Dillard’s, Inc. Reports First Quarter Results
Comparable Store Sales Increased 2%
Dillard’s, Inc. (NYSE: DDS) (the “Company” or “Dillard’s”) announced
operating results for the 13 weeks ended May 5, 2018. This release
contains certain forward-looking statements. Please refer to the
Company’s cautionary statements regarding forward-looking information
included below under “Forward-Looking Information.”
First Quarter Results
Dillard’s reported net income for the 13 weeks ended May 5, 2018 of
$80.5 million, or $2.89 per share, compared to net income of $66.3
million, or $2.12 per share, for the prior year first quarter.
Dillard’s Chief Executive Officer, William T. Dillard, II, stated, “Our
positive sales momentum continued into the first quarter. We believe
this indicates our customer is more comfortable spending in this
economic environment, and we hope the positive trend continues. We
executed $35 million of share repurchases during the quarter, completing
the amount authorized under our February 2016 program.”
Net sales for the 13 weeks ended May 5, 2018 were $1.456 billion and
$1.418 billion for the 13 weeks ended April 29, 2017. Net sales includes
the operations of the Company’s construction business, CDI Contractors,
LLC ("CDI").
Total merchandise sales (which excludes CDI) for the 13-week period
ended May 5, 2018 were $1.409 billion and $1.386 billion for the 13-week
period ended April 29, 2017. Total merchandise sales increased 2% for
the 13-week period ended May 5, 2018. Sales in comparable stores for the
period also increased 2%. Sales of home and furniture, ladies'
accessories and lingerie and juniors' and children's apparel were above
the average company sales trend during the quarter. Sales were slightly
above trend in men's apparel and accessories, on trend in ladies'
apparel, slightly below trend in cosmetics and notably below trend in
shoes. Sales were strongest in the Western region followed by the
Eastern and Central regions, respectively.
Gross Margin/Inventory
Gross margin from retail operations (which excludes CDI) declined 31
basis points of sales for the 13 weeks ended May 5, 2018 compared to the
prior year first quarter. Consolidated gross margin for the 13 weeks
ended May 5, 2018 declined 66 basis points of sales compared to the
prior year first quarter. Inventory increased 4% at May 5, 2018 compared
to April 29, 2017.
Selling, General & Administrative Expenses
Selling, general and administrative expenses ("operating expenses") were
$406.0 million (27.9% of sales) and $396.6 million (28.0% of sales)
during the 13 weeks ended May 5, 2018 and April 29, 2017, respectively.
The increase in operating expenses of $9.4 million is comprised
primarily of increased selling payroll and services purchased.
Share Repurchase
During the 13 weeks ended May 5, 2018, the Company purchased $34.8
million (approximately 0.5 million shares) of Class A Common Stock
completing authorized purchases under the February 2016 $500 million
program. In March, 2018, the Company's Board of Directors authorized a
new $500 Million share repurchase program. At May 5, 2018, $500 million
authorization remained under the new program. Total shares outstanding
(Class A and Class B Common Stock) at May 5, 2018 and April 29, 2017
were 27.6 million and 30.5 million, respectively.
Store Information
Dillard's operates 267 Dillard's locations and 25 clearance centers
spanning 29 states and an Internet store at www.dillards.com.
Total store square footage is 49.1 million.
Revenue Recognition
During the first quarter of fiscal 2018, the Company adopted Accounting
Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with
Customers (Topic 606). The Company adopted the standard using the
full retrospective method, and the condensed consolidated statements of
income, balance sheets and statements of cash flows for the 13 weeks
ended April 29, 2017 have been recast. The impact of the adoption on the
condensed consolidated statements of income for both the 13 weeks ended
May 5, 2018 and April 29, 2017 was immaterial. The condensed
consolidated balance sheets reflect the impact of recording the
allowance for sales returns on a gross basis rather than as a net
liability. The return asset totaled $11.7 million and $11.6 million at
May 5, 2018 and April 29, 2017, respectively, and the allowance for
sales returns totaled $20.0 million at May 5, 2018 and April 29, 2017.
Pension Presentation
Additionally during the first quarter of fiscal 2018, the Company
retrospectively adopted ASU No. 2017-07, Compensation - Retirement
Benefits (Topic 715): Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost. The impact of the
adoption for the 13 weeks ended May 5, 2018 and April 29, 2017 was a
reclass of $1.9 million and $1.8 million, respectively, from selling,
general and administrative expenses to other expense for the non-service
component of net periodic benefit costs.
There is no impact to net earnings or earnings per share as a result of
the adoption of these standards for the periods presented.
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Dillard’s, Inc. and Subsidiaries
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Condensed Consolidated Statements of Income (Unaudited)
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(In Millions, Except Per Share Data)
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13 Weeks Ended
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May 5, 2018
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April 29, 2017
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Amount
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% of Net Sales
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Amount
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% of Net Sales
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Net sales
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$
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1,456.3
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100.0
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%
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$
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1,418.2
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100.0
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%
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Service charges and other income
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34.4
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2.4
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34.6
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2.4
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1,490.7
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102.4
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1,452.8
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102.4
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Cost of sales
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903.0
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62.0
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870.0
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61.3
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Selling, general and administrative expenses
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406.0
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27.9
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396.6
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28.0
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Depreciation and amortization
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56.0
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3.8
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60.0
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4.2
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Rentals
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6.5
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0.4
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6.2
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0.4
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Interest and debt expense, net
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14.0
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1.0
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15.7
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1.1
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Other expense
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1.9
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0.1
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1.8
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0.1
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Loss on disposal of assets
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0.1
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0.0
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—
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0.0
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Income before income taxes
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103.2
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7.1
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102.5
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7.2
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Income taxes
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22.7
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36.2
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Net income
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$
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80.5
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5.5
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%
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$
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66.3
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4.7
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%
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Basic and diluted earnings per share
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$
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2.89
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$
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2.12
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Basic and diluted weighted average shares
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27.8
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31.3
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Dillard’s, Inc. and Subsidiaries
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Condensed Consolidated Balance Sheets (Unaudited)
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(In Millions)
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May 5, 2018
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April 29, 2017
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Assets
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Current Assets:
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Cash and cash equivalents
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$
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164.1
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$
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301.5
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Restricted cash
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1.9
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—
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Accounts receivable
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43.5
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40.4
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Merchandise inventories
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1,780.8
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1,713.9
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Other current assets
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55.1
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48.6
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Total current assets
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2,045.4
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2,104.4
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Property and equipment, net
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1,662.9
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1,764.5
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Other assets
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73.2
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257.6
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Total Assets
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$
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3,781.5
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$
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4,126.5
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Liabilities and Stockholders' Equity
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Current Liabilities:
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Trade accounts payable and accrued expenses
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$
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1,052.3
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$
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1,069.9
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Current portion of long-term debt and capital leases
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162.1
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90.5
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Federal and state income taxes
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63.9
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86.9
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Total current liabilities
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1,278.3
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1,247.3
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Long-term debt and capital leases
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368.0
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529.9
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Other liabilities
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240.5
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238.3
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Deferred income taxes
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12.6
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220.6
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Subordinated debentures
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200.0
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200.0
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Stockholders' equity
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1,682.1
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1,690.4
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Total Liabilities and Stockholders' Equity
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$
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3,781.5
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$
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4,126.5
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Dillard’s, Inc. and Subsidiaries
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Condensed Consolidated Statements of Cash Flows (Unaudited)
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(In Millions)
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13 Weeks Ended
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May 5, 2018
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April 29, 2017
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Operating activities:
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Net income
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$
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80.5
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$
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66.3
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation and amortization of property and other deferred cost
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56.5
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60.6
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Loss on disposal of assets
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0.1
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—
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Changes in operating assets and liabilities:
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(Increase) decrease in accounts receivable
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(5.1
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)
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6.9
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Increase in merchandise inventories
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(317.2
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)
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(307.5
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)
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Increase in other current assets
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(4.7
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)
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(1.1
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)
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(Increase) decrease in other assets
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(1.4
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)
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1.4
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Increase in trade accounts payable and accrued expenses and other
liabilities
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224.4
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215.7
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Increase in income taxes payable
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22.3
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35.1
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Net cash provided by operating activities
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55.4
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77.4
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Investing activities:
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Purchase of property and equipment
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(39.2
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)
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(34.5
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)
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Proceeds from disposal of assets
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1.9
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—
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Proceeds from insurance
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—
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1.9
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Distribution from joint venture
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0.8
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0.3
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Net cash used in investing activities
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(36.5
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)
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(32.3
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)
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Financing activities:
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Principal payments on long-term debt and capital lease obligations
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(0.3
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)
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(0.2
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)
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Cash dividends paid
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(2.8
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)
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(2.3
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)
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Purchase of treasury stock
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(36.8
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)
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(88.1
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)
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Net cash used in financing activities
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(39.9
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)
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(90.6
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)
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Decrease in cash, cash equivalents and restricted cash
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(21.0
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)
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(45.5
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)
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Cash, cash equivalents and restricted cash, beginning of period
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187.0
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347.0
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Cash, cash equivalents and restricted cash, end of period
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$
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166.0
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$
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301.5
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Non-cash transactions:
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Accrued capital expenditures
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$
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8.1
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$
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3.2
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Accrued purchases of treasury stock
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—
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3.0
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Estimates for 2018
The Company is providing the following estimates for certain financial
statement items for the fiscal year ending February 2, 2019 based upon
current conditions. Actual results may differ significantly from these
estimates as conditions and factors change - See “Forward-Looking
Information.”
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In Millions
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2018
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2017
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Estimated
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Actual
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Depreciation and amortization
|
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$
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225
|
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$
|
232
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Rentals
|
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29
|
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28
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Interest and debt expense, net
|
|
|
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50
|
|
|
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63
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Capital expenditures
|
|
|
|
|
|
140
|
|
|
|
130
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Forward-Looking Information
The foregoing contains certain “forward-looking statements” within the
definition of federal securities laws. The following are or may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995: statements including (a) words
such as “may,” “will,” “could,” “believe,” “expect,” “future,”
“potential,” “anticipate,” “intend,” “plan,” “estimate,” “continue,” or
the negative or other variations thereof, and (b) statements regarding
matters that are not historical facts. The Company cautions that
forward-looking statements contained in this report are based on
estimates, projections, beliefs and assumptions of management and
information available to management at the time of such statements and
are not guarantees of future performance. The Company disclaims any
obligation to update or revise any forward-looking statements based on
the occurrence of future events, the receipt of new information, or
otherwise. Forward-looking statements of the Company involve risks and
uncertainties and are subject to change based on various important
factors. Actual future performance, outcomes and results may differ
materially from those expressed in forward-looking statements made by
the Company and its management as a result of a number of risks,
uncertainties and assumptions. Representative examples of those factors
include (without limitation) general retail industry conditions and
macro-economic conditions; economic and weather conditions for regions
in which the Company’s stores are located and the effect of these
factors on the buying patterns of the Company’s customers, including the
effect of changes in prices and availability of oil and natural gas; the
availability of consumer credit; the impact of competitive pressures in
the department store industry and other retail channels including
specialty, off-price, discount and Internet retailers; changes in
consumer spending patterns, debt levels and their ability to meet credit
obligations; changes in tax legislation; changes in legislation,
affecting such matters as the cost of employee benefits or credit card
income; adequate and stable availability and pricing of materials,
production facilities and labor from which the Company sources its
merchandise; changes in operating expenses, including employee wages,
commission structures and related benefits; system failures or data
security breaches; possible future acquisitions of store properties from
other department store operators; the continued availability of
financing in amounts and at the terms necessary to support the Company’s
future business; fluctuations in LIBOR and other base borrowing rates;
potential disruption from terrorist activity and the effect on ongoing
consumer confidence; epidemic, pandemic or other public health issues;
potential disruption of international trade and supply chain
efficiencies; world conflict and the possible impact on consumer
spending patterns and other economic and demographic changes of similar
or dissimilar nature. The Company’s filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for the
fiscal year ended February 3, 2018, contain other information on factors
that may affect financial results or cause actual results to differ
materially from forward-looking statements.
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