Exhibit 99.1
Dillard's, Inc. Reports Second Quarter Results
LITTLE ROCK, Ark.--(BUSINESS WIRE)--Aug. 18, 2004--Dillard's, Inc.
(NYSE:DDS) (the "Company" or "Dillard's") today announced operating
results for its second quarter ended July 31, 2004. 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".
Net loss for the 13 weeks ended July 31, 2004 was $26.0 million
($0.31 per basic and fully diluted share) compared to net loss of
$50.4 million ($0.60 per basic and fully diluted share) for the 13
weeks ended August 2, 2003. During the 13 weeks ended August 2, 2003,
the Company recorded $17.1 million ($10.9 million after-tax, or $0.13
per basic and fully diluted share) for asset impairment and store
closing charges related to certain stores. Additionally, during the
second quarter of 2003, the Company recorded a call premium resulting
in additional interest expense of $15.6 million ($10.0 million
after-tax or $0.12 per basic and fully diluted share) associated with
a $125.9 million call of debt.
Highlights of the quarter ended July 31, 2004 include the
following:
-- Improvement in gross margin performance of 30 basis points of
sales - However, the improvement was insufficient to cover
negative sales leverage, as the Company experienced a
comparable store sales decline of 3% during the quarter.
-- Inventory in comparable stores declined 2% compared to
inventory position at August 2, 2003.
-- Decrease in advertising, selling, general and administrative
expenses of $7.7 million compared to the second quarter of
2003.
-- Decrease in interest expense of $6.3 million excluding a $15.6
call premium recorded during the 13 weeks ended August 2,
2003.
Sales
Sales for the 13 weeks ended July 31, 2004 were $1.671 billion
compared to sales for the 13 weeks ended August 2, 2003 of $1.721
billion, a decrease of 3%. Sales in comparable stores for the 13-week
period also decreased 3%.
Gross Margin/Merchandise Initiatives
Gross margin performance for the 13 weeks ended July 31, 2004
improved 30 basis points as a percentage of sales. Gross margin
improvement was driven by improved levels of markups partially offset
by higher levels of markdowns, as the Company worked to maintain
control over inventory levels in a period of declining sales.
Inventory position at July 31, 2004 in comparable stores declined 2%
compared to inventory position at August 2, 2003.
The Company continues to focus on improving its merchandise mix in
an effort to create more differentiation from its peers. These efforts
include:
-- Introducing new, younger-focused and more upscale national
brands.
-- Increasing storewide penetration of exclusive brands, with
special emphasis on presenting more fashion-forward and
upscale exclusive brands.
-- Eliminating or de-emphasizing brands that are not performing
with satisfactory sales and gross margins from both national
and exclusive brand sources.
-- Fine-tuning merchandise mix by store location to meet the
differing needs of the local demographic.
Storewide sales penetration of exclusive brand merchandise for the
26-week period ended July 31, 2004 was 22.1% compared to 18.8% during
the 26-week period ended August 2, 2003.
Advertising, Selling, Administrative and General Expenses
Advertising, selling, administrative and general expenses declined
$7.7 million during the 13 weeks ended July 31, 2004. The Company
achieved notable savings in bad debt expense of $9.5 million as a
result of improvement in the quality of the Company's credit card
portfolio as well as lower average accounts receivable balances.
Savings in bad debt expense, combined with decreases in supply
expense, services purchased and communication expense were partially
offset by increases in payroll, advertising expense and property
taxes. Advertising, selling, administrative and general expenses
increased 40 basis points as a percentage of sales due to negative
comparable store sales during the second quarter of 2004.
Debt/Interest Expense
Interest and debt expense declined to $37.5 million during the 13
weeks ended July 31, 2004 from $59.4 million for the 13 weeks ended
August 2, 2003. During the second quarter of 2003, the Company
recorded a call premium resulting in additional interest expense of
$15.6 million ($10.0 million after-tax or $0.12 per basic and fully
diluted share) associated with a $125.9 million call of debt.
Excluding this call premium, interest expense declined $6.3 million
during the 13 weeks ended July 31, 2004 as a result of the Company's
continued debt reduction.
At July 31, 2004, $122.0 million in short-term debt was
outstanding under the Company's $400 million account receivable
conduit facilities, and there were no short-term borrowings under the
$1 billion revolving credit facility. On Monday, August 2, 2004, the
Company retired $163.4 million of its maturing 6.43% notes.
Dillard's expects to fund its cyclical working capital needs
through a combination of financing from its accounts receivable
securitization conduit facilities and its revolving credit facility.
The Company expects that its peak working capital requirements during
fiscal 2004 will be approximately $500 million.
At July 31, 2004, letters of credit totaling $100.1 million were
outstanding under the Company's $1 billion revolving credit facility.
Definitive Agreement - Dillard National Bank
On August 8, 2004, the Company announced it has entered into a
definitive agreement to sell substantially all the assets of Dillard
National Bank, the Company's private label credit card subsidiary, to
GE Consumer Finance for approximately $1.25 billion, which includes
the assumption of $400 million of securitization liabilities, the
purchase of owned accounts receivable and an undisclosed premium.
Dillard's expects to use net proceeds to reduce debt outstanding, to
repurchase its common stock and for general corporate purposes.
Dillard's expects the transaction to be accretive to fiscal 2005
earnings per share.
As part of the transaction, Dillard's and GE Consumer Finance will
also enter into a long-term marketing and servicing alliance with an
initial term of 10 years. Dillard's and GE Consumer Finance will share
in the income generated by the long-term marketing and servicing
alliance. Depending upon the performance of the alliance, Dillard's
anticipates that income generated could be comparable to the earnings
currently generated by Dillard National Bank. The transaction is
expected to close by the end of the current fiscal year, subject to
customary regulatory review and closing conditions.
Impact of Hurricane Charley
Hurricane Charley interrupted operations in the Company's Florida
stores on Friday, August 13, 2004. Fourteen stores were closed on
Friday prior to the storm's arrival. Of those, 12 were opened for
business on Saturday and one was opened on Sunday. Two additional
stores that closed on Saturday, following the storm, were opened on
Monday. The Company's Port Charlotte location remains closed. Property
damage was minimal and was limited to minor water and roof damage.
Dillard's operates 43 stores in Florida.
Store Openings/Closings
On August 4, 2004, the Company opened its new store at Jordan
Creek Town Center in West Des Moines, Iowa. The newly constructed
Dillard's store, measuring 200,000 square feet, marks the Company's
fifth Iowa location.
During the 13 weeks ended July 31, 2004, Dillard's announced the
upcoming closure of Spectrum Mall in Phoenix, Arizona. The store has
most recently operated as a clearance unit and is expected to close in
the fall of 2004.
At July 31, 2004, the Company operated 329 Dillard's locations
spanning 29 states.
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Data)
Thirteen-Week Period Ended
---------------------------------------
July 31, 2004 August 2, 2003
---------------------------------------
% of % of
Amount Net Sales Amount Net Sales
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Net sales $1,671.4 - $1,721.5 -
Total revenues 1,730.1 103.5% 1,780.4 103.4%
Cost of sales 1,145.8 68.6 1,186.4 68.9
Advertising, selling,
administrative and general
expenses 500.1 29.9 507.8 29.5
Depreciation and amortization 74.3 4.4 74.6 4.3
Rentals 13.0 0.8 13.8 0.8
Interest and debt expense 37.5 2.2 59.4 3.5
Asset impairment and store
closing charges - 0.0 17.1 1.0
--------- ---------
Total costs and expenses 1,770.7 1,859.1
--------- ---------
Loss before income taxes (40.6) -2.4 (78.7) -4.6
Income taxes (14.6) (28.3)
--------- --------- --------- ---------
Net Loss $(26.0) -1.6% $(50.4) -2.9%
========= ========= ========= =========
Basic and diluted earnings
per share $(0.31) $(0.60)
========= =========
Basic and diluted weighted
average shares 83.7 83.4
========= =========
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Data)
Twenty Six-Week Period Ended
---------------------------------------
July 31, 2004 August 2, 2003
---------------------------------------
% of % of
Amount Net Sales Amount Net Sales
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Net sales $3,525.8 - $3,535.4 -
Total revenues 3,641.9 103.3% 3,671.7 103.9%
Cost of sales 2,333.3 66.2 2,398.4 67.8
Advertising, selling,
administrative and general
expenses 1,009.9 28.6 1,017.5 28.8
Depreciation and amortization 148.5 4.2 148.6 4.2
Rentals 26.7 0.8 27.9 0.8
Interest and debt expense 75.5 2.2 102.8 2.9
Asset impairment and store
closing charges 4.7 0.1 17.1 0.5
--------- ---------
Total costs and expenses 3,598.6 3,712.3
--------- ---------
Income (loss) before income
taxes 43.3 1.2 (40.6) (1.1)
Income taxes 15.6 (14.6)
--------- --------- --------- ---------
Net Income (Loss) $27.7 0.8% $(26.0) (0.7)%
========= ========= ========= =========
Basic and diluted earnings
per share $0.33 $(0.31)
========= =========
Weighted average shares:
Basic 83.6 84.0
========= =========
Diluted 84.1 84.0
========= =========
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Millions)
July 31, August 2,
2004 2003
--------- ---------
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $82.8 $150.5
Accounts receivable (net of allowance for
doubtful accounts of $39.0 and $48.5) 1,036.6 1,159.3
Merchandise inventories 1,723.3 1,742.1
Other current assets 32.3 40.7
--------- ---------
Total current assets 2,875.0 3,092.6
Property and equipment, net 3,146.8 3,248.3
Goodwill 36.7 39.2
Other assets 171.5 126.2
--------- ---------
Total Assets $6,230.0 $6,506.3
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and accrued expenses $731.4 $764.9
Other short-term borrowings 122.0 -
Current portion of long-term debt and capital
leases 257.2 137.5
Federal and state income taxes 113.6 14.9
--------- ---------
Total current liabilities 1,224.2 917.3
Long-term debt and capital leases 1,772.2 2,037.1
Other liabilities 150.4 138.1
Deferred income taxes 616.3 669.9
Guaranteed preferred beneficial interests in the
Company's subordinated debentures 200.0 531.6
Stockholders' equity 2,266.9 2,212.3
--------- ---------
Total Liabilities and Stockholders' Equity $6,230.0 $6,506.3
========= =========
Other Financial Information
(In Millions)
(Unaudited)
July 31, August 2,
2004 2003
--------- ---------
Square footage 56.1 55.9
========= =========
Capital expenditures:
13 weeks ended $59.2 $56.7
26 weeks ended 102.0 98.2
Supplemental Information
Sales by Month
Sales performance by month for the second quarter occurred as
follows:
Total Comparable
---------------------
May -5% -5%
June -1% -1%
July -4% -4%
Quarter 2 -3% -3%
Sales by Category
During the 13 weeks ended July 31, 2004, sales in cosmetics,
accessories, shoes and lingerie were above the Company average sales
trend. Sales of home merchandise were slightly above trend. Sales of
women's and juniors' apparel were in line with trend while below-trend
performances were noted in the men's and children's categories.
Sales by Region
During the 13 weeks ended July 31, 2004, sales in the Eastern
region were stronger than the Company average sales trend. Sales in
the Western region were slightly above trend, and the Central region
reported below-trend sales.
Estimates for 2004
The Company is updating the following estimates for certain income
statement items for the fiscal year ended January 29, 2005 based upon
current conditions. Actual results may differ significantly from these
estimates as conditions and factors change - See "Forward-Looking
Information".
In Millions
-----------
2004 2003
Estimated Actual
--------- ------
Depreciation and amortization $295 $291
Rental expense 61 64
Interest and debt expense 150 181
Capital expenditures 270 227
Forward-Looking Information
The foregoing contains certain "forward-looking statements" within
the definition of federal securities laws. Statements made in this
release regarding the Company's merchandise strategies, funding of
cyclical working capital needs, definitive agreement to sell
substantially all the assets of Dillard National Bank and the use of
such proceeds, the accretive nature of that transaction, the
performance of the long-term marketing and servicing alliance and the
anticipation of income generated by that alliance, closing of the
transaction, estimates of depreciation and amortization, rental
expense, interest and debt expense and capital expenditures for fiscal
year 2004 are forward-looking statements. 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; success in
gaining regulatory review and approval of the definitive agreement to
sell substantially all the assets of Dillard National Bank and the
effectiveness of the performance of the resulting long-term marketing
and servicing alliance with GE Consumer Finance; existing market
conditions regarding the company's Class A Common Stock and debt
available for use of proceeds from the transaction with GE Consumer
Finance; 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; fluctuations in LIBOR and other base
borrowing rates; 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.
CONTACT: Dillard's, Inc.
Julie J. Bull, 501-376-5965