million and 17.2 million, respectively.

Store Information
Dillard’s has announced the upcoming closure of its MacArthur Center location in Norfolk, Virginia (240,000 square feet). The store is expected to close in September 2023. The company operates 274 Dillard’s stores, including 27 clearance centers, spanning 29 states (totaling 46.9 million square feet).

Photo courtesy Dillard’s