Dillard's 2004 Annual Report Download - page 14

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
EXECUTIVE OVERVIEW
Dillard’s, Inc. operates 329 retail department stores in 29 states. Our stores are located in suburban shopping malls and
offer a broad selection of fashion apparel and home furnishings. We offer an appealing and attractive assortment of
merchandise to our customers at a fair price. We offer national brand merchandise as well as our exclusive brand
merchandise. We seek to enhance our income by maximizing the sale of this merchandise to our customers. We do this
by promoting and advertising our merchandise and by making our stores an attractive and convenient place for our
customers to shop.
Fundamentally, our business model is to offer the customer a compelling price/value relationship through the
combination of high quality products and services at a competitive price. We seek to deliver a high level of profitability
and cash flow by:
• maximizing the effectiveness of our pricing and brand awareness;
• minimizing costs through leveraging our centralized overhead expense structure;
• sourcing;
• reinvesting operating cash flows into store growth, and distribution initiatives, and improving product quality in
our exclusive brands;
• returning profits to shareholders through dividends, share repurchases and increased share price; and
• continuing to offer access to credit services and financial products to our customers through our long-term
marketing and servicing alliance with GE Consumer Finance (“GE”).
The consumer retail sector is extremely competitive. Many different retail establishments compete for our customers’
business. These include other department stores, specialty retailers, discounters, internet and mail order retailers. We
also attempt to enhance our income by managing our operating costs without sacrificing service to our customers.
Items of note for the year ended January 29, 2005 include the following:
• The sale of substantially all of the assets of our private label credit card business and the establishment of a
long-term marketing and servicing alliance with GE. The sale generated total proceeds of $1.1 billion,
consisting of the assumption by GE of $400 million of securitized debt and net cash proceeds of approximately
$688 million and resulted in significantly strengthened financial position and liquidity. The financial impact of
the transaction on Dillard’s ongoing financial results will be determined by the effects of the Company’s use of
proceeds as well as the effect of income generated under the long-term marketing and servicing alliance.
Dillard’s expects to use net proceeds to reduce debt outstanding, to repurchase its common stock and for general
corporate purposes.
• The elimination of debt of $988 million, partially in conjunction with the sale of the credit card business.
• Gross profit improvement of 140 basis points of sales compared to the year ended January 31, 2004.
• Decrease in interest and debt expense of $42 million compared to the year ended January 31, 2004.
• Cash and cash equivalents of $498 million as of January 29, 2005.
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