Dillard's 2010 Annual Report Download - page 5

PART I
ITEM 1. BUSINESS.
General
Dillard’s, Inc. (‘‘Dillard’s’’, the ‘‘Company’’, ‘‘we’’, ‘‘us’’, ‘‘our’’ or ‘‘Registrant’’) ranks among the
nation’s largest apparel and home furnishing retailers. Our Company, originally founded in 1938 by
William T. Dillard, was incorporated in Delaware in 1964. As of January 29, 2011, we operated
308 Dillard’s stores, including 14 clearance centers, and one Internet store offering a wide selection of
merchandise including fashion apparel for women, men and children, accessories, cosmetics, home
furnishings and other consumer goods. On August 29, 2008, the Company purchased the remaining
interest in CDI Contractors, LLC and CDI Contractors, Inc. (‘‘CDI’’), a former 50% equity method
joint venture investment of the Company. CDI is a general contractor whose business includes
constructing and remodeling stores for the Company.
In January 2011, the Company formed a wholly-owned subsidiary that will seek to operate as a
real estate investment trust (‘‘REIT’’) and a wholly-owned captive insurance subsidiary (‘‘Captive’’). We
believe the formation of a REIT may enhance our ability to access debt or preferred stock and thereby
enhance our liquidity. Operating subsidiaries of Dillard’s have transferred certain real estate interests to
the REIT. Under the Captive, the following policies were in place as of January 29, 2011: (1) Workers’
Compensation & General Liability—includes claims for self-insured workers’ compensation (with a
self-insured retention of $4 million per claim) and general liability (with a self-insured retention of
$1 million per claim and a one-time $1 million corridor) and (2) Accident & Health—includes certain
claims for self-insured medical, health, salary and related expenses with a minimum attachment that
varies and a specific limit of $300 thousand per plan participant. Additional types of coverage will be
contemplated for future inclusion in the Captive.
The following table summarizes the percentage of net sales by segment and major product line:
Percentage of Net Sales
Fiscal Fiscal Fiscal
2010 2009 2008
Retail operations segment:
Cosmetics ..................................... 15% 15% 15%
Ladies’ apparel and accessories ...................... 37 36 37
Juniors’ and children’s apparel ...................... 8 8 9
Men’s apparel and accessories ....................... 17 17 18
Shoes ........................................ 15 14 13
Home and furniture .............................. 6 7 7
98 97 99
Construction segment .............................. 2 3 1
Total ........................................... 100% 100% 100%
Most of our stores are located in suburban shopping malls and open-air centers. Our customers
may also purchase merchandise on-line at our website, www.dillards.com, which features on-line gift
registries and a variety of other services. We operate retail department stores located primarily in the
southwest, southeast and midwest regions of the United States. The stores are located in 29 states.
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 and Internet retailers.
Competition is characterized by many factors including location, reputation, assortment, advertising,
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