Dillard’s Reports Excellent Third Quarter

One of the positive facts for Dillard’s is the fact that the company has an excellent computer system that allows it to report earnings a week earlier than most other retailers. The information helps the management to stay ahead.

Dillard’s reported third quarter earnings 2021 that were solidly ahead of third quarter 2020 and 2019. The company had strong sales record gross margin and tight control and expenses. The company had net income of $197 million compared to net income of $31.9 Million in the third quarter of 2020 and $5.5 Million in the third quarter of 2019.

At the end of the third quarter Dillard’s had a cash position of $620 Million after repurchasing $239 million of stock. Among the other positive facts for Dillard’s are: net income per share $9.81 compared to $1.43 in 2020 and $0.72 in 2019; gross margin was 46.7% in 2921, compared to 36.6% in 2020 and operating expenses were 26.6% of sales in 2021 and 31.0% of sales in 2020. Comparable sales increased 48% in 2021 compared to 24% in 2020.

All indications are that things are steaming ahead at Dillard’s. There was strong consumer demand and better inventory management leading to decreased markdowns in the quarter. However, inventory decreased by about 1% and management indicated that it is monitoring supply chain issues with regard to shipping delays and disruption in global transportation network. It is a universal problem for the industry.

The company also benefitted in its operating expenses since it is operating with reduced operating hours and fewer associates. Management is focused on the tight labor market as it seeks to hire permanent and seasonal associates for many functions. The company anticipates strong holiday sales and plans to hire for the season

Dillard’s reports on the LIFO method of accounting. LIFO stands for last in, first out meaning that the most recent produced items are recorded as sold first. It is used in the United States, which is governed by the generally accepted accounting principles (GAAP).

As a result of most retailers using LIFO, the inflation factor felt right now in the United States (it increased 6.2% in the most recent reporting period) is not felt in the reporting by Dillard’s and other general merchandise retailers that will report later this month. It is notable that grocery retailers are generally on the FIFO First in, first out method of accounting. They have a much faster turnover of merchandise than general merchandise merchants.

POSTSCRIPT: One looks with anticipation to the final quarter of 2021 for Dillard’s. The company is still in a pandemic mode since it must keep shorter store hours in many states. One hopes that the holiday shopping will be strong, as the current momentum of sales indicates. It should be an excellent recovery quarter.

There are two problems. One is the glut of goods at harbors that must get to stores in time for holiday selling. The other is the fact that merchandise is more expensive due to the difficulty in the supply chain and higher handling costs. Fashion goods have increased in price. The tight control that Dillard’s excellent management has on expenses should be a great benefit.