Dillard's 2010 Annual Report Download - page 22

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Seasonality and Inflation
Our business, like many other retailers, is subject to seasonal influences, with a significant portion
of sales and income typically realized during the last quarter of our fiscal year due to the holiday
season. Because of the seasonality of our business, results from any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year.
We do not believe that inflation has had a material effect on our results during the periods
presented; however, there can be no assurance that our business will not be affected by such in the
future. In response to recent economic volatility in Asia and to increasing fabric prices (including
cotton) and overseas wages, we have sought solutions to help minimize the effects of these events on
our operations during fiscal 2011 by (1) negotiating efficiencies through our longstanding relationships
with our current suppliers, (2) considering alternative manufacturing sources, (3) redesigning our
garments and incorporating other types of fibers where appropriate and (4) adjusting price points as
necessary. Consequently, we believe the effects of these currently known trends on our gross margins in
fiscal 2011 will be minimal.
2011 Guidance
A summary of estimates on key financial measures for fiscal 2011 is shown below. There have been
no changes in the estimates for 2011 since the Company released its fourth quarter earnings on
February 22, 2011.
Fiscal 2011 Fiscal 2010
(in millions of dollars) Estimated Actual
Depreciation and amortization ....................... $260 $262
Rentals ........................................ 46 51
Interest and debt expense, net ....................... 71 74
Capital expenditures .............................. 150 98
General
Net sales. Net sales include merchandise sales of comparable and non-comparable stores and
revenue recognized on contracts of CDI, a former 50% equity method joint venture investment of the
Company that is a general contractor whose business includes constructing and remodeling stores for
the Company. Comparable store sales include sales for those stores which were in operation for a full
period in both the current month and the corresponding month for the prior year. Non-comparable
store sales include: sales in the current fiscal year from stores opened during the previous fiscal year
before they are considered comparable stores; sales from new stores opened during the current fiscal
year; sales in the previous fiscal year for stores closed during the current or previous fiscal year that are
no longer considered comparable stores; and sales in clearance centers.
Service charges and other income. Service charges and other income include income generated
through the Alliance with GE. Other income includes rental income, shipping and handling fees and
lease income on leased departments.
Cost of sales. Cost of sales includes the cost of merchandise sold (net of purchase discounts),
bankcard fees, freight to the distribution centers, employee and promotional discounts, non-specific
margin maintenance allowances and direct payroll for salon personnel. Cost of sales also includes CDI
contract costs, which comprise all direct material and labor costs, subcontract costs and those indirect
costs related to contract performance, such as indirect labor, employee benefits and insurance program
costs.
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