Dillard's 2014 Annual Report Download

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Dillard’s Corporate Offi ce
Little Rock, Arkansas 72201
Copies of fi nancial documents and other Company information such as Dillard’s,
Inc. reports on Form 10-K and 10-Q, and other reports fi led with the Securities and
Exchange Commission are available by contacting:
Dillard’s, Inc.
Investor Relations
Little Rock, Arkansas 72201
501.376.5989
E-mail: investor[email protected]
Financial reports, press releases and other Company information are available on the
Dillard’s, Inc. website: www.dillards.com.
Individuals with questions regarding Dillard’s, Inc. may contact:
Julie Johnson Bull
Director of Investor Relations
Little Rock, Arkansas 72201
Telephone: 501.376.5965
Fax: 501.376.5917
E-mail: [email protected]
Registered shareholders should direct communications regarding address changes,
lost certifi cates and other administrative matters to the Company’s Transfer Agent
and Registrar:
Computershare
Post Offi ce Box 30170
College Station, Texas 77842-3170
Telephone: 1.800.368.5948
For online shareholder inquiries:
https://www-us.computershare.com/investor/Contact
Please refer to Dillard’s, Inc. on all correspondence and have available your name
as printed on your stock certifi cate, your Social Security number, your address and
phone number.
Little Rock, Arkansas 72201
Post Offi ce Box 486
Little Rock, Arkansas 72203
Telephone: 501.376.5200
Fax: 501.376.5917
New York Stock Exchange,
Ticker Symbol “DDS”
2014 Annual Report
Dillard’s, Inc. ranks among the
nation’s
annual sales exceeding $6.6 billion.
The Company focuses on delivering
style, service and value to its
shoppers by offering compelling
apparel, cosmetics and home
selections complemented by
exceptional customer care. Dillard’s
stores offer a broad selection of
merchandise and feature products
from both national and exclusive
brand sources. The Company
operates 274 Dillard’s locations
and 23 clearance centers spanning
www.dillards.com.
The classic elegance of Antonio
Melani as featured on the cover is
available exclusively at Dillard’s.
largest retailers, with
fashion

Table of contents

  • Page 1
    2014 Annual Report

  • Page 2
    The Mall at University Town Center, Sarasota, Florida, opened October 2014 DEAR SHAREHOLDER, We achieved another year of growth in both top line and bottom line performance in 2014, marking our fifth consecutive year of positive comparable store sales. Our customers responded well, particularly in...

  • Page 3
    ... period from to . Commission file number 1-6140 DILLARD'S, INC. (Exact name of registrant as specified in its charter) DELAWARE State or other jurisdiction of incorporation or organization 1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS (Address of principal executive offices) 71-0388071 (IRS Employer...

  • Page 4
    ... the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). No State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of August 2, 2014: $4,158,723,073. Indicate the number of shares outstanding of each of the...

  • Page 5
    ... Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security...

  • Page 6
    ... of the United States. Most of our stores are located in suburban shopping malls and open-air centers. Customers may also purchase our merchandise on-line at our website, www.dillards.com, which features on-line gift registries and a variety of other services. Our retail merchandise business is...

  • Page 7
    ... to sales associates to open new credit accounts, which generally can be opened while a customer is visiting one of our stores. Customers who open accounts are rewarded with discounts on future purchases. Private label card customers are sometimes offered private shopping nights, direct mail...

  • Page 8
    ... and market share. We conduct our retail merchandise business under highly competitive conditions. Competition is characterized by many factors including location, reputation, fashion, merchandise assortment, advertising, operating efficiency, price, quality, customer service and credit availability...

  • Page 9
    ... owns and manages our private label credit cards under the Wells Fargo Alliance. The Wells Fargo Alliance provides for certain payments to be made by Wells Fargo to the Company, including the Company's share of revenues under this alliance. The income and cash flow that the Company receives from the...

  • Page 10
    ... credit or increase the cost of credit to our cardholders or negatively impact provisions which affect our revenue streams associated with our private label credit card, our results of operations could be adversely affected. In addition, changes in credit card use, payment patterns, or default rates...

  • Page 11
    ... affect our business, reputation and financial condition. We receive certain personal information about our employees and our customers, including information permitting cashless payments, both in our stores and through our online operations at www.dillards.com. In addition, our online operations...

  • Page 12
    ... point-of-sale systems in the stores, our Internet website, data centers that process transactions, communication systems and various software applications used throughout our Company to track inventory flow, process transactions and generate performance and financial reports. The Company's computer...

  • Page 13
    ... by state of operation the number of retail stores we operate and the corresponding owned and leased footprint at January 31, 2015: Partially Owned and Partially Leased Location Number of stores Owned Stores Leased Stores Owned Building on Leased Land Alabama ...Arkansas...Arizona...California...

  • Page 14
    ... additional facilities: Owned / Leased Facility Location Square Feet Distribution Centers: ...Mabelvale, AR Gilbert, AZ Valdosta, GA Olathe, KS Salisbury, NC Ft. Worth, TX Internet Fulfillment Center ...Maumelle, AR Dillard's Executive Offices ...Little Rock, AR CDI Contractors, LLC Executive...

  • Page 15
    ...Each is elected to serve a one-year term. There are no other persons chosen to become executive officers. Held Present Office Since Name Age Position & Office Family Relationship to CEO William Dillard, II . . Alex Dillard ...Mike Dillard ...Drue Matheny ...Chris B. Johnson (1) Phillip R. Watts...

  • Page 16
    ...the New York Stock Exchange under the Ticker Symbol "DDS". No public market currently exists for the Company's Class B Common Stock. The high and low sales prices of the Company's Class A Common Stock, and dividends declared on each class of common stock, for each quarter of fiscal 2014 and 2013 are...

  • Page 17
    ... Stock, the Standard & Poor's 500 Index and the Standard & Poor's 500 Department Stores Index as of the last day of each of the Company's last five fiscal years. 2010 2011 2012 2013 2014 Dillard's, Inc...$ S&P 500 ...S&P 500 Department Stores ... 244.31 121.26 114.69 $ 281.52 127.72 129.49...

  • Page 18
    ... - 2 Closed...1 6 2 4 3 Total-end of year ...297 296 302 304 308 _____ * Fiscal 2012 contains 53 weeks. The items below are included in the Selected Financial Data. 2014 A $5.9 million pretax gain ($3.8 million after tax or $0.09 per share) related to the sale of a retail store location. 2013 The...

  • Page 19
    ... or $0.07 per share) on proceeds received for final payment related to hurricane losses. a $5.1 million pretax gain ($3.3 million after tax or $0.05 per share) related to the sale of five retail store locations. a $9.7 million income tax benefit ($0.14 per share) primarily related to net decreases...

  • Page 20
    ...noted, some of the information discussed below is based upon comparison of the 52 weeks ended January 31, 2015, February 1, 2014 and February 2, 2013. EXECUTIVE OVERVIEW Fiscal 2014 Comparable retail sales increased 1% over last year, and gross profit from retail operations improved 35 basis points...

  • Page 21
    ...gross profit as a percentage of net sales ...Selling, general and administrative expenses as a percentage of net sales . . Cash flow from operations (in millions) ...Total retail store count at end of period ...Retail sales per square foot ...Retail stores sales trend...Comparable retail store sales...

  • Page 22
    ... 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; sales in clearance centers; and changes in the allowance for sales returns. Service...

  • Page 23
    ... on our sales return provision were not material for fiscal years 2014, 2013 and 2012. The Company's share of income earned under the Wells Fargo Alliance and former Synchrony Alliance involving the Dillard's branded private label credit cards is included as a component of service charges and...

  • Page 24
    ... Significant changes in the manner of our use of assets or the strategy for the overall business; Significant negative industry or economic trends; A current-period operating or cash flow loss combined with a history of operating or cash flow losses; or Store closings. The Company performs...

  • Page 25
    ...: For the years ended January 31, 2015 % of Net Sales February 1, 2014 % of Net Sales February 2, 2013 % of Net Sales (in thousands of dollars) Amount Amount Amount Net sales ...$ 6,621,054 Service charges and other income ...159,075 6,780,129 Cost of sales ...4,272,605 Selling, general and...

  • Page 26
    ...Company's sales for the past two years is as follows: Percent Change Fiscal 2014 - 2013 Fiscal 2013 - 2012 (1) Retail operations segment Cosmetics...Ladies' apparel ...Ladies' accessories and lingerie ...Juniors' and children's apparel ...Men's apparel and accessories ...Shoes ...Home and furniture...

  • Page 27
    ... to increased initial markups. Inventory in comparable stores increased 2% as of January 31, 2015 compared to February 1, 2014. During fiscal 2014, gross margin improved slightly in juniors' and children's apparel and ladies' apparel. Gross margin was essentially flat in all other product categories...

  • Page 28
    ... Inventory in comparable stores increased 5% as of February 1, 2014 compared to February 2, 2013. During fiscal 2013, gross margin declined slightly in shoes and home and furniture. Gross margin was essentially flat in all other product categories. Gross profit from the construction segment improved...

  • Page 29
    ... 2012 Interest and debt expense (income), net: Retail operations segment...$ Construction segment ...Total interest and debt expense, net ...$ 2014 Compared to 2013 Net interest and debt expense declined $3.2 million in fiscal 2014 compared to fiscal 2013 primarily due to an increase in capitalized...

  • Page 30
    ... 2012 During fiscal 2012, the Company sold five former retail stores and one building that was a portion of a currently operating retail location. Four of the former retail stores were held for sale and were located in Charlotte, North Carolina; Cincinnati, Ohio; Antioch, Tennessee and Dallas, Texas...

  • Page 31
    ... and dividend payments to stockholders. Cash flows for the Company's most recent three fiscal years were as follows: Percent Change (in thousands of dollars) Fiscal 2014 Fiscal 2013 Fiscal 2012 2014 - 2013 2013 - 2012 Operating Activities ...$ Investing Activities ...Financing Activities ...Total...

  • Page 32
    ... new locations: Center City Square Feet Projected 2015 Opening Fashion Place...Murray, Utah Fremaux Town Center...Slidell, Louisiana Liberty Center ...Cincinnati, Ohio * replacement store 200,000 * 126,000 155,000 August October October During fiscal 2014, we closed our Southgate Mall location...

  • Page 33
    ...Capital Finance, LLC as the lead agents for various banks, secured by the inventory of Dillard's, Inc. operating subsidiaries. The credit agreement expires July 1, 2018. Borrowings under the credit agreement accrue interest at either JPMorgan's Base Rate or LIBOR plus 1.5% (1.67% at January 31, 2015...

  • Page 34
    .... These conditions could impact our net sales which may result in reduced cash flows if we are unable to appropriately manage our inventory levels and expenses. Depending upon our actual and anticipated sources and uses of liquidity, the Company will from time to time consider possible financing...

  • Page 35
    ... or credit card income; adequate and stable availability of materials, production facilities and labor from which the Company sources its merchandise at acceptable pricing; changes in operating expenses, including employee wages, commission structures and related benefits; system failures or data...

  • Page 36
    ... procedures as of the end of the fiscal year covered by this annual report, and based on that evaluation, the Company's Principal Executive Officer and CoPrincipal Financial Officers have concluded that these disclosure controls and procedures were effective. Management's Report on Internal Control...

  • Page 37
    ITEM 9B. None. OTHER INFORMATION. 32

  • Page 38
    ... Reporting Compliance" in the Proxy Statement, which information is incorporated herein by reference. The Company's Board of Directors ("Board") has adopted a Code of Conduct that applies to all Company employees, including the Company's executive officers, and, when appropriate, the members...

  • Page 39
    Additional information called for by this item is incorporated herein by reference from the information under the headings "Security Ownership of Certain Beneficial Holders" and "Security Ownership of Management" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND ...

  • Page 40
    PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. Financial Statements (a)(1) and (2) An "Index of Financial Statements" has been filed as a part of this report beginning on page F-1 hereof. (a)(3) Exhibits and Management Compensatory Plans An "Exhibit Index" has been filed as a part of ...

  • Page 41
    ...Financial Officer and Principal Accounting Officer Date: March 25, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/ WILLIAM DILLARD, II...

  • Page 42
    ...DILLARD'S, INC. AND SUBSIDIARIES Year Ended January 31, 2015 Page Report of Independent Registered Public Accounting Firm ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-January 31, 2015 and February 1, 2014 ...Consolidated Statements of Income-Fiscal years...

  • Page 43
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Dillard's, Inc. and subsidiaries as of January 31, 2015 and February 1, 2014, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each...

  • Page 44
    ... consolidated balance sheets of Dillard's, Inc. and subsidiaries (the Company) as of January 31, 2015 and February 1, 2014, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the period ended January 31, 2015. These...

  • Page 45
    ... January 31, 2015 February 1, 2014 Assets Current assets: Cash and cash equivalents ...$ Restricted cash ...Accounts receivable ...Merchandise inventories ...Other current assets ...Total current assets ...Property and equipment: Land and land improvements ...Buildings and leasehold improvements...

  • Page 46
    &RQVROLGDWHG6WDWHPHQWVRI,QFRPH 'ROODUVLQ7KRXVDQGV([FHSW3HU6KDUH'DWD   -DQXDU\

  • Page 47
    ... of Comprehensive Income Dollars in Thousands Years Ended January 31, 2015 February 1, 2014 February 2, 2013 Net income ...$ Other comprehensive (loss) income: Amortization of retirement plan and other retiree benefit adjustments (net of tax of $(4,235), $4,452 and $2,640) ...Comprehensive...

  • Page 48
    ... stock, $5.20 per share...- Balance, February 2, 2013 . Net income ...Other comprehensive income ...Issuance of 30,452 shares under stock bonus plans . Purchase of 3,851,516 shares of treasury stock . Cash dividends declared: Common stock, $0.22 per share ...Balance, February 1, 2014 . Net income...

  • Page 49
    ... benefits from share-based compensation ...Issuance cost of line of credit ...Purchase and retirement of common stock...Net cash used in financing activities...Increase (decrease) in cash and cash equivalents ...Cash and cash equivalents, beginning of year ...Cash and cash equivalents, end of year...

  • Page 50
    ... Cash Flows. Accounts Receivable-Accounts receivable primarily consists of construction receivables of CDI and the monthly settlement with Wells Fargo for Dillard's share of revenue from the long-term marketing and servicing alliance. Construction receivables are based on amounts billed to customers...

  • Page 51
    ... accounted for by the equity and cost methods. These investments originally consisted of a shopping mall located in Bonita Springs, Florida; one property located in Toledo, Ohio; and an investment in Acumen Brands ("Acumen"), an eCommerce company based in Fayetteville, Arkansas. During fiscal 2013...

  • Page 52
    ... in November 2014. Following the scheduled expiration, Wells Fargo Bank, N.A. ("Wells Fargo") purchased the Dillard's private label credit card portfolio from Synchrony and began managing Dillard's private label cards under a new 10-year agreement ("Wells Fargo Alliance"). The Company's share of...

  • Page 53
    ... and $33.5 million for fiscal years 2014, 2013 and 2012, respectively. The Company records net advertising expenses in selling, general and administrative expenses. Income Taxes-Income taxes are recognized for the amount of taxes payable for the current year and deferred tax assets and liabilities...

  • Page 54
    ... of net sales by segment and major product line: Percentage of Net Sales Fiscal 2014 Fiscal 2013 Fiscal 2012 Retail operations segment: Cosmetics ...Ladies' apparel ...Ladies' accessories and lingerie ...Juniors' and children's apparel ...Men's apparel and accessories ...Shoes...Home and furniture...

  • Page 55
    ... excluded from net sales for fiscal years 2014, 2013 and 2012, respectively. 3. Revolving Credit Agreement At January 31, 2015, the Company maintained a $1.0 billion revolving credit facility ("credit agreement") with J. P. Morgan Securities LLC ("JPMorgan") and Wells Fargo Capital Finance, LLC as...

  • Page 56
    ... Maturities Fiscal Year 2015 2016 2017 2018 2019 ...$ ...Net interest and debt expense consists of the following: - - 87.2 161.0 - (in thousands of dollars) Fiscal 2014 Fiscal 2013 Fiscal 2012 Long-term debt: Interest ...$ Amortization of debt expense...Interest on capital lease obligations...

  • Page 57
    ... dollars) Fiscal 2014 Fiscal 2013 Fiscal 2012 Income tax at the statutory federal rate (inclusive of income on and equity in losses of joint ventures)...$ State income taxes, net of federal benefit (inclusive of income on and equity in losses of joint ventures) ...Net changes in unrecognized tax...

  • Page 58
    ... 2013 Fiscal 2012 Unrecognized tax benefits at beginning of period ...$ Gross increases-tax positions in prior period...Gross decreases-tax positions in prior period ...Gross increases-current period tax positions ...Settlements ...Lapse of statutes of limitation...Unrecognized tax benefits at end...

  • Page 59
    ... and $16 million for fiscal 2014, 2013 and 2012, respectively. The Company has an unfunded, nonqualified defined benefit plan ("Pension Plan") for its officers. The Pension Plan is noncontributory and provides benefits based on years of service and compensation during employment. Pension expense...

  • Page 60
    ...the end of each fiscal year and is matched to the future expected cash flows of the benefit plans by annual periods. The discount rate decreased to 3.5% as of January 31, 2015 from 4.4% as of February 1, 2014. Weighted average assumptions are as follows: Fiscal 2014 Fiscal 2013 Fiscal 2012 Discount...

  • Page 61
    ...* The estimated benefit payment for fiscal 2015 also represents the amount the Company expects to contribute to the Pension Plan for fiscal 2015. 9. Stockholders' Equity Capital stock is comprised of the following: Par Value Shares Authorized Type Preferred (5% cumulative) ...Additional preferred...

  • Page 62
    ...A Common Stock under an open-ended plan ("March 2013 Stock Plan"). During fiscal 2013, the Company repurchased 2.7 million shares for $209.6 million at an average price of $77.93 per share. During fiscal 2014, the Company repurchased 0.5 million shares for $40.4 million at an average price of $89.04...

  • Page 63
    ... periodic pension cost. See Note 8, Benefit Plans, for additional information. Changes in AOCL Changes in AOCL by component (net of tax) are summarized as follows (in thousands): Defined Benefit Pension Plan Items Fiscal 2014 Fiscal 2013 Beginning balance ...Other comprehensive loss (income) before...

  • Page 64
    ...January 31, 2015, February 1, 2014 and February 2, 2013. 12. Stock-Based Compensation The Company has various stock option plans that provide for the granting of options to purchase shares of Class A Common Stock to certain key employees of the Company. Exercise and vesting terms for options granted...

  • Page 65
    ..., both of which the Company had contracted to sell. The following is a summary of the activity in the reserve established for store closing charges: Balance, Beginning of Year (in thousands of dollars) Adjustments and Charges* Cash Payments Balance, End of Year Fiscal 2013 Rent, property taxes...

  • Page 66
    ... of amounts the Company could realize in a current market exchange. The fair value of the Company's long-term debt and subordinated debentures is based on market prices. The fair value of the Company's cash and cash equivalents, restricted cash and trade accounts receivable approximates their...

  • Page 67
    ... 1.30 $ 2,135,475 702,806 130,490 3.17 $ $ $ Fiscal 2013, Three Months Ended (in thousands of dollars, except per share data) May 4 August 3 November 2 February 1 Net sales ...$ Gross profit ...Net income ...Diluted earnings per share: Net income ...$ 1,549,136 611,351 117,210 2.50 $ 1,479...

  • Page 68
    ...). Amended and Restated Corporate Officers Non-Qualified Pension Plan (Exhibit 10.1 to Form 8-K dated as of November 21, 2007, File No. 1-6140). Credit Card Program Agreement by and among Dillard's, Inc., Wells Fargo Bank, N.A. and for the limited purposes stated therein, Dillard Investment Co., Inc...

  • Page 69
    ... 101.DEF 101.LAB 101.PRE XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document _____ * + Incorporated by reference as indicated. A management contract or compensatory plan or arrangement. E-2

  • Page 70
    ... Holding Corp. - Little Rock, Arkansas J.C. Watts, Jr. - Former Member of Congress, Chairman of J.C. Watts Companies - Washington, D.C. Nick White - President & Chief Executive Officer, White & Associates - Rogers, Arkansas CORPORATE ORGANIZATION William Dillard, II - Chief Executive Officer Alex...

  • Page 71
    ... apparel, cosmetics and home selections complemented by exceptional customer care. Dillard's stores offer a broad selection of merchandise and feature products from both national and exclusive brand sources. The Company operates 274 Dillard's locations and 23 clearance centers spanning 29 states...