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Dillard's achieves solid improvement in merchandise gross margin
17
Aug '10
Dillard's, Inc. announced operating results for the 13 weeks ended July 31, 2010..

Highlights of the 13 weeks ended July 31, 2010 included:

• Net income of $6.8 million, or $0.10 per share, compared to prior year net loss of $26.7 million, or $0.36 per share. (See further discussion of Net Income below.)
• Improved merchandise gross margin performance of 270 basis points of sales compared to the prior year second quarter with a comparable store inventory decline of 6%.
• Repurchase of approximately $77.6 million (3.0 million shares) of Class A Common Stock, completing the authorization under the Company's $200 million share repurchase program.
• Cash flow from operations of $129 million for the six months ended July 31, 2010 with an ending cash position of $214.7 million and no short term borrowings outstanding under the Company's $1.2 billion revolving credit facility.

Dillard's Chief Executive Officer, William T. Dillard, II, stated, "We are pleased to report continued improved results during the second quarter. We achieved solid improvement in merchandise gross margin as a result of our ongoing focus on better inventory management. Additionally, our strong cash flow enabled us to complete our $200 million share repurchase program and end the quarter in a strong cash position. We are looking forward to the fall season with inventory in good shape and new merchandise arrivals thoughtfully planned."

Net Income
Net income for the 13 weeks ended July 31, 2010 was $6.8 million, or $0.10 per share, compared to a net loss for the 13 weeks ended August 1, 2009 of $26.7 million, or $0.36 per share. Included in net income for the 13 weeks ended July 31, 2010 is a $4.0 million pretax gain on the sale of a store building ($2.6 million after tax or $0.04 per share) and a $2.0 million income tax benefit ($0.03 per share) primarily related to a state administrative settlement.

Net Sales/Total Revenues
Net sales for the 13 weeks ended July 31, 2010 were $1.389 billion compared to net sales for the 13 weeks ended August 1, 2009 of $1.428 billion. Net sales include the operations of the Company's construction business, CDI Contractors, LLC ("CDI").

Total merchandise sales, excluding CDI, for the 13-week period ended July 31, 2010 were $1.359 billion, decreasing 1% compared to $1.366 billion for the 13-week period ended August 1, 2009. Merchandise sales in comparable stores were unchanged on a percentage basis for the 13-week period ended July 31, 2010.

Gross Margin/Inventory
Consolidated gross margin improved 310 basis points of sales during the 13 weeks ended July 31, 2010 compared to the 13 weeks ended August 1, 2009. Gross margin from retail operations (which excludes CDI) improved approximately 270 basis points of sales during the second quarter as a result of continuing inventory management measures which led to reduced markdown activity compared to the prior year second quarter. Inventory in comparable stores declined 6% at July 31, 2010 compared to August 1, 2009.

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