Dillard's 2005 Annual Report Download - page 9

PART I
ITEM 1. BUSINESS.
General
Dillard’s, Inc. (the “Company”, “we”, “us”, “our” or “Registrant”) is an outgrowth of a department store
originally founded in 1938 by William Dillard. We were incorporated in Delaware in 1964. As of January 28,
2006, we operated 330 Dillards stores, selling a wide selection of merchandise, including men’s, women’s and
children’s apparel and accessories, cosmetics, home furnishings and other consumer goods, and are diversified
by size of store, merchandising character and character of community served. Most stores are located at suburban
shopping malls. Customers may also purchase products online at our website, and we offer an on-line bridal
registry to customers. We operate retail department stores located primarily in the southwest, southeast and
midwest. The stores are located in 29 states, with 51 stores being located in the western region, 124 stores in the
eastern region and 155 stores in the central region.
We conduct our retail merchandise business under highly competitive conditions. Although we are a large
regional department store, we have numerous competitors at the national and local level that compete with our
individual stores, including specialty, off-price, discount, internet, and mail-order retailers. Competition is
characterized by many factors including location, reputation, assortment, advertising, price, quality, service and
credit availability. We believe that our stores are in a strong competitive position with regard to each of these
factors. We will continue to make notable changes to our merchandise mix, positioning our stores toward a more
upscale and contemporary tone in an effort to attract new customers who are seeking exciting statements in
fashion. At the same time, we will work to maintain valued relationships with our existing loyal customer base
by providing updated fashion choices, dependable quality, reliable service and measurable value. Our expanded
selections of more upscale and contemporary choices include, but are not limited to, Dillard’s improved lines of
exclusive brand merchandise such as Antonio Melani, Gianni Bini, J. Vincent and Daniel Cremieux. Other
retailers may compete for customers on some or all of these bases, or on other bases, and may be perceived by
some potential customers as being better aligned with their particular preferences. The Company’s earnings
depend to a significant extent on the results of operations for the last quarter of its fiscal year. Due to holiday
buying patterns, sales for that period average approximately one-third of annual sales.
We purchase merchandise from many suppliers, no one of which accounted for more than 5% of our net
purchases during 2005. We have no long-term purchase commitments or arrangements with any of our suppliers,
we and believe that we are not dependent on any one supplier. We consider our relations with our suppliers to be
satisfactory.
Our merchandising, sales promotion, and store operating support functions are conducted in multiple
locations. Our back office sales support functions for the Company, such as accounting, product development,
store planning and information technology, are centralized.
We have developed a knowledge of each of our trade areas and customer bases for our stores. This
knowledge is gained through our regional merchandising structure in conjunction with store visits by senior
management and merchandising personnel and use of on-line merchandise information. We will continue to use
existing technology and research to edit assortments by store to meet the specific preference, taste and size
requirements of each local operating area.
Certain departments in our stores are licensed to independent companies in order to provide high quality
service and merchandise where specialization, focus and expertise are critical. The licensed departments vary by
store to complement our own merchandising departments. The principal licensed departments in the stores are
fine jewelry and a portion of an upscale women’s apparel vendor. The terms of the license agreements typically
are between three and five years with one year renewals and require the licensee to pay for fixtures and provide
its own employees. We regularly evaluate the performance of the licensed departments and require compliance
with established customer service guidelines.
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