Dillard’s, Inc. — Form 10-Q Summary
Business context and reporting period
The filing covers the quarter and six months ended July 31, 2021; the request metadata’s “2020 Q2” does not match the filing period. Comparisons are with the periods ended August 1, 2020. Dillard’s operates department stores and a general contracting construction business. It had 280 stores, including 31 clearance centers, and an internet store at quarter-end. The prior-year comparison is heavily affected by COVID-19 store closures and reopening.
Financial performance and liquidity
| Metric | Three months ended July 31, 2021 | Six months ended July 31, 2021 |
|---|---|---|
| Net sales | $1.570 billion, up 70.9% | $2.899 billion, up 69.9% |
| Gross profit / gross margin | $643.2 million / 41.0% | $1.198 billion / 41.3% |
| Net income | $185.7 million; $8.81 per diluted share | $343.9 million; $16.03 per diluted share |
| Cash from operations | $492.3 million for the six-month period |
- Quarterly retail sales increased approximately 72% year over year; retail gross margin rose to 41.7% from 31.1%. Management attributed margin improvement to stronger demand, better inventory management, and fewer markdowns. Retail inventory was down approximately 13% from the prior-year quarter.
- SG&A increased in dollars as stores reopened and payroll costs rose, but declined as a share of sales to 23.3% for the quarter from 29.1%. Six-month SG&A was 24.2% of sales versus 32.7%.
- Cash and cash equivalents were $669.5 million at July 31, 2021; working capital was $1.112 billion. Total debt, excluding lease liabilities, was $565.9 million: $365.9 million of long-term debt and $200 million of subordinated debentures. No revolving-facility borrowings were outstanding; $716.0 million of facility availability remained after letters of credit.
- Six-month capital expenditures were $41.2 million. The company repurchased $171.0 million of shares during the six months and declared dividends of $0.30 per share. A new $500 million repurchase authorization was approved in May 2021.
Material changes and unusual items
- Compared with the pandemic-disrupted 2020 quarter, sales and earnings recovered sharply. For additional context, retail sales were approximately 12% above the comparable 2019 quarter, and comparable-store sales were approximately 14% higher; management did not report a 2021-versus-2020 comparable-store figure because of prior-year closures and the interaction of online and in-store sales.
- Six-month results included a $24.7 million gain on sale of three store properties, with $29.3 million in related proceeds. They also included a $2.8 million loss on early extinguishment of debt from writing off financing fees related to the credit-facility amendment.
- The prior-year quarter and six-month periods included CARES Act tax benefits of $17.4 million and $32.1 million, respectively, from carrying back net operating losses to higher-rate tax years.
Outlook, risks, and contingencies
- No full-year earnings or sales guidance was provided. Management estimated a fiscal 2021 effective tax rate of approximately 22%–23% and said results remain subject to seasonal patterns and the continuing effects of COVID-19.
- Management cited supply-chain disruption, shipping delays and higher shipping costs, including congestion at the Los Angeles and Long Beach ports; it could not quantify the effect on fiscal 2021 results or inventory. COVID-19-related demand, operating, and liquidity impacts also remain uncertain.
- The company planned store openings in Grand Junction, Colorado, in fall 2021 and Orem, Utah, in spring 2022, and planned to close a clearance center in Harlingen, Texas, in the third quarter. It expects remaining construction-contract obligations of $51.8 million to be earned over the next nine to eighteen months.
- The revolving facility matures in April 2026 and uses LIBOR-based pricing; the company said it would work with lenders on a suitable alternative reference rate. Ordinary-course litigation was not expected by management to have a material adverse effect. Letters of credit under the facility totaled $20.2 million.
Important facts for investors to verify
- Confirm the intended filing period: this is the quarter ended July 31, 2021, not 2020 Q2.
- Assess how much of the sharp year-over-year improvement reflects recovery from 2020 closures, and track sales and margins against pre-pandemic comparisons.
- Monitor merchandise availability, freight costs, markdowns, and inventory as supply-chain conditions evolve.
- Separate recurring operating performance from the property-sale gain, debt-amendment charge, and prior-year CARES Act tax benefits.
- Review cash deployment, including ongoing share repurchases, planned store investment, and remaining facility availability; the filing gives no specific forward earnings outlook.