August 8, 2012 - Little Rock, Arkansas - Dillard's, Inc. (DDS-NYSE) (the "Company" or "Dillard's") announced operating results for the 13 weeks ended July 28, 2012. This release contains certain forward-looking statements. Please refer to the Company's cautionary statements regarding forward-looking information included below under "Forward-Looking Information".
Second Quarter Results
Dillard's reported net income for the 13 weeks ended July 28, 2012 of $31.0 million, or $0.63 per diluted share compared to net income of $17.6 million or $0.32 per share for the 13 weeks ended July 30, 2011. Highlights of the 13 weeks ended July 28, 2012 included:
Dillard's Chief Executive Officer, William T. Dillard, II, stated, "Continuing on the momentum of a successful first quarter, we are proud to report a 97% increase in second quarter earnings per share. Our 3% sales increase combined with gross margin improvement and control of our expenses enabled us to report a notable improvement in operating results today. Additionally, with strong cash flow during the quarter, we repurchased $134.6 million of Class A Common Stock under our share repurchase program."
Included in net income for the prior year second quarter is a $2.1 million net pretax gain ($1.4 million after tax or $0.02 per share) relating to the sale of an interest in a mall joint venture.
Net Sales - 13 Weeks
Net sales for the 13 weeks ended July 28, 2012 were $1.488 billion compared to net sales for the 13 weeks ended July 30, 2011 of $1.442 billion. Net sales include the operations of the Company's construction business, CDI Contractors, LLC ("CDI").
Total merchandise sales (which exclude CDI) for the 13-week period ended July 28, 2012 were $1.456 billion compared to $1.426 billion for the 13-week period ended July 30, 2011. Total merchandise sales increased 2% during the second quarter. Sales in comparable stores increased 3%.
Sales trends were strongest in ladies' accessories and lingerie, followed by shoes and cosmetics. Weakest performing categories were home and furniture and juniors' and children's apparel. Sales trends were strongest in the Central region, followed by the Eastern and Western regions.
Gross margin from retail operations (which excludes CDI) was 34.3% (of sales) for the 13 weeks ended July 28, 2012 compared to 33.6% for the prior year second quarter. Consolidated gross margin for the 13 weeks ended July 28, 2012 was 33.6% compared to 33.2% during the prior year second quarter. Inventory in comparable stores was flat at July 28, 2012 compared to July 30, 2011.
Advertising, Selling, Administrative and General Expenses
Advertising, selling, administrative and general expenses ("operating expenses") decreased approximately 70 basis points of sales during the 13 weeks ended July 28, 2012 compared to the 13 weeks ended July 30, 2011. Operating expenses were $398.8 million (26.8% of sales) and $396.0 million (27.5% of sales), respectively. During the second quarter, increases in payroll, services purchased and insurance were partially offset by cost savings in advertising and utilities.
During the 13 weeks ended July 28, 2012, Dillard's repurchased approximately $134.6 million of Class A Common Stock (2.1 million shares). At July 28, 2012, $115.4 million of authorization remained under the Company's share repurchase program. Total shares outstanding (Class A and Class B Common Stock) at July 28, 2012 and July 30, 2011 were 47.1 million and 54.4 million, respectively.
During the second quarter of 2012, the Company announced the upcoming closure of its Southpark Mall location in Colonial Heights, Virginia (85,000 square feet). The store is expected to close during the third quarter of 2012. During the second quarter, Dillard's closed its Hutchinson Mall location in Hutchinson, Kansas (70,000 square feet).
At July 28, 2012, the Company operated 285 Dillard's locations and 18 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total square footage at July 28, 2012 was 52.4 million.
Estimates for 2012
The Company is updating the following estimates for certain financial statement items for the fiscal year ending February 2, 2013 based upon current conditions. Actual results may differ significantly from these estimates as conditions and factors change - See "Forward-Looking Information".
The foregoing contains certain "forward-looking statements" within the definition of federal securities laws. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: statements including (a) words such as "may," "will," "could," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "estimate," "continue," or the negative or other variations thereof, and (b) statements regarding matters that are not historical facts. 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 prices and availability of oil and natural gas; the availability of consumer credit; the impact of competitive pressures in the department store industry and other retail channels including specialty, off-price, discount and Internet retailers; changes in consumer spending patterns, debt levels and their ability to meet credit obligations; changes in legislation, affecting such matters as the cost of employee benefits or credit card income; adequate and stable availability and pricing 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 breaches; 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 Annual Report on Form 10-K for the fiscal year ended January 28, 2012, contain other information on factors that may affect financial results or cause actual results to differ materially from forward-looking statements.
Julie Johnson Bull