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November 26, 2008 - Little Rock, Arkansas - Dillard's, Inc. (DDS-NYSE) (the "Company" or "Dillard's") announced operating results for the 13 weeks ended November 1, 2008. This release contains certain forward-looking statements. Please refer to the Company's cautionary statement regarding forward-looking information included below under "Forward-Looking Information".
Net loss for the 13 weeks ended November 1, 2008 was $56.0 million ($0.76 per share) compared to net loss of $11.3 million ($0.15 per share) for the 13 weeks ended November 3, 2007. Included in net loss for the 13 weeks ended November 1, 2008 are asset impairment and store closing charges of $9.3 million ($6.0 million after tax or $0.08 per share) related to closure of under-performing stores and $4.4 million ($2.8 million after tax or $.04 per share) of hurricane-related expenses. Included in net loss for the 13 weeks ended November 3, 2007 is a pretax gain of $11.1 million ($7.0 million after tax or $0.09 per share) related to hurricane recovery and asset impairment and store closing charges of $3.7 million ($2.3 after tax or $0.03 per share).
Dillard's Chief Executive Officer, William Dillard, II, stated, "The oppressive economic environment clearly weighed heavily on our results during the third quarter. We continue to take aggressive action to navigate these challenging times. We announced the closure of 21 under-performing stores during 2008, dramatically reduced capital spending for 2008 and 2009 and are executing appropriate operating expense reduction measures throughout the Company. These efforts are not only designed to position ourselves to weather near-term economic uncertainty but also to position Dillard's well for the long term." Accordingly, Dillard's highlights the following key financial strengths:
CDI Contractors, LLC.
Operating results for the thirteen weeks ended November 1, 2008 reflect the operations of CDI Contractors, LLC, ("CDI") a former equity method joint venture investment. The Company purchased the remaining 50% interest of CDI on August 29, 2008. The operations of CDI did not have a material impact on the operating results of the Company for the thirteen weeks ended November 1, 2008. Notably, the increase in accounts receivable from $10.0 million at November 3, 2007 to $80.1 million at November 1, 2008 is primarily due to the consolidation of CDI.
Revenues
Net sales for the 13 weeks ended November 1, 2008 were $1.508 billion compared to net sales for the 13 weeks ended November 3, 2007 of $1.633 billion. Total sales declined 10% during the 13-week period. Sales in comparable stores declined 9%.
During the 13 weeks ended November 1, 2008, net sales were above the Company's average performance trend in the Central region, slightly below trend in the Western region and below trend in the Eastern region. Sales of juniors' and children's apparel were significantly below trend during the period.
Gross Margin/Cost of Sales
Gross margin declined 390 basis points of sales during the 13 weeks ended November 1, 2008 primarily as a result of increased markdowns in a notably difficult sales environment. Inventory in comparable stores declined 7% as of November 1, 2008 compared to November 3, 2007.
Dillard's is committed to conservatively managing its inventory during this difficult retail environment. Dillard's efforts to improve gross margin performance include refining the merchandise mix by reducing duplication of product among vendor lines, eliminating under-performing brands and seeking brands that resonate with the Company's customers.
Advertising, Selling, Administrative and General Expenses
Advertising, selling, administrative and general ("S G & A") expenses declined $30.3 million during the third quarter as a result of expense saving measures implemented earlier in the fiscal year. Notable savings in payroll and related payroll taxes, advertising, services purchased and supplies were partially offset by increases in hurricane-related expenses. Dillard's has taken additional expense saving measures. Management believes recent expense saving initiatives will provide an additional
S G & A savings of approximately $70 million in 2009.
Included in S G & A expenses for the thirteen weeks ended November 1, 2008 were approximately $4.4 million ($2.8 million after tax or $.04 per share) of hurricane losses and remediation expenses related to Hurricane Ike which occurred in September of 2008. Excluding these expenses, S G and A expenses declined approximately $34.7 million. S G & A expenses were $490.7 million and $521.0 million during the 13 weeks ended November 1, 2008 and November 3, 2007, respectively.
Interest and Debt Expense
Net interest and debt expense declined $1.1 million for the 13 weeks ended November 1, 2008 compared to the 13 weeks ended November 3, 2007 primarily due to lower borrowing rates. Interest and debt expense was $22.0 million and $23.1 million during the 13 weeks ended November 1, 2008 and November 3, 2007, respectively. As of November 1, 2008, short-term borrowings of $360 million and letters of credit totaling $93.2 million were outstanding under the Company's $1.2 billion revolving credit facility.
Store Information
Earlier this month, Dillard's closed its Metro North Mall location in Kansas City, Missouri (161,000 square feet) and its Boulevard Mall location in Las Vegas, Nevada (200,000 square feet).
At November 1, 2008, the Company operated 317 Dillard's locations and 7 clearance centers spanning 29 states and an Internet store at www.dillards.com.
Estimates for 2008
The Company is updating the following estimates for certain income statement items for the fiscal year ending January 31, 2009 based upon current conditions. Actual results may differ significantly from these estimates as conditions and factors change - See "Forward-Looking Information
Forward-Looking Information
The foregoing contains certain "forward-looking statements" within the definition of federal securities laws. Statements made in this release regarding the Company's plans to close under-performing stores, reduce capital expenditures, reduce expenses, make changes to its merchandise mix, and the Company's estimates of depreciation and amortization, rental expense, interest and debt expense, capital expenditures, expected available borrowings under its credit facility, working capital reduction from closed stores and expected expense savings are forward looking statements. The Company cautions that forward-looking statements contained in this report are based on estimates, projections, beliefs and assumptions of management and information available to management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. Forward-looking statements of the Company involve risks and uncertainties and are subject to change based on various important factors. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of those factors include (without limitation) general retail industry conditions and macro-economic conditions; economic and weather conditions for regions in which the Company's stores are located and the effect of these factors on the buying patterns of the Company's customers, including the effect of changes in changes in prices and availability of oil and natural gas; the impact of competitive pressures in the department store industry and other retail channels including specialty, off-price, discount, internet, and mail-order retailers; changes in consumer spending patterns, debt levels and their ability to meet credit obligations or obtain credit; adequate and stable availability of materials, production facilities and labor from which the Company sources its merchandise; changes in operating expenses, including employee wages, commission structures and related benefits; system failures or data security; possible future acquisitions of store properties from other department store operators; the continued availability of financing in amounts and at the terms necessary to support the Company's future business; fluctuations in LIBOR and other base borrowing rates; potential disruption from terrorist activity and the effect on ongoing consumer confidence; epidemic, pandemic or other public health issues; potential disruption of international trade and supply chain efficiencies; world conflict and the possible impact on consumer spending patterns and other economic and demographic changes of similar or dissimilar nature. The Company's filings with the Securities and Exchange Commission, including its report on From 10-K for the fiscal year ended February 2, 2008, contain other information on factors that may affect financial results or cause actual results to differ materially from forward-looking statements.
Contact:
Julie J. Bull
(501) 376-5965
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