Dillard’s, Inc. reported a net loss for the thirteen weeks ended August 1, 2009 of $26.7 million, or 36 cents a share, compared to the net loss of $38.3 million, or 51 cents, a year ago. Included in year-ago period is a pretax gain of $17.9 million ($11.2 million after tax or 15 cents per share) primarily related to the sale of an airplane and asset impairment and store closing charges of $9.8 million ($6.1 million after tax or 8 cents per share).
Dillard’s Chief Executive Officer William Dillard, II, stated, “Although we are clearly disappointed with a net loss for the second quarter, we were pleased to realize continued significant benefits from our aggressive actions pertaining to inventory management, expense reduction and cash conservation.” Highlights of the thirteen weeks ended August 1, 2009 include:
- Improved merchandise gross margin performance of approximately 130 basis points of sales compared to prior year second quarter.
- Operating expense savings of $82.6 million compared to the prior year second quarter.
- Positive cash flow from operations of $183.1 million for the twenty six weeks ended August 1, 2009 compared to $109.7 million for the prior year twenty-six week period.
- Inventory reduction of $336.5 million (19%) at August 1, 2009 compared to August 2, 2008. Inventory in comparable stores declined 18%.
- Year over year debt reduction of $326.5 million.
Net sales for the thirteen weeks ended August 1, 2009 were $1.428 billion compared to net sales for the thirteen weeks ended August 2, 2008 of $1.608 billion. Net sales for the thirteen weeks ended August 1, 2009 include the operations of CDI Contractors, LLC (“CDI”) a former equity method joint venture investment.
Total merchandise sales were $1.366 billion, declining 15% during the thirteen-week period ended August 1, 2009 compared to the thirteen week period ended August 2, 2008. Merchandise sales in comparable stores declined 13%.
Gross Margin/Inventory
Gross margin from retail operations improved approximately 130 basis points of sales during the thirteen weeks ended August 1, 2009 compared to the thirteen weeks ended August 2, 2008 as a result of the Company’s successful inventory management efforts evidenced by lower inventory levels, decreased purchases and decreased markdown activity. Inventory in total and comparable stores declined 19% and 18%, respectively, at August 1, 2009 compared to August 2, 2008. Dillard’s remains focused on inventory management with realistic purchasing in light of current economic conditions combined with measures to better match the timing of merchandise receipts with anticipated customer demand.
Gross margin from retail operations excludes the effect of CDI Contractors, LLC, (“CDI”), a wholly-owned subsidiary of the Company. Including the effect of CDI, gross margin improved 10 basis points of sales during the second quarter. The Company purchased the remaining 50% interest of CDI on August 29, 2008.
Advertising, Selling, Administrative and General Expenses
Advertising, selling, administrative and general (“operating expenses”) expenses declined $82.6 million during the thirteen weeks ended August 1, 2009 compared to the thirteen weeks ended August 2, 2008 primarily as a result of the Company’s extensive expense reduction measures combined with recent store closures. Notable areas of savings during the second quarter of 2009 were payroll, advertising, services purchased and supplies. Management believes recent expense reduction initiatives combined with savings from store closures could produce an operating expense decline exceeding $200 million during the 2009 fiscal year.
Interest and Debt Expense
Net interest and debt expense declined $4.0 million for the thirteen weeks ended August 1, 2009 compared to the thirteen weeks ended August 2, 2008 primarily as a result of lower average debt. Interest and debt expense was $19.0 million and $23.0 million during the thirteen weeks ended August 1, 2009 and August 2, 2008, respectively.
Credit Facility
Dillard’s maintains a $1.2 billion revolving credit facility with JPMorgan Chase Bank as the lead agent. The credit agreement expires on December 12, 2012, and there are no financial covenants under this facility provided its availability exceeds $100 million. As of August 1, 2009, short-term borrowings of $67 million and letters of credit totaling $92.7 million were outstanding under the revolving credit facility.
CDI Contractors, LLC.
Operating results for the thirteen weeks ended August 1, 2009 reflect the operations of CDI Contractors, LLC, a former equity method joint venture investment. The Company purchased the remaining 50% interest of CDI on August 29, 2008. The increase in accounts receivable from $9.3 million at August 2, 2008 to $68.9 million at August 1, 2009 is primarily due to the consolidation of CDI.
Store Information
During the thirteen weeks ended August 1, 2009, Dillard’s closed its Tullahoma, Tennessee location (64,000 square feet). Currently, Dillard’s has identified five other locations for closure during 2009 and remains committed to closing under-performing stores where appropriate.
At August 1, 2009, the company operated 304 Dillard’s locations and 10 clearance centers spanning 29 states and an Internet store at www.dillards.com.
Dillard’s, Inc. and Subsidiaries | ||||||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||||||
(In Millions, Except Per Share Data) | ||||||||||||||||||||
| 13-Week Period Ended | ||||||||||||||||||||
August 1, 2009 |
| August 2, 2008 | ||||||||||||||||||
| % of | % of | |||||||||||||||||||
Amount | Net Sales | Amount | Net Sales | |||||||||||||||||
| Net sales | $ | 1,427.8 | – | $ | 1,607.8 | – | ||||||||||||||
| Total revenues | 1,455.2 | 101.9 | % | 1,646.5 | 102.4 | % | ||||||||||||||
| Cost of sales | 1,001.0 | 70.1 | 1,129.4 | 70.2 | ||||||||||||||||
| Advertising, selling, administrative and general expenses | 396.7 | 27.8 | 479.3 | 29.8 | ||||||||||||||||
| Depreciation and amortization | 66.4 | 4.6 | 73.0 | 4.6 | ||||||||||||||||
| Rentals | 13.9 | 1.0 | 14.5 | 0.9 | ||||||||||||||||
| Interest and debt expense, net | 19.0 | 1.3 | 23.0 | 1.4 | ||||||||||||||||
| Gain on disposal of assets | (0.5 | ) | 0.0 | (17.9 | ) | (1.1 | ) | |||||||||||||
| Asset impairment and store closing charges | – | 0.0 | 9.8 | 0.6 | ||||||||||||||||
Loss before income taxes and equity in losses of joint ventures | (41.3 | ) | (2.9 | ) | (64.6 | ) | (4.0 | ) | ||||||||||||
| Income tax benefit | (15.0 | ) | (27.3 | ) | ||||||||||||||||
| Equity in losses of joint ventures | (0.4 | ) | (0.0 | ) | (1.0 | ) | (0.1 | ) | ||||||||||||
| Net loss | $ | (26.7 | ) | (1.9 | )% | $ | (38.3 | ) | (2.4 | )% | ||||||||||
| Basic and diluted loss per share | $ | |||||||||||||||||||
