Exhibit 99
Dillard's, Inc. Reports Third Quarter Results
LITTLE ROCK, Ark.--(BUSINESS WIRE)--Nov. 20, 2003--Dillard's, Inc.
(NYSE:DDS) (the "Company" or "Dillard's") today announced operating
results for its third quarter ended November 1, 2003. In lieu of a
conference call, the Company has provided herein detailed information
regarding its third quarter operating performance, financial position,
ongoing strategies and senior management's current thoughts regarding
the business. This release contains certain forward-looking
statements. Please refer to the Company's cautionary statement
regarding forward-looking information included below under
"Forward-Looking Information".
Income
Net loss for the 13 weeks ended November 1, 2003 was $15.8 million
($0.19 per basic and fully diluted share) compared to a net loss of
$5.1 million ($0.06 per basic and fully diluted share) for the 13
weeks ended November 2, 2002.
During the 13 weeks ended November 1, 2003, the Company recorded
$1.7 million ($1.1 million after-tax, or $0.01 per basic and fully
diluted share) for asset impairment related to one store.
Management is pleased with the following highlights regarding the
Company's third quarter performance:
-- Control of inventory - Inventory in comparable stores at
November 1, 2003 was down 50 basis points in comparison to
inventory at November 2, 2002.
-- Control of advertising, selling, administrative and general
expenses - These operating expenses declined $22.6 million
during the third quarter of 2003 compared to the third quarter
of 2002.
Revenues
Sales for the 13 weeks ended November 1, 2003 were $1.765 billion
compared to sales for the 13 weeks ended November 2, 2002 of $1.794
billion, a decrease of 2%. Sales in comparable stores for the 13-week
period decreased 2%. Management believes unseasonably warm
temperatures hindered the Company's third quarter sales, particularly
in October.
Income from joint ventures is included in total revenues. The
Company sold its interest in two mall joint ventures during the fourth
and first quarters of 2002 and 2003, respectively. As a result of
these sales, income from joint ventures decreased approximately $3.8
million during the third quarter of 2003 compared to the third quarter
of 2002. Also included in revenues for the thirteen weeks ended
November 2, 2002 is a charge of $2.2 million related to the
amortization of the beneficial interests originally recognized on
off-balance-sheet financing. (See Debt/Interest Expense below).
Sales for the 39 weeks ended November 1, 2003 were $5.300 billion
compared to sales for the 39 weeks ended November 2, 2002 of $5.523
billion, a decrease of 4%. Sales in comparable stores for the 39-week
period decreased 4%.
Gross Margin/Inventory
Gross margin for the 13 weeks ended November 1, 2003 declined 160
basis points of sales. Management attributes the decline to sales
pressure during the third quarter and the Company's resulting efforts
to maintain effective control of inventory levels with increased
markdown activity. Management believes competition among industry
peers, partially driven by unseasonably warm fall temperatures,
further necessitated its aggressive posture with regard to markdown
activity, as customer response to cooler-weather merchandise was
hampered during the third quarter.
Inventory position at November 1, 2003 in comparable stores was
down 50 basis points compared to inventory position at November 2,
2002. Having entered the third quarter of 2003 with comparable
inventory position up 260 basis points and firmly committed to
continued inventory management during the period, management is
pleased with the overall level and quality of the Company's ending
inventory at November 1, 2003.
During the fourth quarter, Dillard's will continue to focus its
efforts on inventory control, keeping abreast of sales trends and
customer response to its merchandise mix during the important holiday
selling season. Management is hopeful that its improved merchandise
mix, which includes expanded and enhanced assortments of Dillard's
exclusive brands, will be well received in a holiday selling
environment hopefully bolstered by improving consumer confidence.
As a matter of policy, the Company does not provide guidance
regarding sales or gross margin performance. In an effort to improve
its competitive position and merchandise mix, Dillard's has launched
specific merchandise initiatives. Dillard's will continue the
execution of these initiatives with management's ongoing confidence in
their appropriateness based upon current industry factors and the
Company's current position. The initiatives include:
-- Increasing the penetration of Dillard's exclusive brand
merchandise and building Dillard's brands as national
destination brands.
-- Evaluating performance of national "branded" vendor sources,
de-emphasizing or replacing under-performers with more
promising brands. Based upon continued disappointing
performance of certain of the Company's largest national
vendor sources, the Company has recently taken notable steps
to reduce its exposure to certain over-distributed national
brands.
-- Following the "Product-first" buying philosophy through
considering specific customer needs first, seeking the best
source for that need and creating more market-right
assortments with less duplication among merchandise lines.
-- Executing the purchasing model encouraging vendors to provide
more margin support at time of purchase, hopefully reducing
the amount of margin assistance at end of the season. The
Company treats such vendor allowances as a reduction of
inventoriable product cost regardless of when received.
Dillard's management reiterates their strong belief that
merchandise differentiation by the Company is crucial to its future
success in the marketplace. The Company will continue to build its
exclusive brands as a means to deliver fashion to its customers at
compelling prices - in an effort to set Dillard's apart from its peers
as the store of choice for exclusive destination brands. At the same
time, the Company will seek differentiation by considering new and
unique presentations of assortments from national vendor sources,
seeking to build exclusive relationships with promising vendors and
designers where appropriate.
Advertising, Selling, Administrative and General Expenses
Advertising, selling, administrative and general ("SG&A") expenses
declined $22.6 million to $517.2 million for the 13 weeks ended
November 1, 2003 from $539.8 million for the comparable period ended
November 2, 2002. The improvement in
SG&A expenses was driven by savings in payroll ($10.4 million),
advertising ($7.2 million) and bad debt expense related to the
Company's proprietary credit card ($3.7 million). The Company achieved
savings in most other expense categories, as well.
The Company is in the process of repositioning its advertising
efforts, seeking the most appropriate media to reach new and existing
Dillard's customers. Savings achieved in advertising expense during
the quarter ended November 1, 2003 resulted from reduction in
newspaper advertising. Dillard's will consider reallocation of funds
saved in newspaper advertising to other media more appropriately
matched to its customers' lifestyles. This reallocation includes
expansion of advertising efforts in fashion magazines, regional
magazines, billboards, broadcast, the Internet and alternative uses of
newspaper circulation, such as insertion of preprinted material.
Management is pleased with the progress regarding the quality of
its accounts receivable portfolio and with the resulting reduction in
bad debt expense during the thirteen weeks ended November 1, 2003. The
Company has improved the scoring matrix used to manage its existing
portfolio, incorporating a credit bureau bankruptcy score with its own
custom credit bureau risk score. This has allowed the company to more
accurately identify accounts that will likely become delinquent.
Debt/Interest Expense
As a result of the Company's continuing efforts to reduce debt,
interest and debt expense declined to $37.3 million during the third
quarter of 2003 from $42.6 million for the third quarter of 2002.
Interest and debt expense for the 13 weeks ended November 1, 2003
includes $4.1 million received from the Internal Revenue Service as a
result of the Company's filing of an interest netting claim related to
previously settled tax years. Included in interest and debt expense
for the 13 weeks ended November 2, 2002 is a pretax gain of $1.7
million related to the early extinguishment of debt. (See below.)
On Monday, November 3, 2003, the Company retired the remaining
$130.0 million 6.13% notes maturing Saturday, November 1, 2003.
The Company has adopted SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 rescinds SFAS
No. 4 and 64, which required gains and losses from extinguishments of
debt to be classified as extraordinary items. For the 13 weeks ended
November 2, 2002, as a result of adopting SFAS No. 145, the Company
has reclassified a pretax gain of $1.7 million (after-tax $1.1 million
or $0.01 per basic and fully diluted share) to interest and debt
expense from extraordinary gain on early extinguishment of debt.
The Company utilizes securitizations of its credit card receivable
portfolio as a financing vehicle. At November 1, 2003 and November 2,
2002, all financing associated with the securitizations of the
Company's credit card portfolio was recorded on the balance sheet,
with $400 million in related financing recorded in long-term debt.
Prior to the quarter ended November 2, 2002, the Company accounted for
these transactions as off-balance-sheet financing. In early May 2002,
the Company amended its conduit financing agreement and as such future
transfers of accounts receivable did not qualify for sale treatment.
Based upon the expected average life of the credit card receivables,
the final $160 million of $400 million of accounts receivable
securitization were brought back onto the balance sheet at November 2,
2002. Accordingly, during the thirteen weeks ended November 2, 2002,
the Company took a charge to its income statement of $2.2 million
related to the amortization of the beneficial interests recognized
upfront on the off-balance-sheet financing.
At November 1, 2003 and November 2, 2002, the Company had $20.5
million and $285 million outstanding, respectively, in short-term
borrowings under its accounts receivable conduit facilities related to
its seasonal financing needs. Remaining available short-term
borrowings under these conduit facilities at November 1, 2003 were
$479.5 million. Management plans to meet peak borrowing demand in the
fourth quarter of 2003 with additional borrowings under these accounts
receivable conduit facilities. This peak demand is expected to be less
than $400 million, compared to the peak of $465 million during the
fall season of 2002.
Since May of 2002, the Company has maintained a $400 million
revolving credit facility to provide backup liquidity. At November 1,
2003, letters of credit totaling $72.5 million were issued under this
facility. There has never been any funded debt outstanding under this
facility since its inception.
Store Openings/Closings - 2003
During the third quarter of 2003, Dillard's opened three new
stores as planned:
Open
Dillard's at: City Month Sq. Feet
- ----------------------------------------------------------------------
Stony Point Fashion Park Richmond, Virginia September 200,000
Short Pump Town Center Richmond, Virginia September 200,000
Memorial City Mall(1) Houston, Texas October 250,000
(1) Replacement store
During the third quarter of 2003, the Company completed the
closure of one store in Richmond, Virginia, where it opened two new
locations. The store was located at The Shops at Willow Lawn and was a
65,000 square foot facility. The Company has announced the upcoming
closure of its Pinellas Parkside location in Pinellas Park, Florida.
This 105,000 square foot location is expected to close in January
2004. During the 39 weeks ended November 1, 2003, the Company has
closed or has announced the upcoming closures of nine Dillard's
locations. Since announcing its policy in late 2000 to close
under-performing stores as conditions permit, the Company has closed
36 Dillard's stores.
Store Opening Schedule - 2004
Scheduled store openings for the year ended January 29, 2005:
Open
Dillard's at: City Month Sq. Feet
- ----------------------------------------------------------------------
The Shoppes at East Chase Montgomery, Alabama March 155,000
Coastal Grand Myrtle Beach,
SouthCarolina March 155,000
Colonial University Village(1)Auburn, Alabama April 126,000
Greenbrier Mall(1) Chesapeake, Virginia April 160,000
Jordan Creek Town Center West Des Moines, Iowa August 200,000
Yuma Palms(1) Yuma, Arizona October 98,000
Eastern Shore Spanish Fort, Alabama October 126,000
(1) Replacement store
Capital expenditures for fiscal year 2004 are expected to
approximate $240 million.
At November 1, 2003, the Company operated 330 stores spanning 29
states - all operating with one name - Dillard's.
Supplemental Information
Additional information regarding sales for the quarter is
provided:
Sales by Month
Sales performance by month for the third quarter occurred as
follows:
Total Comparable
--------------------------
August -4% -4%
September +3% +3%
October -5% -5%
Quarter 3 -2% -2%
Sales by Category
Sales were strongest in the cosmetics and accessories, shoes and
lingerie and men's areas during the third quarter of 2003, with those
areas performing above the Company average trend for the period. Sales
in the women's and juniors' categories were in line with the total
Company sales performance. Sales were weakest in the home and
children's areas, with sales in children's trending significantly
below average.
Sales by Region
During the third quarter of 2003, sales were strongest in the
western and eastern regions of the Company. Sales in the central
region were slightly weaker than the average Company sales
performance.
Estimates for 2003
The Company is updating the following estimates for certain income
statement items for the fiscal year ended January 31, 2004 based upon
current conditions. Actual results may differ significantly from these
estimates as conditions and factors change - See "Forward Looking
Information".
In Millions
-----------
2003 2002
Estimated Actual
--------- ------
Depreciation and amortization $ 300 $ 301
Rental expense 68 68
Interest and debt expense 180 190
Capital expenditures 215 233
Forward-Looking Information
The foregoing contains certain "forward-looking statements" within
the definition of federal securities laws. These statements may be
identified by such forward looking terminology as "expect," "believe,"
"hope," "anticipate," "will," "look," "outlook," "plan, " "may" or
similar statements or variations of such terms. The Company cautions
that forward-looking statements, as such term is defined in the
Private Securities Litigation Reform Act of 1995, contained in this
report are based on estimates, projections, beliefs and assumptions of
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 (without limitation) include general retail industry
conditions and macro-economic conditions; 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; the impact of competitive pressures in the department store
industry and other retail channels including specialty, off-price,
discount, internet, and mail-order retailers; trends in personal
bankruptcies and charge-off trends in the credit card receivables
portfolio; changes in consumer spending patterns and debt levels;
adequate and stable availability of materials and production
facilities from which the Company sources its merchandise; changes in
operating expenses, including employee wages, commission structures
and related benefits; possible future acquisitions of store properties
from other department store operators and the continued availability
of financing in amounts and at the terms necessary to support the
Company's future business; potential disruption from terrorist
activity and the effect on ongoing consumer confidence; potential
disruption of international trade and supply chain efficiencies; world
conflict and the possible impact on consumer spending patterns and
other economic and demographic changes of similar or dissimilar
nature.
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Data)
Thirteen-Week Period Ended
------------------------------------
November 1, 2003 November 2, 2002
------------------------------------
% of % of
Amount Net Amount Net
Sales Sales
----------- ------ --------- ------
(Unaudited) (Unaudited)
Net sales $1,764.5 - $1,794.2 -
Total revenues 1,820.4 103.2 % 1,857.6 103.5 %
Cost of sales 1,200.0 68.0 1,191.4 66.4
Advertising, selling,
administrative and general
expenses 517.2 29.3 539.8 30.1
Depreciation and amortization 74.2 4.2 76.9 4.3
Rentals 14.7 0.9 14.9 0.8
Interest and debt expense 37.3 2.1 42.6 2.3
Asset impairment and store
closing charges 1.7 0.1 - (0.0)
----------- ---------
Total costs and expenses 1,845.1 1,865.6
----------- ---------
Loss before income taxes (24.7) (1.4) (8.0) (0.4)
Income tax benefit (8.9) (2.9)
----------- ------ --------- ------
Net loss $(15.8) (0.9)% $(5.1) (0.3)%
=========== ====== ========= ======
Basic and diluted loss per
share: $( 0.19) $(0.06)
=========== =========
Weighted average shares basic
and diluted: 83.3 84.7
=========== =========
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Data)
Thirty-Nine Week Period Ended
----------------------------------
November 1, 2003 November 2, 2002
-----------------------------------
% of % of
Amount Net Amount Net
Sales Sales
---------- ------ ------ ------
(Unaudited) (Unaudited)
Net sales $5,299.9 - $5,523.1 -
Total revenues 5,492.1 103.6 % 5,717.6 103.5 %
Cost of sales 3,598.4 67.9 3,615.2 65.4
Advertising, selling, administrative
and general expenses 1,534.6 29.0 1,590.4 28.8
Depreciation and amortization 222.8 4.2 231.2 4.2
Rentals 42.7 0.8 45.1 0.8
Interest and debt expense 140.1 2.6 143.3 2.6
Asset impairment and store
closing charges 18.8 0.3 (0.9) -
-------- --------
Total costs and expenses 5,557.4 5,624.3
-------- --------
(Loss) income before income taxes (65.3) (1.2) 93.3 1.7
Income taxes (benefit) (23.5) 33.6
-------- --------
(Loss) income before accounting
change (41.8) (0.8) 59.7 1.1
Cumulative effect of accounting
change - - (530.3) (9.6)
-------- ----- -------- -----
Net loss $(41.8) (0.8)%$(470.6) (8.5)%
======== ===== ======== =====
Basic earnings (loss) per share:
(Loss) income before
accounting change $(0.50) $0.71
Cumulative effect of
accounting change - (6.28)
-------- --------
Net loss
Diluted $(0.50) $(5.57)
======== ========
Diluted earnings (loss) per share:
(Loss) income before accounting
change $(0.50) $0.70
Cumulative effect of accounting
change - (6.21)
-------- --------
Net loss
Diluted $(0.50) $(5.51)
======== ========
Weighted average shares:
Weighted average shares:
Basic 83.7 84.5
======== ========
Diluted
Diluted 83.7 85.4
======== ========
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Data)
Fifty-Two Week Period Ended
----------------------------------
November 1, 2003 November 2, 2002
-----------------------------------
% of % of
Amount Net Amount Net
Sales Sales
---------- ------ ------ ------
(Unaudited) (Unaudited)
Net sales $7,687.8 - $8,057.1 -
Total revenues 8,008.4 104.2 % 8,315.0 103.2 %
Cost of sales 5,237.4 68.1 5,318.5 66.0
Advertising, selling,
administrative and general
expenses 2,108.2 27.4 2,161.9 26.8
Depreciation and amortization 293.0 3.8 309.2 3.8
Rentals 65.7 0.9 70.7 0.9
Interest and debt expense 186.6 2.4 191.1 2.4
Asset impairment and store
closing charges 71.9 1.0 0.9 -
-------- --------
Total costs and expenses 7,962.8 8,052.3
-------- --------
Income before income taxes 45.6 0.6 262.7 3.3
Income taxes 15.2 101.5
-------- --------
Income before accounting change 30.4 0.4 161.2 2.0
Cumulative effect of accounting
change - - (530.3) (6.6)
-------- ----- -------- -----
Net income (loss) $30.4 0.4 %$(369.1) (4.6)%
======== ===== ======== =====
Basic earnings (loss) per share:
Income before accounting
change $0.36 $1.91
Cumulative effect of
accounting change - (6.29)
-------- --------
Net income (loss)
Diluted $0.36 $(4.38)
======== ========
Diluted earnings (loss) per share:
Income before accounting change $0.36 $1.89
Cumulative effect of accounting
change - (6.23)
-------- --------
Net income (loss)
Diluted $0.36 $(4.34)
======== ========
Weighted average shares:
Weighted average shares:
Basic 84.0 84.3
======== ========
Diluted
Diluted 84.2 85.1
======== ========
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Millions)
November 1, November 2,
2003 2002
----------- -----------
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $110.4 $103.2
Trade accounts receivable 1,119.9 1,239.9
Merchandise inventories 2,287.6 2,286.2
Other current assets 85.6 60.9
----------- ---------
Total current assets 3,603.5 3,690.2
Property and equipment, net 3,241.6 3,385.6
Goodwill 39.2 39.2
Other assets 130.9 227.6
----------- ---------
Total Assets $7,015.2 $7,342.6
=========== =========
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and accrued expenses $1,278.8 $1,187.8
Other short-term borrowings 20.5 285.0
Current portion of long-term debt and capital
leases 299.8 140.6
Federal and state income taxes - 19.5
----------- ---------
Total current liabilities 1,599.1 1,632.9
Long-term debt and capital leases 1,872.9 2,213.5
Other liabilities 137.7 112.1
Deferred income taxes 680.5 658.9
Guaranteed preferred beneficial interests in the
Company's subordinated debentures 531.6 531.6
Stockholders' equity 2,193.4 2,193.6
---------- ---------
Total Liabilities and Stockholders' Equity $7,015.2 $7,342.6
========== =========
Other Financial Information
(In Millions)
(Unaudited)
November November
1, 2,
2003 2002
-------- ---------
Square footage 56.2 57.0
======== ==========
Capital expenditures:
13 weeks ended $73.6 $86.0
39 weeks ended 171.8 193.5
CONTACT: Dillard's Inc., Little Rock
Julie J. Bull, 501-376-5965