DILLARD'S, INC. [DDT] Filings

10-Q 1 dds-20221029x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 29, 2022


☐	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: 1-6140

DILLARD’S, INC.

(Exact name of registrant as specified in its charter)



DELAWARE		71-0388071
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201

(Address of principal executive offices)

(Zip Code)

(501) 376-5200

(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
Class A Common Stock	DDS	New York Stock Exchange

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.

☒ Yes ☐ No

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).

☒ Yes ☐ No

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.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

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).

☐ Yes ☒ No

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 November 26, 2022 13,138,681

CLASS B COMMON STOCK as of November 26, 2022 3,986,233

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Index

DILLARD’S, INC.

		Page
		Number
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of October 29, 2022, January 29, 2022 and October 30, 2021	3

	Condensed Consolidated Statements of Income for the Three and Nine Months Ended October 29, 2022 and October 30, 2021	4

	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 29, 2022 and October 30, 2021	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended October 29, 2022 and October 30, 2021	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 29, 2022 and October 30, 2021	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6.	Exhibits	31

SIGNATURES		32

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

DILLARD’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands)


	October 29,		January 29,		October 30,
	2022		2022		2021
Assets
Current assets:
Cash and cash equivalents	$	532,708	$	716,759	$	619,721
Accounts receivable		40,476		39,777		28,472
Short-term investments		197,971		—		—
Merchandise inventories		1,644,793		1,080,178		1,525,860
Federal and state income taxes		—		—		99,764
Other current assets		99,471		77,937		102,981

Total current assets		2,515,419		1,914,651		2,376,798

Property and equipment (net of accumulated depreciation and amortization of $2,647,231, $2,517,915 and $2,586,059, respectively)		1,146,064		1,190,151		1,218,840
Operating lease assets		36,663		42,941		41,189
Deferred income taxes		30,841		28,931		34,809
Other assets		63,646		68,883		68,560

Total assets	$	3,792,633	$	3,245,557	$	3,740,196

Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable and accrued expenses	$	1,293,699	$	886,233	$	1,285,786
Current portion of long-term debt		44,800		44,800		—
Current portion of finance lease liabilities		—		—		180
Current portion of operating lease liabilities		10,332		11,712		11,432
Federal and state income taxes		7,418		23,441		—

Total current liabilities		1,356,249		966,186		1,297,398

Long-term debt		321,327		321,247		365,982
Operating lease liabilities		26,232		30,969		29,293
Other liabilities		279,471		275,937		283,323
Subordinated debentures		200,000		200,000		200,000
Commitments and contingencies
Stockholders’ equity:
Common stock		1,240		1,240		1,240
Additional paid-in capital		958,974		956,653		955,198
Accumulated other comprehensive loss		(22,254)		(22,798)		(33,350)
Retained earnings		5,619,813		5,027,922		5,002,074
Less treasury stock, at cost		(4,948,419)		(4,511,799)		(4,360,962)

Total stockholders’ equity		1,609,354		1,451,218		1,564,200

Total liabilities and stockholders’ equity	$	3,792,633	$	3,245,557	$	3,740,196

See notes to condensed consolidated financial statements.

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DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Data)


	Three Months Ended				Nine Months Ended
	October 29,		October 30,		October 29,		October 30,
	2022		2021		2022		2021
Net sales	$	1,544,142	$	1,480,999	$	4,744,430	$	4,379,920
Service charges and other income		28,930		30,913		89,311		90,959

		1,573,072		1,511,912		4,833,741		4,470,879

Cost of sales		855,677		796,276		2,658,331		2,497,575
Selling, general and administrative expenses		413,838		393,191		1,215,943		1,095,673
Depreciation and amortization		46,665		50,188		140,793		146,639
Rentals		5,272		4,947		15,667		15,157
Interest and debt expense, net		6,957		10,550		27,108		32,856
Other expense		1,936		2,134		5,808		9,232
Gain on disposal of assets		(2)		(4)		(7,240)		(24,686)

Income before income taxes		242,729		254,630		777,331		698,433
Income taxes		54,820		57,300		174,880		157,200

Net income	$	187,909	$	197,330	$	602,451	$	541,233

Earnings per share:
Basic and diluted	$	10.96	$	9.81	$	34.05	$	25.76

See notes to condensed consolidated financial statements.

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DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In Thousands)


	Three Months Ended				Nine Months Ended
	October 29,		October 30,		October 29,		October 30,
	2022		2021		2022		2021
Net income	$	187,909	$	197,330	$	602,451	$	541,233
Other comprehensive income:
Amortization of retirement plan and other retiree benefit adjustments (net of tax of $58, $168, $174 and $505, respectively)		181		528		544		1,585

Comprehensive income	$	188,090	$	197,858	$	602,995	$	542,818

See notes to condensed consolidated financial statements.

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DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share and Per Share Data)


	Three Months Ended October 29, 2022
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive		Retained		Treasury
	Stock		Capital		Loss		Earnings		Stock		Total
Balance, July 30, 2022	$	1,240	$	958,974	$	(22,435)	$	5,435,331	$	(4,924,109)	$	1,449,001
Net income		—		—		—		187,909		—		187,909
Other comprehensive income		—		—		181		—		—		181
Purchase of 98,983 shares of treasury stock		—		—		—		—		(24,310)		(24,310)
Cash dividends declared:
Common stock, $0.20 per share		—		—		—		(3,427)		—		(3,427)
Balance, October 29, 2022	$	1,240	$	958,974	$	(22,254)	$	5,619,813	$	(4,948,419)	$	1,609,354


	Three Months Ended October 30, 2021
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive		Retained		Treasury
	Stock		Capital		Loss		Earnings		Stock		Total
Balance, July 31, 2021	$	1,240	$	955,198	$	(33,878)	$	4,808,737	$	(4,121,718)	$	1,609,579
Net income		—		—		—		197,330		—		197,330
Other comprehensive income		—		—		528		—		—		528
Purchase of 1,230,705 shares of treasury stock		—		—		—		—		(239,244)		(239,244)
Cash dividends declared:
Common stock, $0.20 per share		—		—		—		(3,993)		—		(3,993)
Balance, October 30, 2021	$	1,240	$	955,198	$	(33,350)	$	5,002,074	$	(4,360,962)	$	1,564,200


	Nine Months Ended October 29, 2022
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive		Retained		Treasury
	Stock		Capital		Loss		Earnings		Stock		Total
Balance, January 29, 2022	$	1,240	$	956,653	$	(22,798)	$	5,027,922	$	(4,511,799)	$	1,451,218
Net income		—		—		—		602,451		—		602,451
Other comprehensive income		—		—		544		—		—		544
Issuance of 9,000 shares under equity plans		—		2,321		—		—		—		2,321
Purchase of 1,708,918 shares of treasury stock		—		—		—		—		(436,620)		(436,620)
Cash dividends declared:
Common stock, $0.60 per share		—		—		—		(10,560)		—		(10,560)
Balance, October 29, 2022	$	1,240	$	958,974	$	(22,254)	$	5,619,813	$	(4,948,419)	$	1,609,354

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	Nine Months Ended October 30, 2021
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive		Retained		Treasury
	Stock		Capital		Loss		Earnings		Stock		Total
Balance, January 30, 2021	$	1,240	$	954,131	$	(34,935)	$	4,471,269	$	(3,950,697)	$	1,441,008
Net income		—		—		—		541,233		—		541,233
Other comprehensive income		—		—		1,585		—		—		1,585
Issuance of 9,000 shares under equity plans		—		1,067		—		—		—		1,067
Purchase of 2,590,065 shares of treasury stock		—		—		—		—		(410,265)		(410,265)
Cash dividends declared:
Common stock, $0.50 per share		—		—		—		(10,428)		—		(10,428)
Balance, October 30, 2021	$	1,240	$	955,198	$	(33,350)	$	5,002,074	$	(4,360,962)	$	1,564,200

See notes to condensed consolidated financial statements.

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DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)


	Nine Months Ended
	October 29,		October 30,
	2022		2021
Operating activities:
Net income	$	602,451	$	541,233
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and other deferred cost		141,978		148,319
Gain on disposal of assets		(7,240)		(24,686)
Proceeds from insurance		—		2,902
Loss on early extinguishment of debt		—		2,830
Accrued interest on short-term investments		(1,155)		—
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(699)		8,221
Increase in merchandise inventories		(564,615)		(438,097)
Increase in other current assets		(18,416)		(49,214)
Increase in other assets		(213)		(2,492)
Increase in trade accounts payable and accrued expenses and other liabilities		425,248		528,087
(Decrease) increase in income taxes		(18,918)		10,980

Net cash provided by operating activities		558,421		728,083

Investing activities:
Purchase of property and equipment and capitalized software		(94,771)		(79,748)
Proceeds from disposal of assets		8,095		29,293
Proceeds from insurance		4,886		3,801
Purchase of short-term investments		(196,816)		—
Distribution from joint venture		—		1,475

Net cash used in investing activities		(278,606)		(45,179)

Financing activities:
Principal payments on long-term debt and finance lease liabilities		—		(515)
Issuance cost of line of credit		—		(3,008)
Cash dividends paid		(11,013)		(9,734)
Purchase of treasury stock		(452,853)		(410,265)

Net cash used in financing activities		(463,866)		(423,522)

(Decrease) increase in cash and cash equivalents		(184,051)		259,382
Cash and cash equivalents, beginning of period		716,759		360,339

Cash and cash equivalents, end of period	$	532,708	$	619,721

Non-cash transactions:
Accrued capital expenditures	$	8,757	$	7,168
Stock awards		2,321		1,067
Lease assets obtained in exchange for new operating lease liabilities		3,392		4,536

See notes to condensed consolidated financial statements.

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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 and nine months ended October 29, 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.

During the fiscal quarter ended July 30, 2022, the Company began purchasing short-term investments. Short-term investments are securities with original maturities of greater than three months but less than twelve months and are comprised of U.S. Treasury Bills. The Company determines the classification of these securities as trading, available for sale or held to maturity at the time of purchase and re-evaluates these determinations at each balance sheet date. Our short-term investments are classified as held-to-maturity for the period presented as we have the positive intent and ability to hold these investments to maturity. Our held-to-maturity investments are stated at amortized cost, which approximated fair value, and are periodically assessed for other-than-temporary impairment.

Note 2. Accounting Standards

Recently Issued Accounting Pronouncements

Except as noted below, the Company has considered all recent accounting pronouncements and Management believes there is no accounting guidance issued but not yet effective that would be relevant to the Company’s current condensed consolidated financial statements.

Disclosure of Supplier Finance Program Obligations

In September 2022, the Financial Accounting Standards Board issued accounting standards update ("ASU") No. 2022-04, Disclosure of Supplier Finance Program Obligations. The ASU is intended to enhance the transparency of the use of supplier finance programs by requiring that the buyers in those programs provide additional disclosures about the program’s nature and potential magnitude, including a rollforward of the obligations and activity during the period. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The amendments in the update should be applied retrospectively, except for the amendment on rollforward information, which should be applied prospectively. The Company is currently assessing the impact of this ASU on our condensed consolidated financial statements.

Note 3. Business Segments

The Company operates in two reportable segments: the operation of retail department stores (“retail operations”) and a general contracting construction company (“construction”).

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 one reportable segment. The Company’s operating segments are

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aggregated for financial reporting purposes because they are similar in each of the following areas: economic characteristics, class of consumer, nature of products and distribution methods. Revenues from external customers are derived from merchandise sales, and the Company does not rely on any major customers as a source of revenue. Across all stores, the Company operates one store format under the Dillard’s name where each store offers the same general mix of merchandise with similar categories and similar customers. The Company believes that disaggregating its operating segments would not provide meaningful additional information.

The following table summarizes the percentage of net sales by segment and major product line:


	Three Months Ended				Nine Months Ended
	October 29,		October 30,		October 29,		October 30,
	2022		2021		2022		2021
Retail operations segment
Cosmetics	14	%	13	%	13	%	13	%
Ladies’ apparel	21		22		23		23
Ladies’ accessories and lingerie	13		14		14		15
Juniors’ and children’s apparel	10		11		10		10
Men’s apparel and accessories	20		20		20		19
Shoes	16		16		15		15
Home and furniture	3		3		3		3
	97		99		98		98
Construction segment	3		1		2		2
Total	100	%	100	%	100	%	100	%

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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 October 29, 2022
Net sales from external customers	$	1,499,072	$	45,070	$	1,544,142
Gross margin		685,643		2,822		688,465
Depreciation and amortization		46,614		51		46,665
Interest and debt expense (income), net		6,984		(27)		6,957
Income before income taxes		241,863		866		242,729
Total assets		3,737,746		54,887		3,792,633

Three Months Ended October 30, 2021
Net sales from external customers	$	1,460,184	$	20,815	$	1,480,999
Gross margin		682,317		2,406		684,723
Depreciation and amortization		50,122		66		50,188
Interest and debt expense (income), net		10,557		(7)		10,550
Income before income taxes		254,152		478		254,630
Total assets		3,703,257		36,939		3,740,196

Nine Months Ended October 29, 2022
Net sales from external customers	$	4,632,529	$	111,901	$	4,744,430
Gross margin		2,079,008		7,091		2,086,099
Depreciation and amortization		140,628		165		140,793
Interest and debt expense (income), net		27,154		(46)		27,108
Income before income taxes		775,965		1,366		777,331
Total assets		3,737,746		54,887		3,792,633

Nine Months Ended October 30, 2021
Net sales from external customers	$	4,296,316	$	83,604	$	4,379,920
Gross margin		1,876,558		5,787		1,882,345
Depreciation and amortization		146,441		198		146,639
Interest and debt expense (income), net		32,889		(33)		32,856
Income before income taxes		697,140		1,293		698,433
Total assets		3,703,257		36,939		3,740,196

Intersegment construction revenues of $10.7 million and $12.0 million for the three months ended October 29, 2022 and October 30, 2021, respectively, and $32.4 million and $28.6 million for the nine months ended October 29, 2022 and October 30, 2021, respectively, were eliminated during consolidation and have been excluded from net sales for the respective periods.

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
	October 29,		January 29,		October 30,		January 30,
(in thousands of dollars)	2022		2022		2021		2021
Contract liabilities	$	67,109	$	80,421	$	59,718	$	68,021

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During the nine months ended October 29, 2022 and October 30, 2021, the Company recorded $44.8 million and $35.4 million, respectively, in revenue that was previously included in the retail operations contract liability balances of $80.4 million and $68.0 million at January 29, 2022 and January 30, 2021, respectively.

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
	October 29,		January 29,		October 30,		January 30,
(in thousands of dollars)	2022		2022		2021		2021
Accounts receivable	$	31,111	$	25,912	$	18,586	$	25,094
Costs and estimated earnings in excess of billings on uncompleted contracts		3,512		2,847		2,333		450
Billings in excess of costs and estimated earnings on uncompleted contracts		9,969		6,298		6,521		4,685

During the nine months ended October 29, 2022 and October 30, 2021, the Company recorded $5.7 million and $4.1 million, respectively, in revenue that was previously included in billings in excess of costs and estimated earnings on uncompleted contracts of $6.3 million and $4.7 million at January 29, 2022 and January 30, 2021, respectively.

The remaining performance obligations related to executed construction contracts totaled $232.7 million, $93.9 million and $84.2 million at October 29, 2022, January 29, 2022 and October 30, 2021, respectively.

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).

DILLARD'S, INC. [DDT] Filings

DILLARD'S, INC. [DDS] Filings