Dillard's 2002 Annual Report Download - page 3

e are pleased to report the Dillard’s team, with the
ongoing support of our shareholders, made notable
progress in 2002 and we did it in a very challenging
retail environment. We increased income before extraor-
dinary item and accounting change to $136.3 million
during the fiscal year ended February 1, 2003 from
$65.8 million in the prior year.
Throughout 2002, we executed key merchandising
initiatives, which were previously noted as crucial to the
continued success of our Company. These changes are
designed to significantly improve our supply chain – the
manner through which we provide our customers with
great merchandise and exceptional value. By strengthen-
ing the supply chain with better buying processes, we
are giving our customers more reasons to shop Dillard’s.
At the same time, we are responding to their prefer-
ences, distinguishing ourselves from our competitors
with our own private brand merchandise and giving our
customers a sense of true ownership of their hometown
Dillard’s store.
We know that one of the best ways to deliver value
and distinction is through our private brand assortments
and we made real progress in 2002 in building these
brands. We increased the storewide penetration of these
brands to 18.2% from 15.4% (of sales) in the prior year
– and we are not yet finished. We will continue to
replace underperforming brands with private brands.
We encourage you as shareholders and shoppers to take
aclose look at our brands. We are confident you will
agree there is great potential in growing this part of
our business.
As a result of our initiatives to improve our supply
chain, we increased our gross margin 110 basis points
of sales in 2002. This is less improvement than we
had originally hoped, as we entered the year after a
record fourth quarter of 2001. However, the lackluster
retail sales climate which existed particularly during
the fourth quarter of 2002, and the resulting highly
competitive environment, was a hindrance to greater
gross margin improvement.
We remained focused on the balance sheet during
2002, executing good stewardship of our asset base and
further reducing indebtedness. We closed nine under-
performing stores during the year, eliminating their
detrimental effect on future operating results, and we
sold a real estate joint venture at a substantial profit. We
reduced our indebtedness $193 million. Additionally,
we opened seven new stores in select markets, and we
continue to seek opportunities to replace under-perform-
ing stores with locations such as these where we see an
opportunity to maximize our return for our shareholders.
Moving ahead into 2003, we will continue to improve
merchandise assortments. Dillard’s merchandising pro-
fessionals are committed to listening to our customers
and providing the right merchandise mix with special
emphasis upon growing private brands, and we intend
to deliver these selections with great service supported
by the rest of the Dillard’s team. We thank our associ-
ates and our shareholders for their valued contributions
to our continuing success.
Regards,
William Dillard, II Alex Dillard
Chairman of the Board President
and Chief Executive Officer
TO OUR SHAREHOLDERS
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Alex Dillard William Dillard, II
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