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Women’s Apparel and Shoes Drove Dillard’s Q2

Great news from Dillard’s Inc., which swung back to the black from the year-ago net loss and posted a second quarter retail gross margin that exceeded 2019 levels.

In a Nutshell:  Female consumers were out shopping during the quarter, spending on women’s apparel and shoes, which “significantly outperformed” other merchandise categories, the department store company reported.

Retail gross margin for the quarter grew to 41.7 percent from 31.1 percent a year ago. Compared with 2019, the 41.7 percent in gross margins improved 1,299 basis points from 28.7 percent.

“Management attributes the substantial improvement in gross margin to stronger consumer demand and better inventory management leading to decreased markdowns in the second quarter of 2021,” the company said.

During the quarter, Dillard’s closed its Paradise Valley mall location in Phoenix, Ariz. It also plans to shutter is clearance center at Valle Vista Mall in Harlingen, Tex. during the third quarter, which began Aug. 1. The company also plans to open a new location at Mesa Mall in Grand Junction, Colo. during the third quarter.

For the fiscal year ending Jan. 29, 2022, Dillard’s expects to incur capital expenditures of $120 million, doubling the $60 million incurred in 2020.

So far, it operates 249 Dillard’s department stores and 31 clearance centers in 29 states, in addition to e-commerce.

Net Sales: For the three months ended July 31, net sales rose 71 percent to $1.57 billion from $919.0 million. Excluding net sales from the company’s construction business, CDI Contractors LLC (CDI), total retail sales for the quarter ended July 31 was $1.54 billion, representing a 72 percent increase above the $893.2 million in total retail sales for the year-ago quarter.

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When compared with 2019’s pre-pandemic levels, total retail sales for the current quarter ended July 31 rose 12 percent from the $1.38 billion in the comparable 2019 quarter. Store retail sales for the second quarter of 2021 rose 14 percent when compared to the same 2019 quarter.

Inventory fell 13 percent from year-ago levels.

For the six months, net sales climbed 70 percent to $2.90 billion from $1.71 billion. Total retail sales, excluding net sales from CDI, rose 72 percent to $2.84 billion from $1.64 billion.

Earnings: The company ended back on the black for the quarter, with profits of $185.7 million, or $8.81 a diluted share, against a net loss of $8.6 million, or 37 cents, in the year-ago period. The company said the net loss for the year-ago quarter included a net tax benefit of $17.5 million or 75 cents a share, related to the federal government’s Coronavirus Aid, Relief and Economic Security Act.

The company ended the quarter with $670 million in cash. Dillard’s earlier this year amended its revolving credit facility.

For the six months, net income was $343.9 million, or $16.03 a diluted share, against a net loss of $170.5 million, or $7.33 a diluted share.

CEO’s Take: “The strong consumer demand we saw in the first quarter continued throughout the second quarter. This momentum, combined with our continuing focus on inventory and expense control, produced a sequential record performance,” CEO William T. Dillard, II said.