Dillard’s, Inc. — Form 10-K Summary
Period clarification: The filing is for fiscal 2020, the 52 weeks ended January 30, 2021, compared primarily with fiscal 2019, ended February 1, 2020. It is not a 2019 fourth-quarter filing; the supplied filing text does not provide standalone Q4 results.
Business context
Dillard’s operates department stores and an online store, with a separate general contracting construction segment. At January 30, 2021, it operated 282 stores, including 32 clearance centers, in 29 states. Fiscal 2020 results were heavily affected by COVID-19: stores began closing March 19, all locations were temporarily closed by April 9, and all had reopened by June 2, generally with reduced hours and safety measures.
Financial results and liquidity
| Metric | Fiscal 2020 | Fiscal 2019 |
|---|---|---|
| Net sales | $4.301 billion | $6.204 billion |
| Gross profit | $1.232 billion | $1.968 billion |
| Gross margin | 28.6% | 31.7% |
| SG&A | $1.211 billion | $1.691 billion |
| SG&A as % of sales | 28.2% | 27.3% |
| Net income (loss) | $(71.7) million; $(3.16) per share | $111.1 million; $4.38 per share |
| Cash from operating activities | $252.9 million | $365.1 million |
- Retail sales fell 30.8%; the company did not report comparable-store sales for the year because of temporary store closures and the interdependence of online and in-store sales. Construction-segment sales declined 26.5% to $140.7 million.
- Retail gross margin decreased to 29.4% from 32.6%, primarily due to increased markdowns. Inventory was down 26% year over year, with merchandise purchases reduced approximately 37%.
- SG&A dollars declined 28.4%, primarily from lower payroll expense, but rose as a share of sales because of reduced sales leverage. Payroll expense and related payroll taxes fell 33% to $788.5 million.
- Fiscal 2020 included $10.7 million of impairment charges on certain clearance locations and a $2.2 million loss primarily related to a property sale. Fiscal 2019 included a $20.3 million gain primarily from six property sales.
- The fiscal 2020 net loss included a $45.2 million tax benefit related to CARES Act NOL carrybacks to higher-rate tax years. The company reported a $153.4 million pretax loss and an $81.8 million income-tax benefit.
- Cash and cash equivalents were $360.3 million; working capital was $889.1 million. Merchandise inventory was $1.088 billion, versus $1.465 billion a year earlier.
- Total debt was approximately $565.8 million, excluding finance and operating lease liabilities: $365.8 million of unsecured notes and $200 million of subordinated debentures. No revolving-credit borrowings were outstanding at year-end; the $800 million facility had $662 million of availability after letters of credit. Long-term debt maturities included $44.8 million in fiscal 2022, with no scheduled maturities in fiscal 2021.
- Fiscal 2020 cash used in investing activities was $48.4 million and cash used in financing activities was $121.3 million. Capital expenditures were $60.5 million. The company repurchased $95.6 million of stock and paid $14.0 million in cash dividends.
Outlook, commentary and risks
- Management said the duration and business effects of COVID-19 remained uncertain and that the fiscal 2021 financial impact could not be reasonably estimated. Fiscal 2021 liquidity and sales could be further affected by customer demand and the company’s ability to manage inventory and expenses.
- Management expected to fund fiscal 2021 operations with cash on hand, operating cash flow and, if needed, the revolving credit facility. Fiscal 2021 estimates included depreciation and amortization of $200 million, rentals of $21 million, net interest and debt expense of $42 million, and capital expenditures of $130 million. No sales or earnings forecast was provided.
- Key risks include renewed store restrictions or weaker discretionary spending, supply-chain and import delays or costs, intense retail and online competition, markdown and fashion risk, and reliance on income from the Wells Fargo private-label card alliance, which expires in November 2024. Management also identified cybersecurity, weather, real-estate and labor-cost risks.
- The company had $1.084 billion of purchase obligations for merchandise and store construction commitments expected to be paid in fiscal 2021. It reported no material pending legal proceedings and said ordinary-course claims were not expected to materially affect results.
- The company expected to continue quarterly dividends in fiscal 2021, subject to board approval. It planned $6.1 million in fiscal 2021 pension contributions; the unfunded pension liability was $235.8 million at year-end.
Important facts for investors to verify
- Confirm the intended reporting period: this filing covers fiscal 2020, not 2019 Q4.
- Assess whether sales, gross margin and operating cash flow recover after store reopenings, and whether elevated markdowns persist.
- Separate recurring performance from the CARES Act tax benefit, impairment charges and prior-year property-sale gain.
- Monitor liquidity, inventory and purchase obligations against the company’s fiscal 2021 capital-spending estimate and uncertain demand.
- Review debt maturities, revolving-facility availability and the terms of the amended credit agreement, as well as the 2024 Wells Fargo alliance renewal risk.