Dillard’s, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended January 29, 2022 (52 weeks), filed March 29, 2022. Although the request metadata says “2020 Q4,” this filing reports fiscal 2021 and includes comparisons with fiscal 2020 and fiscal 2019; it is not a standalone Q4 report.
Business context
Dillard’s operates 280 department stores, including 30 clearance centers, across 29 states, plus an e-commerce business and CDI Contractors, its construction subsidiary. Retail generated 98% of fiscal 2021 net sales; construction generated 2%. The company’s sales are seasonal, with roughly one-third typically occurring in the fiscal fourth quarter.
Key financial results
| Metric | Fiscal 2021 | Fiscal 2020 | Fiscal 2019 |
|---|---|---|---|
| Net sales | $6,493.0 million | $4,300.9 million | $6,203.5 million |
| Gross margin | $2,745.3 million; 42.3% | $1,231.8 million; 28.6% | $1,967.5 million; 31.7% |
| SG&A | $1,536.6 million; 23.7% of sales | $1,211.5 million; 28.2% | $1,691.0 million; 27.3% |
| Net income (loss) | $862.5 million | $(71.7) million | $111.1 million |
| Diluted earnings (loss) per share | $41.88 | $(3.16) | $4.38 |
| Cash from operations | $1,280.0 million | $252.9 million | $365.1 million |
| Capital expenditures | $104.4 million | $60.5 million | $103.4 million |
Retail sales rose 53% from fiscal 2020; comparable retail sales were not reported against that disrupted year. Against fiscal 2019, retail sales increased 6% and comparable store sales increased 8%. Fiscal 2021 retail gross margin reached a reported record 42.9%, reflecting stronger demand, better inventory control and fewer markdowns. Fiscal 2021 results included a $24.7 million pretax gain, primarily from selling three store properties, and an $18.0 million tax benefit related to dividends paid to the company’s Investment and Employee Stock Ownership Plan. Fiscal 2020 included $10.7 million of impairment charges and a $45.2 million CARES Act tax benefit.
Liquidity, debt and capital allocation
- At year-end, cash and cash equivalents were $716.8 million and working capital was $948.5 million.
- Total debt, excluding lease liabilities, was $566.0 million: $366.0 million of unsecured notes and $200.0 million of 7.5% subordinated debentures. No revolving-facility borrowings were outstanding; $700.6 million of facility availability remained after letters of credit.
- The company reported $44.8 million of debt due in fiscal 2022. The $800 million revolving facility matures April 2026.
- Fiscal 2021 financing uses included $561.1 million of share repurchases (about 3.2 million shares) and $305.2 million of cash dividends, including a special $15-per-share dividend. A further $500 million repurchase authorization was announced in February 2022.
- Merchandise and store-construction purchase obligations totaled $1,550.5 million, expected to be paid during fiscal 2022.
Outlook, commentary and risks
Management’s fiscal 2022 estimates include depreciation and amortization of $190 million, rentals of $23 million, net interest and debt expense of $42 million, and capital expenditures of $150 million. Management expected an effective tax rate of approximately 22%. The filing provides no clear fiscal 2022 sales or earnings forecast. Management expected to fund operations with cash on hand, operating cash flow and, if needed, the revolving facility.
Management said supply-chain disruptions, shipping delays and costs, port slowdowns, inflation, fuel prices and labor-market tightness could affect fiscal 2022, but their financial impact could not then be reasonably estimated. Other principal risks include changing consumer demand and fashion preferences, intense retail competition, seasonal and weather-related variability, merchandise sourcing and import restrictions, store and distribution disruptions, cybersecurity and privacy incidents, and dependence on the Wells Fargo private-label card alliance, which expires in November 2024. The filing also notes exposure to named-storm losses at approximately 74 coastal stores.
The company reported a $226.3 million unfunded pension obligation; a 50-basis-point discount-rate change would affect that liability by about $13 million. Management expected a $6.2 million pension contribution in fiscal 2022. No material legal proceedings were reported as of March 29, 2022, and management did not expect ordinary-course claims to materially affect results. KPMG gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Confirm the period: fiscal 2021 ended January 29, 2022; the filing does not provide standalone fiscal Q4 results in the supplied text.
- Assess how much of the record profit and margin improvement is sustainable after comparing with pandemic-affected fiscal 2020 and fiscal 2019.
- Track fiscal 2022 merchandise availability, freight and labor costs, markdowns, inventory levels, and customer acceptance of price increases.
- Review debt maturities and liquidity needs alongside the large purchase obligations, planned capital spending, dividends and repurchase authorizations.
- Monitor the Wells Fargo alliance ahead of its November 2024 expiration and the assumptions underlying the pension obligation.