|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
(Address of principal executive offices)
(Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
CLASS A COMMON STOCK as of May 28, 2022
CLASS B COMMON STOCK as of May 28, 2022
Index
DILLARD’S, INC.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DILLARD’S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
| April 30, |
| January 29, |
| May 1, | ||||
2022 | 2022 | 2021 | |||||||
Assets |
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
| |||
Cash and cash equivalents | $ | | $ | | $ | | |||
Accounts receivable |
| |
| |
| | |||
Merchandise inventories |
| |
| |
| | |||
Federal and state income taxes |
| — |
| — |
| | |||
Other current assets |
| |
| |
| | |||
Total current assets |
| |
| |
| | |||
Property and equipment (net of accumulated depreciation and amortization of $ |
| |
| |
| | |||
Operating lease assets |
| |
| |
| | |||
Deferred income taxes |
| |
| |
| | |||
Other assets |
| |
| |
| | |||
Total assets | $ | | $ | | $ | | |||
Liabilities and stockholders’ equity |
|
|
|
|
|
| |||
Current liabilities: |
|
|
|
|
|
| |||
Trade accounts payable and accrued expenses | $ | | $ | | $ | | |||
Current portion of long-term debt |
| |
| |
| — | |||
Current portion of finance lease liabilities |
| — |
| — |
| | |||
Current portion of operating lease liabilities | | | | ||||||
Federal and state income taxes |
| |
| |
| — | |||
Total current liabilities |
| |
| |
| | |||
Long-term debt |
| |
| |
| | |||
Operating lease liabilities |
| |
| |
| | |||
Other liabilities |
| |
| |
| | |||
Subordinated debentures |
| |
| |
| | |||
Commitments and contingencies |
|
|
|
|
|
| |||
Stockholders’ equity: |
|
|
|
|
|
| |||
Common stock |
| |
| |
| | |||
Additional paid-in capital |
| |
| |
| | |||
Accumulated other comprehensive loss |
| ( |
| ( |
| ( | |||
Retained earnings |
| |
| |
| | |||
Less treasury stock, at cost |
| ( |
| ( |
| ( | |||
Total stockholders’ equity |
| |
| |
| | |||
Total liabilities and stockholders’ equity | $ | | $ | | $ | | |||
See notes to condensed consolidated financial statements.
3
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Data)
| Three Months Ended | |||||
April 30, |
| May 1, | ||||
2022 | 2021 | |||||
Net sales | $ | | $ | | ||
Service charges and other income |
| |
| | ||
| |
| | |||
Cost of sales |
| |
| | ||
Selling, general and administrative expenses |
| |
| | ||
Depreciation and amortization |
| |
| | ||
Rentals |
| |
| | ||
Interest and debt expense, net |
| |
| | ||
Other expense |
| |
| | ||
Gain on disposal of assets |
| ( |
| ( | ||
Income before income taxes |
| |
| | ||
Income taxes |
| |
| | ||
Net income | $ | | $ | | ||
Earnings per share: |
|
|
|
| ||
Basic and diluted | $ | | $ | | ||
See notes to condensed consolidated financial statements.
4
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In Thousands)
Three Months Ended | ||||||
April 30, | May 1, | |||||
| 2022 |
| 2021 | |||
Net income | $ | | $ | | ||
Other comprehensive income: |
|
|
|
| ||
Amortization of retirement plan and other retiree benefit adjustments (net of tax of $ |
| |
| | ||
Comprehensive income | $ | | $ | | ||
See notes to condensed consolidated financial statements.
5
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended April 30, 2022 | ||||||||||||||||||
|
|
| Accumulated |
|
|
| ||||||||||||
Additional | Other | |||||||||||||||||
Common | Paid-in | Comprehensive | Retained | Treasury | ||||||||||||||
Stock | Capital | Loss | Earnings | Stock | Total | |||||||||||||
Balance, January 29, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| |
| — |
| | ||||||
Other comprehensive income |
| — |
| — |
| |
| — |
| — |
| | ||||||
Purchase of |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Cash dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common stock, $ |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Balance, April 30, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Three Months Ended May 1, 2021 | ||||||||||||||||||
|
|
| Accumulated |
|
|
| ||||||||||||
Additional | Other | |||||||||||||||||
Common | Paid-in | Comprehensive | Retained | Treasury | ||||||||||||||
Stock | Capital | Loss | Earnings | Stock | Total | |||||||||||||
Balance, January 30, 2021 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| |
| — |
| | ||||||
Other comprehensive income |
| — |
| — |
| |
| — |
| — |
| | ||||||
Purchase of |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Cash dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common stock, $ |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Balance, May 1, 2021 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
See notes to condensed consolidated financial statements.
6
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
| Three Months Ended | |||||
April 30, |
| May 1, | ||||
2022 | 2021 | |||||
Operating activities: |
|
|
|
| ||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
| ||
Depreciation and amortization of property and other deferred cost |
| |
| | ||
Gain on disposal of assets |
| ( |
| ( | ||
Proceeds from insurance |
| — |
| | ||
Loss on early extinguishment of debt |
| — |
| | ||
Changes in operating assets and liabilities: |
|
|
|
| ||
Decrease in accounts receivable |
| |
| | ||
Increase in merchandise inventories |
| ( |
| ( | ||
Increase in other current assets |
| ( |
| ( | ||
Increase in other assets |
| ( |
| ( | ||
Increase in trade accounts payable and accrued expenses and other liabilities |
| |
| | ||
Increase in income taxes |
| |
| | ||
Net cash provided by operating activities |
| |
| | ||
Investing activities: |
|
|
|
| ||
Purchase of property and equipment and capitalized software |
| ( |
| ( | ||
Proceeds from disposal of assets |
| |
| | ||
Proceeds from insurance |
| |
| | ||
Net cash (used in) provided by investing activities |
| ( |
| | ||
Financing activities: |
|
|
|
| ||
Principal payments on long-term debt and finance lease liabilities |
| — |
| ( | ||
Issuance cost of line of credit |
| — |
| ( | ||
Cash dividends paid |
| ( |
| ( | ||
Purchase of treasury stock |
| ( |
| ( | ||
Net cash used in financing activities |
| ( |
| ( | ||
Increase in cash and cash equivalents |
| |
| | ||
Cash and cash equivalents, beginning of period |
| |
| | ||
Cash and cash equivalents, end of period | $ | | $ | | ||
Non-cash transactions: |
|
|
|
| ||
Accrued capital expenditures | $ | | $ | | ||
Accrued purchase of treasury stock | | | ||||
Lease assets obtained in exchange for new operating lease liabilities |
| — |
| | ||
See notes to condensed consolidated financial statements.
7
DILLARD’S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of Dillard’s, Inc. (the “Company”) have been prepared in accordance with the rules of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 28, 2023 due to, among other factors, the seasonal nature of the business.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 filed with the SEC on March 29, 2022.
Note 2. Accounting Standards
Recently Issued Accounting Pronouncements
Management believes there is no accounting guidance issued but not yet effective that would be relevant to the Company’s current financial statements.
Note 3. Business Segments
The Company operates in
For the Company’s retail operations, the Company determined its operating segments on a store by store basis. Each store’s operating performance has been aggregated into
8
The following table summarizes the percentage of net sales by segment and major product line:
| Three Months Ended |
| |||
April 30, | May 1, | ||||
2022 |
| 2021 |
| ||
Retail operations segment |
|
|
| ||
Cosmetics | | % | | % | |
Ladies’ apparel |
| |
| | |
Ladies’ accessories and lingerie |
| |
| | |
Juniors’ and children’s apparel |
| |
| | |
Men’s apparel and accessories |
| |
| | |
Shoes |
| |
| | |
Home and furniture |
| |
| | |
| |
| | ||
Construction segment |
| |
| | |
Total | | % | | % | |
The following tables summarize certain segment information, including the reconciliation of those items to the Company’s consolidated operations:
| Retail |
|
| ||||||
(in thousands of dollars) | Operations | Construction | Consolidated | ||||||
Three Months Ended April 30, 2022 |
|
|
|
|
|
| |||
Net sales from external customers | $ | | $ | | $ | | |||
Gross margin |
| |
| |
| | |||
Depreciation and amortization |
| |
| |
| | |||
Interest and debt expense (income), net |
| |
| ( |
| | |||
Income (loss) before income taxes |
| |
| ( |
| | |||
Total assets |
| |
| |
| | |||
Three Months Ended May 1, 2021 |
|
|
|
|
|
| |||
Net sales from external customers | $ | | $ | | $ | | |||
Gross margin |
| |
| |
| | |||
Depreciation and amortization |
| |
| |
| | |||
Interest and debt expense (income), net |
| |
| ( |
| | |||
Income before income taxes |
| |
| |
| | |||
Total assets |
| |
| |
| | |||
Intersegment construction revenues of $
The retail operations segment gives rise to contract liabilities through the customer loyalty program associated with Dillard’s private label cards and through the issuances of gift cards. The loyalty program liability and a portion of the gift card liability is included in trade accounts payable and accrued expenses, and a portion of the gift card liability is included in other liabilities on the condensed consolidated balance sheets. Our retail operations segment contract liabilities are as follows:
Retail | ||||||||||||
April 30, | January 29, | May 1, | January 30, | |||||||||
(in thousands of dollars) |
| 2022 |
| 2022 |
| 2021 |
| 2021 | ||||
Contract liabilities | $ | | $ | | $ | | $ | | ||||
9
During the three months ended April 30, 2022 and May 1, 2021, the Company recorded $
Construction contracts give rise to accounts receivable, contract assets and contract liabilities. We record accounts receivable based on amounts expected to be collected from customers. We also record costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) in other current assets and trade accounts payable and accrued expenses in the condensed consolidated balance sheets, respectively. The amounts included in the condensed consolidated balance sheets are as follows:
Construction |
|
|
|
| ||||||||
April 30, | January 29, | May 1, | January 30, | |||||||||
(in thousands of dollars) | 2022 | 2022 | 2021 | 2021 | ||||||||
Accounts receivable | $ | | $ | | $ | | $ | | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
| |
| |
| |
| | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts |
| |
| |
| |
| | ||||
During the three months ended April 30, 2022 and May 1, 2021, the Company recorded $
The remaining performance obligations related to executed construction contracts totaled $
Note 4. Earnings Per Share Data
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data).
Three Months Ended | ||||||
| April 30, |
| May 1, | |||
2022 | 2021 | |||||
Net income | $ | | $ | | ||
Weighted average shares of common stock outstanding |
| |
| | ||
Basic and diluted earnings per share | $ | | $ | | ||
The Company maintains a capital structure in which common stock is the only equity security issued and outstanding, and there were
Note 5. Commitments and Contingencies
Various legal proceedings, in the form of lawsuits and claims, which occur in the normal course of business, are pending against the Company and its subsidiaries. In the opinion of management, disposition of these matters, individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, cash flows or results of operations.
At April 30, 2022, letters of credit totaling $
10
Note 6. Benefit Plans
The Company has an unfunded, nonqualified defined benefit plan (“Pension Plan”) for its officers. The Pension Plan is noncontributory and provides benefits based on years of service and compensation during employment. The Company determines pension expense using an actuarial cost method to estimate the total benefits ultimately payable to officers and allocates this cost to service periods. The actuarial assumptions used to calculate pension costs are reviewed annually. The Company contributed $
The components of net periodic benefit costs are as follows (in thousands):
Three Months Ended | ||||||
| April 30, |
| May 1, | |||
2022 | 2021 | |||||
Components of net periodic benefit costs: | ||||||
Service cost | $ | | $ | | ||
Interest cost |
| |
| | ||
Net actuarial loss |
| |
| | ||
Net periodic benefit costs | $ | | $ | | ||
The service cost component of net periodic benefit costs is included in selling, general and administrative expenses, and the interest cost and net actuarial loss components are included in other expense.
Note 7. Revolving Credit Agreement
The Company maintains a credit facility (“credit agreement”) for general corporate purposes including, among other uses, working capital financing, the issuance of letters of credit, capital expenditures and, subject to certain restrictions, the repayment of existing indebtedness and share repurchases. The credit agreement provides a borrowing capacity of $
In April 2021, the Company amended the credit agreement (the 2021 amendment). Pursuant to the 2021 amendment, the Company pays a variable rate of interest on borrowings under the credit agreement and a commitment fee to the participating banks. The rate of interest on borrowings is LIBOR plus
At April 30, 2022,
Note 8. Stock Repurchase Programs
In March 2018, the Company announced that its Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $
11
pursuant to preset trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934 or through privately negotiated transactions.
The following is a summary of share repurchase activity for the periods indicated (in thousands, except per share data):
| Three Months Ended | |||||
April 30, |
| May 1, | ||||
2022 | 2021 | |||||
Cost of shares repurchased | $ | | $ | | ||
Number of shares repurchased |
| |
| | ||
Average price per share | $ | | $ | | ||
All repurchases of the Company’s Class A Common Stock above were made at the market price at the trade date, and all amounts paid to reacquire these shares were allocated to treasury stock. As of April 30, 2022, the Company had completed the authorized purchases under the March 2018 Stock Plan and the May 2021 Stock Plan, and $
Note 9. Income Taxes
During the three months ended April 30, 2022 and May 1, 2021, income tax expense differed from what would be computed using the statutory federal income tax rate primarily due to the effects of state and local income taxes.
Note 10. Leases
The Company leases retail stores, office space and equipment under operating leases. As of April 30, 2022, January 29, 2022, and May 1, 2021, right-of-use operating lease assets, which are recorded in operating lease assets in the condensed consolidated balance sheets, totaled $
In determining our operating lease assets and operating lease liabilities, we apply an incremental borrowing rate to the minimum lease payments within each lease agreement. GAAP requires the use of the rate implicit in the lease whenever that rate is readily determinable; furthermore, if the implicit rate is not readily determinable, a lessee may use its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate our specific incremental borrowing rates that align with applicable lease terms, we utilize a model consistent with the credit quality of our outstanding debt instruments.
Renewal options of to
Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other contingent rentals are based entirely on a percentage of sales. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.
12
The following table summarizes the Company’s operating and finance leases:
|
| April 30, |
| January 29, |
| May 1, | |||||
(in thousands of dollars) | Classification - Condensed Consolidated Balance Sheets | 2022 | 2022 | 2021 | |||||||
Assets | |||||||||||
Finance lease assets |
| Property and equipment, net (a) | $ | — | $ | — | $ | | |||
Operating lease assets |
| Operating lease assets |
| |
| |
| | |||
Total leased assets | $ | | $ | | $ | | |||||
Liabilities |
|
|
|
|
|
|
|
| |||
Current |
|
|
|
|
|
|
|
| |||
Finance |
| Current portion of finance lease liabilities | $ | — | $ | — | $ | | |||
Operating |
| Current portion of operating lease liabilities |
| |
| |
| | |||
Noncurrent |
|
|
|
|
|
|
|
| |||
Finance |
| Finance lease liabilities |
| — |
| — |
| — | |||
Operating |
| Operating lease liabilities |
| |
| |
| | |||
Total lease liabilities |
|
| $ | | $ | | $ | | |||
|
| |||||||
Lease Cost |
| Three Months Ended | ||||||
(in thousands of dollars) | Classification - Condensed Consolidated Statements of Income | April 30, 2022 | May 1, 2021 | |||||
Operating lease cost (a) |
| Rentals | $ | | $ | | ||
Finance lease cost |
|
|
|
|
|
| ||
Amortization of leased assets |
| Depreciation and amortization |
| — |
| | ||
Interest on lease liabilities |
| Interest and debt expense, net |
| — |
| | ||
Net lease cost |
|
| $ | | $ | | ||
Maturities of Lease Liabilities
(in thousands of dollars) |
| Operating |
| Finance |
| ||||
Fiscal Year | Leases | Leases | Total | ||||||
2022 (excluding the three months ended April 30, 2022) | $ | | $ | | $ | | |||
2023 |
| |
| |
| | |||
2024 |
| |
| |
| | |||
2025 |
| |
| |
| | |||
2026 |
| |
| |
| | |||
After 2026 |
| |
| |
| | |||
Total minimum lease payments |
| |
| |
| | |||
Less amount representing interest |
| ( |
| |
| ( | |||
Present value of lease liabilities | $ | | $ | | $ | | |||
13
Lease Term and Discount Rate
| April 30, | ||
2022 | |||
Weighted-average remaining lease term |
|
| |
Operating leases |
| years | |
Weighted-average discount rate |
|
| |
Operating leases |
| | % |
Other Information
| Three Months Ended | |||||
April 30, |
| May 1, | ||||
(in thousands of dollars) | 2022 | 2021 | ||||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
| ||
Operating cash flows from operating leases | $ | | $ | | ||
Operating cash flows from finance leases |
| — |
| | ||
Financing cash flows from finance leases | — | | ||||
Note 11. Gain on Disposal of Assets
During the three months ended April 30, 2022, the Company recorded proceeds of $
During the three months ended May 1, 2021, the Company recorded proceeds of $
Note 12. Fair Value Disclosures
The estimated fair values of financial instruments presented herein have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange.
The fair value of the Company’s long-term debt and subordinated debentures is based on market prices and is categorized as Level 1 in the fair value hierarchy.
The fair value of the Company’s cash and cash equivalents and accounts receivable approximates their carrying values at April 30, 2022 due to the short-term maturities of these instruments. The fair value of the Company’s long-term debt at April 30, 2022 was approximately $
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the condensed consolidated financial statements and the footnotes thereto included elsewhere in this report, as well as the financial and other information included in our Annual Report on Form 10-K for the year ended January 29, 2022.
EXECUTIVE OVERVIEW
The Company’s results for the three months ended April 30, 2022 improved significantly compared to the three months ended May 1, 2021. Positive customer response to the Company’s merchandise selections led to a 23% increase in comparable store sales compared to the prior year first quarter.
Retail gross margin increased significantly to a record high of 47.3% during the three months ended April 30, 2022 compared to 42.6% during the three months ended May 1, 2021. As a result of the robust sales momentum throughout the quarter, the Company experienced strong sell through of its merchandise with notably less promotional and markdown activity compared to the prior year first quarter. The Company continued its efforts to control inventory during the quarter. Inventory increased 4% at April 30, 2022 compared to May 1, 2021 following a 17% decrease in the prior year first quarter.
Selling, general and administrative expenses (“SGA”) increased to $400.8 million (24.9% of sales) compared to $336.6 million (25.3% of sales) for the prior year first quarter. Increased retail sales during the first quarter of 2022 compared to the first quarter of 2021 provided leverage for these increased expenses as SGA from retail operations improved 60 basis points of sales. The dollar increase in SGA expense is primarily due to inflationary wage pressure in a highly competitive employment environment.
The Company reported net income of $251.1 million ($13.68 per share) compared to net income of $158.2 million ($7.25 per share) for the prior year first quarter. Included in net income for the three months ended April 30, 2022 is a pretax gain on disposal of assets of $7.2 million ($5.6 million after tax or $0.31 per share) primarily related to the sale of a store property. Included in net income for the three months ended May 1, 2021 is a pretax gain on disposal of assets of $24.7 million ($19.2 million after tax or $0.88 per share) primarily related to the sale of three store properties.
Cash flows provided by operating activities were $365.2 million for the three months ended April 30, 2022. The Company repurchased 0.7 million shares of its outstanding Class A Common Stock for $186.5 million under its stock repurchase plans during the three months ended April 30, 2022. At April 30, 2022, $425.5 million of authorization remained under the Company’s open stock repurchase plan.
As of April 30, 2022, the Company had working capital of $1,035.5 million (including cash and cash equivalents of $862.2 million) and $566.1 million of total debt outstanding, excluding operating lease liabilities, and including one scheduled debt maturity of $44.8 million at the end of fiscal 2022.
The Company maintained 280 Dillard’s stores, including 29 clearance centers, and an internet store as of April 30, 2022.
At present, a number of economic and geopolitical factors are affecting the U.S. and world economies (including countries from which we source some of our merchandise): rising gas prices (in part due to the war in Ukraine and the resulting sanctions imposed on Russia by the U.S. and other countries), increased shipping costs with reduced shipping capacity, U.S. port slowdowns, increasing U.S. wages in a tight labor market as well as some continuing effects from the COVID-19 pandemic. The extent to which our business will be affected by these factors depends on our customer’s ability and willingness to accept price increases and our ability to receive merchandise timely. Accordingly, the related financial impact to fiscal 2022 from these factors cannot be reasonably estimated at this time.
15
Key Performance Indicators
We use a number of key indicators of financial condition and operating performance to evaluate our business, including the following:
| Three Months Ended |
| |||||
April 30, |
| May 1, |
| ||||
2022 | 2021 |
| |||||
Net sales (in millions) | $ | 1,611.7 | $ | 1,328.5 | |||
Retail stores sales trend |
| 22 | % |
| 73 | % | |
Comparable retail stores sales trend |
| 23 | % |
| * | ||
Gross margin (in millions) | $ | 750.2 | $ | 554.5 | |||
Gross margin as a percentage of net sales |
| 46.5 | % |
| 41.7 | % | |
Retail gross margin as a percentage of retail net sales |
| 47.3 | % |
| 42.6 | % | |
Selling, general and administrative expenses as a percentage of net sales |
| 24.9 | % |
| 25.3 | % | |
Cash flow provided by operations (in millions) | $ | 365.2 | $ | 302.4 | |||
Total retail store count at end of period |
| 280 |
| 281 | |||
Retail sales per square foot | $ | 34 | $ | 28 | |||
Retail store inventory trend |
| 4 | % |
| (17) | % | |
Annualized retail merchandise inventory turnover |
| 2.7 |
| 2.5 | |||
* The Company reported no comparable store sales data for the three months ended May 1, 2021 due to the temporary COVID-19-related closures of its brick-and-mortar stores during the first quarter of fiscal 2020 as well as the interdependence between in-store and online sales.
General
Net sales. Net sales includes merchandise sales of comparable and non-comparable stores and revenue recognized on contracts of CDI Contractors, LLC (“CDI”), the Company’s general contracting construction company. Comparable store sales includes sales for those stores which were in operation for a full period in both the most recently completed quarter and the corresponding quarter for the prior fiscal year, including our internet store. Comparable store sales excludes changes in the allowance for sales returns. Non-comparable store sales includes: sales in the current fiscal year from stores opened during the previous fiscal year before they are considered comparable stores; sales from new stores opened during the current fiscal year; sales in the previous fiscal year for stores closed during the current or previous fiscal year that are no longer considered comparable stores; sales in clearance centers; and changes in the allowance for sales returns.
Sales occur as a result of interaction with customers across multiple points of contact, creating an interdependence between in-store and online sales. Online orders are fulfilled from both fulfillment centers and retail stores. Additionally, online customers have the ability to buy online and pick up in-store. Retail in-store customers have the ability to purchase items that may be ordered and fulfilled from either a fulfillment center or another retail store location. Online customers may return orders via mail, or customers may return orders placed online to retail store locations. Customers who earn reward points under the private label credit card program may earn and redeem rewards through in-store or online purchases.
Service charges and other income. Service charges and other income includes income generated through the long-term marketing and servicing alliance with Wells Fargo Bank, N.A. (“Wells Fargo Alliance”). Other income includes rental income, shipping and handling fees and gift card breakage.
Cost of sales. Cost of sales includes the cost of merchandise sold (net of purchase discounts, non-specific margin maintenance allowances and merchandise margin maintenance allowances), bankcard fees, freight to the distribution centers, employee and promotional discounts, shipping to customers and direct payroll for salon personnel. Cost of sales also includes CDI contract costs, which comprise all direct material and labor costs, subcontract costs and those indirect costs related to contract performance, such as indirect labor, employee benefits and insurance program costs.
16
Selling, general and administrative expenses. Selling, general and administrative expenses include buying, occupancy, selling, distribution, warehousing, store and corporate expenses (including payroll and employee benefits), insurance, employment taxes, advertising, management information systems, legal and other corporate level expenses. Buying expenses consist of payroll, employee benefits and travel for design, buying and merchandising personnel.
Depreciation and amortization. Depreciation and amortization expenses include depreciation and amortization on property and equipment.
Rentals. Rentals includes expenses for store leases, including contingent rent, data processing and other equipment rentals and office space leases.
Interest and debt expense, net. Interest and debt expense includes interest, net of interest income and capitalized interest, relating to the Company’s unsecured notes, subordinated debentures and commitment fees and borrowings, if any, under the Company’s credit agreement. Interest and debt expense also includes the amortization of financing costs and interest on finance lease obligations.
Other expense. Other expense includes the interest cost and net actuarial loss components of net periodic benefit costs related to the Company’s unfunded, nonqualified defined benefit plan and charges related to the write off of certain deferred financing fees in connection with the amendment and extension of the Company's secured revolving credit facility, if any.
Gain on disposal of assets. Gain on disposal of assets includes the net gain or loss on the sale or disposal of property and equipment, as well as gains from insurance proceeds in excess of the cost basis of insured assets, if any.
LIBOR
On March 5, 2021, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the 1-week and 2-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. The 2021 amendment to our credit agreement included an approach to replace LIBOR with a SOFR-based rate. We have not yet transitioned to a SOFR-based rate and will continue to monitor, assess and plan for the replacement of LIBOR with an alternative rate. We also intend to work with the Wells Fargo Alliance and any other applicable agreements to determine a suitable alternative reference rate.
Seasonality
Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income typically realized during the last quarter of our fiscal year due to the holiday season. Because of the seasonality of our business, results from any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.
17
RESULTS OF OPERATIONS
The following table sets forth the results of operations as a percentage of net sales for the periods indicated (percentages may not foot due to rounding):
Three Months Ended |
| ||||
| April 30, |
| May 1, |
| |
2022 | 2021 |
| |||
Net sales | 100.0 | % | 100.0 | % | |
Service charges and other income |
| 1.9 |
| 2.2 | |
| 101.9 |
| 102.2 | ||
Cost of sales |
| 53.5 |
| 58.3 | |
Selling, general and administrative expenses |
| 24.9 |
| 25.3 | |
Depreciation and amortization |
| 2.9 |
| 3.5 | |
Rentals |
| 0.3 |
| 0.4 | |
Interest and debt expense, net |
| 0.7 |
| 0.9 | |
Other expense |
| 0.1 |
| 0.4 | |
Gain on disposal of assets |
| (0.4) |
| (1.9) | |
Income before income taxes |
| 20.1 |
| 15.3 | |
Income taxes |
| 4.5 |
| 3.4 | |
Net income | 15.6 | % | 11.9 | % | |
Net Sales
| Three Months Ended |
| |||||||
April 30, | May 1, | ||||||||
(in thousands of dollars) | 2022 | 2021 | $ Change | ||||||
Net sales: |
|
|
|
|
|
| |||
Retail operations segment | $ | 1,580,799 | $ | 1,296,736 | $ | 284,063 | |||
Construction segment |
| 30,869 |
| 31,807 |
| (938) | |||
Total net sales | $ | 1,611,668 | $ | 1,328,543 | $ | 283,125 | |||
The percent change in the Company’s sales by segment and product category for the three months ended April 30, 2022 compared to the three months ended May 1, 2021 as well as the sales percentage by segment and product category to total net sales for the three months ended April 30, 2022 are as follows:
| % Change |
| % of |
| |
2022 - 2021 | Net Sales |
| |||
Retail operations segment |
|
|
|
| |
Cosmetics |
| 14.8 | % | 14 | % |
Ladies’ apparel |
| 26.3 |
| 23 | |
Ladies’ accessories and lingerie |
| 7.4 |
| 13 | |
Juniors’ and children’s apparel |
| 26.8 |
| 11 | |
Men’s apparel and accessories |
| 33.1 |
| 19 | |
Shoes |
| 22.3 |
| 15 | |
Home and furniture |
| 11.7 |
| 3 | |
| 98 | ||||
Construction segment |
| (2.9) |
| 2 | |
Total |
| 100 | % |
18
Net sales from the retail operations segment increased $284.1 million, or approximately 22%, and sales in comparable stores increased approximately 23% during the three months ended April 30, 2022 compared to the three months ended May 1, 2021. Sales in all product categories increased significantly over the first quarter last year.
For the three months ended April 30, 2022 compared to the three months ended May 1, 2021, the number of sales transactions increased by 14% and the average dollars per sales transaction increased by 5%.
We recorded a return asset of $14.7 million and $12.4 million and an allowance for sales returns of $30.3 million and $23.1 million as of April 30, 2022 and May 1, 2021, respectively.
During the three months ended April 30, 2022, net sales from the construction segment decreased $0.9 million, or approximately 3%, compared to the three months ended May 1, 2021 due to a decrease in construction activity. The remaining performance obligations related to executed construction contracts totaled $96.1 million as of April 30, 2022, increasing approximately 2% from January 29, 2022 and increasing approximately 77% from May 1, 2021, respectively. We expect these remaining performance obligations to be earned over the next nine to eighteen months.
Service Charges and Other Income
Three | |||||||||
| Three Months Ended |
| Months | ||||||
April 30, | May 1, | $ Change | |||||||
(in thousands of dollars) | 2022 |
| 2021 | 2022-2021 | |||||
Service charges and other income: |
|
|
| ||||||
Retail operations segment |
|
|
| ||||||
Income from Wells Fargo Alliance | $ | 17,174 | $ | 17,707 | $ | (533) | |||
Shipping and handling income |
| 10,222 |
| 8,480 |
| 1,742 | |||
Other |
| 3,654 |
| 2,427 |
| 1,227 | |||
| 31,050 |
| 28,614 |
| 2,436 | ||||
Construction segment |
| 64 |
| 378 |
| (314) | |||
Total service charges and other income | $ | 31,114 | $ | 28,992 | $ | 2,122 | |||
Shipping and handling income increased $1.7 million during the three months ended April 30, 2022 compared to the three months ended May 1, 2021 due to an increase in online shopping.
Gross Margin
| April 30, |
| May 1, |
|
|
| ||||||
(in thousands of dollars) | 2022 | 2021 | $ Change | % Change | ||||||||
Gross margin: |
|
|
|
|
| |||||||
Three months ended |
|
|
|
|
|
|
| |||||
Retail operations segment | $ | 748,444 | $ | 553,001 | $ | 195,443 |
| 35.3 | % | |||
Construction segment |
| 1,787 |
| 1,453 |
| 334 |
| 23.0 | ||||
Total gross margin | $ | 750,231 | $ | 554,454 | $ | 195,777 |
| 35.3 | % | |||
| Three Months Ended |
| |||
April 30, | May 1, |
| |||
2022 |
| 2021 | |||
Gross margin as a percentage of segment net sales: |
|
|
| ||
Retail operations segment | 47.3 | % | 42.6 | % | |
Construction segment |
| 5.8 |
| 4.6 | |
Total gross margin as a percentage of net sales |
| 46.5 |
| 41.7 | |
Gross margin, as a percentage of sales, increased to 46.5% from 41.7% during the three months ended April 30, 2022 compared to the three months ended May 1, 2021, respectively.
19
Gross margin from retail operations, as a percentage of sales, increased to 47.3% from 42.6% during the three months ended April 30, 2022 compared to the three months ended May 1, 2021, respectively. Management attributes the substantial improvement in gross margin to positive customer response to the company’s merchandise assortment combined with continued inventory management leading to decreased markdowns in the first quarter of 2022. Gross margin increased significantly in ladies’ apparel and men’s apparel and accessories. Gross margin increased moderately in shoes and juniors’ and children’s apparel. Gross margin increased slightly in home and furniture and cosmetics, while remaining flat in ladies’ accessories and lingerie.
Inventory increased 4% in total as of April 30, 2022 compared to May 1, 2021. A 1% change in the dollar amount of markdowns would have impacted net income by approximately $1 million for the three months ended April 30, 2022.
We source a significant portion of our private label and exclusive brand merchandise from countries that continue to be impacted by the COVID-19 virus. Additionally, many of our branded merchandise vendors may also source a significant portion of their merchandise from these same countries. Manufacturing capacity in those countries has been significantly impacted by the pandemic and in some countries the pandemic continues to negatively impact our supply chain, resulting in shipping delays as well as increased shipping costs.
Additionally, disruptions continue in the global transportation network, and it is unclear when these issues will be resolved. The California ports of Los Angeles and Long Beach, which together handle a significant portion of United States merchandise imports including our own imports, have experienced and are continuing to experience delays in processing imported merchandise, thereby resulting in untimely deliveries of merchandise. Further shipping delays may occur if the ongoing west coast port labor contract negotiations fail.
The United States is also currently experiencing a shortage of truck drivers, trucks and truck parts, which may impact overall costs of transportation and the timely delivery of merchandise.
At present, while monitoring all of these situations closely, management is unable to quantify the effects of these factors on the Company's results of operations and inventory position for fiscal 2022.
Selling, General and Administrative Expenses (“SGA”)
| April 30, |
| May 1, |
|
|
| ||||||
(in thousands of dollars) | 2022 | 2021 | $ Change | % Change | ||||||||
SGA: |
| |||||||||||
Three months ended |
|
|
|
|
|
|
|
| ||||
Retail operations segment | $ | 398,869 | $ | 335,143 | $ | 63,726 |
| 19.0 | % | |||
Construction segment |
| 1,904 |
| 1,471 |
| 433 |
| 29.4 | ||||
Total SGA | $ | 400,773 | $ | 336,614 | $ | 64,159 |
| 19.1 | % | |||
| Three Months Ended |
| |||
April 30, | May 1, |
| |||
2022 |
| 2021 | |||
SGA as a percentage of segment net sales: |
| ||||
Retail operations segment | 25.2 | % | 25.8 | % | |
Construction segment |
| 6.2 |
| 4.6 | |
Total SGA as a percentage of net sales |
| 24.9 |
| 25.3 | |
SGA decreased to 24.9% of sales during the three months ended April 30, 2022 compared to 25.3% of sales during the three months ended May 1, 2021, while increasing $64.2 million. SGA from retail operations decreased to 25.2% of sales for the three months ended April 30, 2022 compared to 25.8% of sales for the three months ended May 1, 2021, while increasing $63.7 million. The dollar increase in operating expenses is primarily due to increased payroll and payroll-related expenses in the current highly competitive wage environment. The Company remains focused on hiring, developing and retaining talented associates.
20
Payroll expense and related payroll taxes for the three months ended April 30, 2022 was $272.3 million compared to $225.4 million for the three months ended May 1, 2021, increasing $46.9 million.
Other Expense
| April 30, |
| May 1, |
|
|
| ||||||
(in thousands of dollars) | 2022 | 2021 | $ Change | % Change | ||||||||
Other expense: |
| |||||||||||
Three months ended |
|
|
|
|
|
|
|
| ||||
Retail operations segment | $ | 1,936 | $ | 4,964 | $ | (3,028) |
| (61.0) | % | |||
Construction segment |
| — |
| — |
| — |
| — | ||||
Total other expense | $ | 1,936 | $ | 4,964 | $ | (3,028) |
| (61.0) | % | |||
Other expense decreased $3.0 million during the three months ended April 30, 2022 compared to the three months ended May 1, 2021 primarily due to the write-off of certain deferred financing fees in connection with the amendment and extension of the Company’s secured revolving credit facility during the first quarter of fiscal 2021.
Gain on Disposal of Assets
| April 30, |
| May 1, |
| |||||
(in thousands of dollars) | 2022 | 2021 | $ Change | ||||||
(Gain) loss on disposal of assets: |
| ||||||||
Three months ended |
|
|
|
|
|
| |||
Retail operations segment | $ | (7,240) | $ | (24,673) | $ | 17,433 | |||
Construction segment |
| 3 |
| — |
| 3 | |||
Total gain on disposal of assets | $ | (7,237) | $ | (24,673) | $ | 17,436 | |||
During the three months ended April 30, 2022, the Company recorded proceeds of $8.1 million primarily from the sale of one store property, resulting in a gain of $7.2 million that was recorded in gain on disposal of assets.
During the three months ended May 1, 2021, the Company recorded proceeds of $29.3 million primarily from the sale of three store properties, resulting in a gain of $24.7 million that was recorded in gain on disposal of assets.
Income Taxes
The Company’s estimated federal and state effective income tax rate was approximately 22.5% and 22.2% for the three months ended April 30, 2022 and May 1, 2021, respectively. During the three months ended April 30, 2022 and May 1, 2021, income tax expense differed from what would be computed using the statutory federal income tax rate primarily due to the effects of state and local income taxes.
The Company expects the fiscal 2022 federal and state effective income tax rate to approximate 22%. This rate may change if results of operations for fiscal 2022 differ from management’s current expectations. Changes in the Company’s assumptions and judgments can materially affect amounts recognized in the condensed consolidated financial statements.
21
FINANCIAL CONDITION
A summary of net cash flows for the three months ended April 30, 2022 and May 1, 2021 follows:
| Three Months Ended |
| |||||||
April 30, | May 1, | ||||||||
(in thousands of dollars) | 2022 |
| 2021 | $ Change | |||||
Operating Activities | $ | 365,182 | $ | 302,413 | $ | 62,769 | |||
Investing Activities |
| (14,784) |
| 14,183 |
| (28,967) | |||
Financing Activities |
| (204,984) |
| (61,015) |
| (143,969) | |||
Total Increase in Cash and Cash Equivalents | $ | 145,414 | $ | 255,581 | $ | (110,167) | |||
Net cash flows from operations increased $62.8 million during the three months ended April 30, 2022 compared to the three months ended May 1, 2021 due to increases in net income, primarily due to increases in gross margin.
Wells Fargo owns and manages the Dillard’s private label cards under the Wells Fargo Alliance. The Company recognized income of $17.2 million and $17.7 million from the Wells Fargo Alliance during the three months ended April 30, 2022 and May 1, 2021, respectively.
During the three months ended May 1, 2021, the Company received proceeds from insurance of $1.8 million for claims filed for merchandise losses related to storm damage incurred at two stores.
Capital expenditures were $27.3 million and $16.9 million for the three months ended April 30, 2022 and May 1, 2021, respectively. The capital expenditures were primarily related to equipment purchases, the continued construction of one new store and the remodeling of existing stores. During the three months ended April 30, 2022, the Company opened a new store at University Place in Orem, Utah (160,000 square feet). The Company has also announced plans to replace a leased building at Westgate Mall in Amarillo, Texas with a newly remodeled owned facility in the fall of 2022.
During the three months ended April 30, 2022, the Company received cash proceeds of $8.1 million and recorded a related gain of $7.2 million, primarily from the sale of a 200,000 square foot location at Provo Towne Centre in Provo, Utah, which closed at the end of May 2022. The Company also closed its leased clearance center at University Square Mall in Tampa, Florida (80,000 square feet) during the first quarter of fiscal 2022. The Company has announced the upcoming closure of its leased location at the Sikes Center in Wichita Falls, Texas (150,000 square feet). There were no material costs associated or expected with any of these store closures. We remain committed to closing under-performing stores where appropriate and may incur future closing costs related to such stores when they close.
During the three months ended May 1, 2021, the Company received cash proceeds of $29.3 million and recorded a related gain of $24.7 million, primarily from the sale of three store properties.
During the three months ended April 30, 2022, the Company received life insurance proceeds of $4.4 million related to one policy. During the three months ended May 1, 2021, the Company received proceeds from insurance of $1.8 million for claims filed for building losses related to storm damage incurred at two stores.
The Company had cash on hand of $862.2 million as of April 30, 2022. The Company maintains a credit facility (“credit agreement”) for general corporate purposes including, among other uses, working capital financing, the issuance of letters of credit, capital expenditures and, subject to certain restrictions, the repayment of existing indebtedness and share repurchases. The credit agreement provides a borrowing capacity of $800 million, subject to certain limitations as outlined in the credit agreement, with a $200 million expansion option.
In April 2021, the Company amended the credit agreement (the “2021 amendment”). See Note 7, Revolving Credit Agreement, in the “Notes to Condensed Consolidated Financial Statements,” in Part I, Item I hereof for additional information. During the three months ended May 1, 2021, the Company paid $2.7 million in issuance costs related to the 2021 amendment, which were recorded in other assets on the condensed consolidated balance sheet, and the Company recognized a loss on the early extinguishment of debt of $2.8 million for the write-off of certain remaining deferred
22
financing fees related to the previous agreement. This charge was recorded in other expense on the condensed consolidated statement of income.
At April 30, 2022, no borrowings were outstanding, and letters of credit totaling $19.3 million were issued under the credit agreement leaving unutilized availability of $780.7 million.
During the three months ended April 30, 2022, the Company repurchased 0.7 million shares of Class A Common Stock at an average price of $253.72 per share for $186.5 million (including the accrual of $1.6 million of share repurchases that had not settled as of April 30, 2022) under its stock repurchase plans, and the Company paid $16.2 million for share repurchases that had not yet settled but were accrued at January 29, 2022. During the three months ended May 1, 2021, the Company repurchased 0.6 million shares of Class A Common Stock at an average price of $94.12 per share for $58.8 million (including the accrual of $4.0 million of share repurchases that had not settled as of May 1, 2021) under its stock repurchase plan. As of April 30, 2022, $425.5 million of authorization remained under the Company’s open stock repurchase plan. The ultimate disposition of the repurchased stock has not been determined. See Note 8, Stock Repurchase Programs, in the “Notes to Condensed Consolidated Financial Statements,” in Part I, Item I hereof for additional information.
The Company expects to finance its operations during fiscal 2022 from cash on hand, cash flows generated from operations and, if necessary, utilization of the credit facility. Depending upon our actual and anticipated sources and uses of liquidity, the Company will from time to time consider other possible financing transactions, the proceeds of which could be used to fund working capital or for other corporate purposes.
There have been no material changes in the information set forth under caption “Commercial Commitments” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
OFF-BALANCE-SHEET ARRANGEMENTS
The Company has not created, and is not party to, any special-purpose entities or off-balance-sheet arrangements for the purpose of raising capital, incurring debt or operating the Company’s business. The Company does not have any off-balance-sheet arrangements or relationships that are reasonably likely to materially affect the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or the availability of capital resources.
NEW ACCOUNTING STANDARDS
For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2, Accounting Standards, in the “Notes to Condensed Consolidated Financial Statements,” in Part I, Item I hereof.
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements. The following are or may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (a) statements including words such as “may,” “will,” “could,” “should,” “believe,” “expect,” “future,” “potential,” “anticipate,” “intend,” “plan,” “estimate,” “continue,” or the negative or other variations thereof; (b) statements regarding matters that are not historical facts; and (c) statements about the Company’s future occurrences, plans and objectives, including statements regarding management’s expectations and forecasts for the remainder of fiscal 2022 and beyond, statements concerning the opening of new stores or the closing of existing stores, statements regarding our competitive position, statements concerning capital expenditures and sources of liquidity, statements regarding the expected impact of the COVID-19 pandemic and related government responses, including the CARES Act and other subsequently-enacted COVID-19 stimulus packages, statements concerning share repurchases, statements concerning pension contributions, statements concerning changes in loss trends, settlements and other costs related to our self-insurance programs, statements regarding the expected phase out of LIBOR, statements concerning expectations regarding the payment of dividends,
23
statements regarding the impacts of inflation in fiscal 2022 and statements concerning estimated taxes. 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) the COVID-19 pandemic and its effects on public health, our supply chain, the health and well-being of our employees and customers, and the retail industry in general; other general retail industry conditions and macro-economic conditions including inflation and changes in traffic at malls and shopping centers; 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 and interest rates on 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 the Company’s ability to meet labor needs amid nationwide labor shortages and an intense competition for talent; changes in consumer spending patterns, debt levels and their ability to meet credit obligations; high levels of unemployment; changes in tax legislation; 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; the elimination of LIBOR; potential disruption from terrorist activity and the effect on ongoing consumer confidence; other epidemic, pandemic or public health issues; potential disruption of international trade and supply chain efficiencies; any government-ordered restrictions on the movement of the general public or the mandated or voluntary closing of retail stores in response to the COVID-19 pandemic; global conflicts (including the recent conflict in Ukraine) 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 29, 2022, contain other information on factors that may affect financial results or cause actual results to differ materially from forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in the information set forth under caption “Item 7A-Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
Item 4. Controls and Procedures.
The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). The Company’s management, with the participation of our Principal Executive Officer and Co-Principal Financial Officers, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly report, and based on that evaluation, the Company’s Principal Executive Officer and Co-Principal Financial Officers have concluded that these disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended April 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, the Company is involved in litigation relating to claims arising out of the Company’s operations in the normal course of business. This may include litigation with customers, employment related lawsuits, class action lawsuits, purported class action lawsuits and actions brought by governmental authorities. As of June 3, 2022, the Company is not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.
Item 1A. Risk Factors.
There have been no material changes in the information set forth under caption “Item 1A-Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
| (c) | Purchases of Equity Securities |
Issuer Purchases of Equity Securities
|
|
| (c) Total Number of Shares |
| (d) Approximate Dollar Value of | |||||
Purchased as Part | Shares that May | |||||||||
(a) Total Number | of Publicly | Yet Be Purchased | ||||||||
of Shares | (b) Average Price | Announced Plans | Under the Plans | |||||||
Period | Purchased | Paid per Share | or Programs | or Programs | ||||||
January 30, 2022 through February 26, 2022 | 462,748 | $ | 244.56 | 462,748 | $ | 498,854,110 | ||||
February 27, 2022 through April 2, 2022 | 140,770 | 249.49 | 140,770 | 463,732,753 | ||||||
April 3, 2022 through April 30, 2022 | 131,599 | 290.47 | 131,599 | 425,507,216 | ||||||
Total | 735,117 | $ | 253.72 | 735,117 | $ | 425,507,216 | ||||
In May 2021, the Company’s Board of Directors authorized the repurchase of up to $500 million of the Company’s Class A Common Stock under an open-ended stock repurchase plan (“May 2021 Stock Plan”). In February 2022, the Company announced that its Board of Directors approved a new open-ended stock repurchase program authorizing the Company to repurchase up to $500 million of its Class A Common Stock (“February 2022 Stock Plan”). During the three months ended April 30, 2022, the Company repurchased 0.7 million shares totaling $186.5 million under its stock repurchase plans. As of April 30, 2022, the Company had completed the authorized purchases under the May 2021 Stock Plan, and $425.5 million of authorization remained under the February 2022 Stock Plan.
Reference is made to the discussion in Note 8, Stock Repurchase Programs, in the “Notes to Condensed Consolidated Financial Statements” in Part I of this Quarterly Report on Form 10-Q, which information is incorporated by reference herein.
26
Item 6. Exhibits.
Number |
| Description |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | ||
31.3 | ||
32.1 | ||
32.2 | ||
32.3 | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| DILLARD’S, INC. | |
| (Registrant) | ||
| |||
|
| ||
Date: | June 3, 2022 |
| /s/ Phillip R. Watts |
Phillip R. Watts | |||
|
| Senior Vice President, Co-Principal Financial Officer and Principal Accounting Officer | |
|
| ||
/s/ Chris B. Johnson | |||
Chris B. Johnson | |||
Senior Vice President and Co-Principal Financial Officer |
28