DILLARD'S, INC. Dillard's, Inc. operates 280 retail department stores spanning 29 states and an Internet store. The Company also operates a general contracting construction company, CDI, a portion of whose business includes constructing and remodeling stores for the Company, which is a reportable segment separate from our retail operations. In accordance with theNational Retail Federation fiscal reporting calendar and our bylaws, the Company's fiscal year ends on the Saturday nearestJanuary 31 of each year. Fiscal 2021, 2020 and 2019 ended onJanuary 29, 2022 ,January 30, 2021 andFebruary 1, 2020 , respectively, and contained 52 weeks each. A discussion regarding results of operations and analysis of financial condition for the year endedJanuary 30, 2021 , as compared to the year endedFebruary 1, 2020 is included in Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year endedJanuary 30, 2021 .
Due to the significant impact of COVID-19 on prior year figures, the information that follows will include certain comparisons to 2019 to provide additional context.
EXECUTIVE OVERVIEW Fiscal 2021 InMarch 2020 , theWorld Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to impactthe United States and global economies. The COVID-19 pandemic has had a significant impact on the Company's business, results of operations and financial position. The Company began closing stores onMarch 19, 2020 as mandated by state and local governments, and byApril 9, 2020 , all of the Company's brick-and-mortar store locations were temporarily closed to the public. Our eCommerce capabilities allowed us to use our closed store locations (with limited staffing) to fill orders from our Internet store. During the month endedMay 30, 2020 (fiscal May), we re-opened most of our full-line stores, and byJune 2, 2020 all Dillard's store locations had been re-opened. All stores remained open throughout the fiscal year endedJanuary 29, 2022 , although operating at reduced hours compared to fiscal 2019. Our results for fiscal 2021 improved significantly over fiscal 2020 and 2019. Beginning in the first quarter of 2021, as COVID-19 vaccines were rolled out, stimulus checks were released and warmer weather arrived, we began to experience improving sales, with momentum continuing throughout the year. Total retail sales increased 53% compared to fiscal 2020. The Company is not reporting comparable store retail sales for the 2021 fiscal year compared to fiscal 2020 due to the aforementioned COVID-19 store closures during the first half of fiscal 2020. Compared to fiscal 2019, comparable store retail sales increased 8%. Gross margin improved significantly in fiscal 2021 compared to fiscal 2020 and 2019 primarily as a result of stronger consumer demand combined with our continued efforts to control inventory. Both factors resulted in less promotional activity and decreased markdowns compared to fiscal 2020 and 2019. Consolidated gross margin improved to a record 42.3% of sales during fiscal 2021 from 28.6% of sales in fiscal 2020. Retail gross margin for fiscal 2021 improved to a record 42.9% of sales from 29.4% of sales and 32.6% of sales for fiscal 2020 and 2019, respectively. Inventory atJanuary 29, 2022 decreased 1% compared toJanuary 30, 2021 . Consolidated selling, general and administrative ("SG&A") expenses for fiscal 2021 increased to$1,536.6 million compared to$1,211.5 million for fiscal 2020. The increase of$325.1 million is primarily a result of COVID-19 related disruption in fiscal 2020 marked by temporary store closures and SG&A expense saving measures. Improved sales during 2021 provided support for the increased SG&A expenses which decreased approximately 450 basis points to 23.7% of sales from 28.2% of sales in fiscal 2020. Compared to fiscal 2019, consolidated SG&A expenses decreased$154.5 million to$1,536.6 million from$1,691.0 million , improving approximately 360 basis points of sales. The decrease is primarily due to decreased payroll and payroll-related taxes as we operated with reduced hours and fewer associates during fiscal 2021 compared to fiscal 2019. Dillard's reported record net income for fiscal 2021 of$862.5 million ($41.88 per share) compared to a net loss of$71.7 million ($3.16 per share) for fiscal 2020. Included in net income for fiscal 2021 is a pretax gain of$24.7 million ($19.5 million after tax or$0.95 per share) primarily related to the sale of three store properties and a net tax benefit of$18.0 million ($0.88 per share) due to the deduction related to that portion of a special dividend of$15 per share that was paid to theDillard's, Inc. Investment and Employee Stock Ownership Plan during the year. 17
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Included in the net loss for fiscal 2020 is a pretax loss of$2.2 million ($1.4 million after tax or$0.06 per share) primarily related to the sale of a store property and$10.7 million ($8.4 million after tax or$0.37 per share) in asset impairment charges. Also included in the net loss for fiscal 2020 is a net tax benefit of$45.2 million ($1.99 per share) related to The Coronavirus Aid, Relief and Economic Security ("CARES") Act. We reported record cash flow provided by operations for fiscal 2021 of$1,280.0 million compared to$252.9 million for fiscal 2020. During fiscal 2021, we purchased$561.1 million (approximately 3.2 million shares) of Class A Common Stock under our share repurchase programs. As ofJanuary 29, 2022 , authorization of$112.0 million remained under theMay 2021 Stock Plan. During fiscal 2021, we paid$305.2 million in dividends including a special dividend of$15 per share in December of 2021. OnFebruary 24, 2022 , we announced a new$500 million share repurchase program. As ofJanuary 29, 2022 , we had working capital of$948.5 million (including cash and cash equivalents of$716.8 million ) and$566.0 million of total debt outstanding, excluding operating lease liabilities, and including one scheduled debt maturity of$44.8 million at the end of fiscal 2022.
Key Performance Indicators
We use a number of key indicators of financial condition and operating performance to evaluate our business, including the following:
Fiscal 2021 Fiscal 2020 Fiscal 2019
Net sales (in millions) $ 6,493.0 $ 4,300.9 $ 6,203.5
Gross margin (in millions) $ 2,745.3 $ 1,231.8 $ 1,967.5
Gross margin as a percentage of net sales 42.3 % 28.6 % 31.7 %
Retail gross margin as a percentage of retail net 42.9 % 29.4 % 32.6 %
sales
Selling, general and administrative expenses as a percentage of net sales 23.7 % 28.2 % 27.3 % Cash flow from operations (in millions)$ 1,280.0 $ 252.9 $ 365.1 Total retail store count at end of period 280 282 285 Retail sales per square foot$ 138 $ 90 $ 127 Retail stores sales trend 53 % (31) % (2) % * Comparable retail store sales trend ** ** (1) % * Retail store inventory trend (1) % (26) % (4) % Retail merchandise inventory turnover 2.9 2.0 2.4 * Based upon the 52 weeks endedFebruary 1, 2020 and the 52 weeks endedFebruary 2, 2019 . ** The Company reported no comparable store sales data for the fiscal year due to the temporary COVID-19-related closures of its brick-and-mortar stores during the first and second quarters of fiscal 2020 as well as the interdependence between in-store and online sales.
Trends and Uncertainties
Fluctuations in the following key trends and uncertainties may have a material effect on our operating results.
•Cash flow-Cash from operating activities is a primary source of our liquidity that is adversely affected when the retail industry faces economic challenges. Furthermore, operating cash flow can be negatively affected by competitive factors.
•Pricing-If our customers do not purchase our merchandise offerings in sufficient quantities, we respond by taking markdowns. If we have to reduce our retail selling prices, the cost of sales on our consolidated statement of operations will correspondingly rise, thus reducing our net income and cash flow.
•Success of brand-The success of our exclusive brand merchandise as well as
merchandise we source from national vendors is dependent upon customer fashion
preferences and how well we can predict and anticipate trends.
•Sourcing-Our store merchandise selection is dependent upon our ability to
acquire appealing products from a number of sources. Our ability to attract and
retain compelling vendors as well as in-house design talent, the adequacy and
stable availability of materials and production facilities from which we source
our merchandise
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and the speed at which we can respond to customer trends and preferences all have a significant impact on our merchandise mix and, thus, our ability to sell merchandise at profitable prices. •Store growth-Our ability to open new stores is dependent upon a number of factors, such as the identification of suitable markets and locations and the availability of shopping developments, especially in a weak economic environment. Store growth can be further hindered by mall attrition and subsequent closure of underperforming properties. At present, a number of economic and geopolitical factors are affecting theU.S. and world economies, including rising gas prices (in part due to the war inUkraine and the resulting sanctions imposed onRussia by theU.S. and other countries), increased shipping costs with reduced shipping capacity,U.S. port slowdowns, increasingU.S. wages in a tight labor market as well as some continuing effects from the COVID-19 pandemic, including countries from which we source some of our merchandise. The extent to which our business will be affected by these factors depends on our customer's ability and willingness to accept price increases. Accordingly, the related financial impact to fiscal 2022 from these factors cannot be reasonably estimated at this time.
Seasonality and Inflation
Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income typically realized during the last quarter of our fiscal year due to the holiday season. Because of the seasonality of our business, results from any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. We do not believe that inflation has had a material effect on our results during the periods presented; however, our business will likely be affected by inflation in fiscal 2022, the extent of which depends on the customer's ability and willingness to accept price increases.
2022 Guidance
A summary of management's estimates of certain financial measures for fiscal 2022 is shown below:
(in millions of dollars) Fiscal 2022 Estimated Fiscal 2021 Actual Depreciation and amortization $
190 $ 199
Rentals 23
23
Interest and debt expense, net 42 43 Capital expenditures 150 104 General Net sales. Net sales includes merchandise sales of comparable and non-comparable stores and revenue recognized on contracts ofCDI Contractors, LLC ("CDI"), the Company's general contracting construction company. Comparable store sales includes sales for those stores which were in operation for a full period in both the most recently completed quarter and the corresponding quarter for the prior fiscal year, including our internet store. Comparable store sales excludes changes in the allowance for sales returns. Non-comparable store sales includes: sales in the current fiscal year from stores opened during the previous fiscal year before they are considered comparable 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. Sales occur as a result of interaction with customers across multiple points of contact, creating an interdependence between in-store and online sales. Online orders are fulfilled from both fulfillment centers and retail stores. Additionally, online customers have the ability to buy online and pick up in-store. Retail in-store customers have the ability to purchase items that may be ordered and fulfilled from either a fulfillment center or another retail store location. Online customers may return orders via mail, or customers may return orders placed online to retail store locations. Customerswho earn reward points under the private label credit card program may earn and redeem rewards through in-store or online purchases. Service charges and other income. Service charges and other income includes income generated through the long-term marketing and servicing alliance withWells Fargo Bank, N.A. ("Wells Fargo Alliance "). Other income includes rental income, shipping and handling fees, gift card breakage and lease income on leased departments. Cost of sales. Cost of sales includes the cost of merchandise sold (net of purchase discounts, non-specific margin maintenance allowances and merchandise margin maintenance allowances), bankcard fees, freight to the distribution centers, employee and promotional discounts, shipping to customers and direct payroll for salon personnel. Cost of sales also includes 19
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CDI contract costs, which comprise all direct material and labor costs, subcontract costs and those indirect costs related to contract performance, such as indirect labor, employee benefits and insurance program costs.
Selling, general and administrative expenses. Selling, general and administrative expenses include buying, occupancy, selling, distribution, warehousing, store and corporate expenses (including payroll and employee benefits), insurance, employment taxes, advertising, management information systems, legal and other corporate level expenses. Buying expenses consist of payroll, employee benefits and travel for design, buying and merchandising personnel.
Depreciation and amortization. Depreciation and amortization expenses include depreciation and amortization on property and equipment.
Rentals. Rentals includes expenses for store leases, including contingent rent, and data processing and other equipment rentals.
Interest and debt expense, net. Interest and debt expense includes interest,
net of interest income and capitalized interest, relating to the Company's
unsecured notes, subordinated debentures and borrowings under the Company's
credit facility. Interest and debt expense also includes gains and losses on
note repurchases, if any, amortization of financing costs and interest on
finance lease obligations.
Other expense. Other expense includes the interest cost and net actuarial loss
components of net periodic benefit costs and charges related to the write off of
certain deferred financing fees in connection with the amendment and extension
of the Company's secured revolving credit facility.
(Gain) loss on disposal of assets. (Gain) loss on disposal of assets includes
the net gain or loss on the sale or disposal of property and equipment, as well
as gains from any insurance proceeds in excess of the cost basis of the insured
assets.
Asset impairment and store closing charges. Asset impairment and store closing
charges consist of (a) write-downs to fair value of under-performing or held for
sale properties and cost method investments and (b) exit costs associated with
the closure of certain stores, if any. Exit costs include future rent, taxes and
common area maintenance expenses from the time the stores are closed.
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Critical Accounting Policies and Estimates
The Company's significant accounting policies are also described in Note 1 in the "Notes to Consolidated Financial Statements" in Item 8 hereof. As disclosed in that note, the preparation of financial statements in conformity with accounting principles generally accepted inthe United States of America ("GAAP") requires management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates its estimates and judgments on an ongoing basis and predicates those estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Since future events and their effects cannot be determined with absolute certainty, actual results could differ from those estimates.
Management of the Company believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in preparation of the Company's consolidated financial statements.
Merchandise inventory. All of the Company's inventories are valued at the lower
of cost or market using the last-in, first-out ("LIFO") inventory method.
Approximately 95% of the Company's inventories are valued using the LIFO retail
inventory method. Under the retail inventory method, the valuation of
inventories at cost and the resulting gross margins are calculated by applying a
cost to retail ratio to the retail value of inventories. The retail inventory
method is an averaging method that is widely used in the retail industry due to
its practicality. Inherent in the retail inventory method calculation are
certain significant management judgments including, among others, merchandise
markon, markups, and markdowns, which significantly impact the ending inventory
valuation at cost as well as the resulting gross margins. During periods of
deflation, inventory values on the first-in, first-out ("FIFO") retail inventory
method may be lower than the LIFO retail inventory method. Additionally,
inventory values at LIFO cost may be in excess of net realizable value. At
January 29, 2022 and January 30, 2021 , merchandise inventories valued at LIFO,
including adjustments as necessary to record inventory at the lower of cost or
market, approximated the cost of such inventories using the FIFO retail
inventory method. The application of the LIFO retail inventory method did not
result in the recognition of any LIFO charges or credits affecting cost of sales
for fiscal 2021, 2020, or 2019. A 1% change in the dollar amount of markdowns
would have impacted net income by approximately $8 million for fiscal 2021.
The Company regularly records a provision for estimated shrinkage, thereby
reducing the carrying value of merchandise inventory. Complete physical
inventories of the Company's stores and warehouses are performed at least once
during each fiscal year, with the recorded amount of merchandise inventory being
adjusted to coincide with these physical counts. The differences between the
estimated amounts of shrinkage and the actual amounts realized during the past
three years have not been material.
Revenue recognition. The Company's retail operations segment recognizes revenue
upon the sale of merchandise to its customers, net of anticipated returns of
merchandise. The asset and liability for sales returns are based on historical
evidence of our return rate. We recorded an allowance for sales returns of $19.6
million and $11.7 million and return assets of $10.8 million and $7.5 million as
of January 29, 2022 and January 30, 2021 , respectively. The return asset and the
allowance for sales returns are recorded in the consolidated balance sheets in
other current assets and trade accounts payable and accrued expenses,
respectively. Adjustments to earnings resulting from revisions to estimates on
our sales return provision were not material for fiscal 2021, 2020 and 2019.
The Company's share of income under the Wells Fargo Alliance , involving the
Dillard's branded private label credit cards is included as a component of
service charges and other income. The Company recognized income of $74.8
million , $78.6 million and $91.2 million from the alliance in fiscal 2021, 2020
and 2019, respectively. The Company participates in the marketing of the private
label credit cards, which includes the cost of customer reward programs. Through
the reward programs, customers earn points that are redeemable for discounts on
future purchases. The Company defers a portion of its net sales upon the sale of
merchandise to its customer reward program members that is recognized in net
sales when the reward is redeemed or expired at a future date.
Revenues from CDI construction contracts are generally measured based on the
ratio of costs incurred to total estimated contract costs (the "cost-to-cost
method"). Some of our contracts with customers contain multiple performance
obligations. For these contracts, we account for individual performance
obligations separately if they are distinct. The transaction price is allocated
to the separate performance obligations based on stand-alone selling prices.
Construction contracts are often modified to account for changes in contract
specifications and requirements. We consider contract modifications to exist
when the modification either creates new or changes the existing enforceable
rights and obligations. Most of our contract modifications are for goods and
services that are not distinct from the existing contracts; therefore, the
modifications are accounted for as if they were part of the existing contract.
The effect of a contract modification on the transaction price and our measure
of progress for the performance obligation for which it relates, is recognized
as an adjustment to revenue on a cumulative catch-up basis. The length of each
contract varies but is typically nine to eighteen months. The progress towards
completion is
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determined by relating the actual costs of work performed to date to the current estimated total costs of the respective contracts. Estimated contract losses are recognized in full when determined. Construction contracts give rise to accounts receivable, contract assets and contract liabilities. We record accounts receivable based on amounts billed to customers. We also record costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) in other current assets and trade accounts payable and accrued expenses, respectively, on the consolidated balance sheets.
Vendor allowances. The Company receives concessions from vendors through a variety of programs and arrangements, including cooperative advertising, payroll reimbursements and margin maintenance programs.
Cooperative advertising allowances are reported as a reduction of advertising expense in the period in which the advertising occurred. If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising as well as the volume and frequency of our product advertising, which could increase or decrease our expenditures. We are not able to assess the impact of vendor advertising allowances on creating additional revenues, as such allowances do not directly generate revenues for our stores.
Payroll reimbursements are reported as a reduction of payroll expense in the period in which the reimbursement occurred.
Amounts of margin maintenance allowances are recorded only when an agreement has been reached with the vendor and the collection of the concession is deemed probable. All such merchandise margin maintenance allowances are recognized as a reduction of cost purchases. Under the retail inventory method, a portion of these allowances reduces cost of goods sold and a portion reduces the carrying value of merchandise inventory. Insurance accruals. The Company's consolidated balance sheets include liabilities with respect to 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$2 million per claim). The Company's retentions are insured through a wholly-owned captive insurance subsidiary. The Company estimates the required liability of such claims, utilizing an actuarial method, based upon various assumptions, which include, but are not limited to, our historical loss experience, projected loss development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon the changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per incident (severity). As ofJanuary 29, 2022 andJanuary 30, 2021 , insurance accruals of$39.9 million and$37.9 million , respectively, were recorded in trade accounts payable and accrued expenses and other liabilities. These expenses declined in fiscal 2020 due to temporary store closures, reduced operating hours and decreased associate headcount in response to COVID-19. We do not anticipate any significant change in loss trends, settlements or other costs that would cause a significant change in our earnings. A 10% change in our self-insurance reserve would have affected net income by approximately$3 million for fiscal 2021. Long-lived assets. The Company's judgment regarding the existence of impairment indicators is based on market and operational performance. We assess the impairment of long-lived assets, primarily fixed assets and operating lease assets, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:
•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; and
•Store closings.
The Company performs an analysis of the anticipated undiscounted future net cash
flows of the related long-lived assets. If the carrying value of the related
asset exceeds the fair value, the carrying value is reduced to its fair value.
Various factors including future sales growth, profit margins and real estate
values are included in this analysis. To the extent these future projections,
the Company's strategies, or market conditions change, the conclusion regarding
impairment may differ from the current estimates.
Income taxes. Temporary differences arising from differing treatment of income
and expense items for tax and financial reporting purposes result in deferred
tax assets and liabilities that are recorded on the balance sheet. These
balances, as well as income tax expense, are determined through management's
estimations, interpretation of tax law for multiple jurisdictions and tax
planning. If the Company's actual results differ from estimated results due to
changes in tax laws, changes in store locations, settlements of tax audits or
tax planning, the Company's effective tax rate and tax balances could be
affected.
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As such, these estimates may require adjustment in the future as additional facts become known or as circumstances change. Changes in the Company's assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.
The total amount of unrecognized tax benefits as ofJanuary 29, 2022 was$6.7 million , of which,$3.9 million would, if recognized, affect the Company's effective tax rate. The total amount of unrecognized tax benefits as ofJanuary 30, 2021 was$5.1 million , of which$3.3 million would, if recognized, affect the Company's effective tax rate. The Company does not expect a significant change in unrecognized tax benefits in the next twelve months. The Company classifies accrued interest expense and penalties relating to income tax in the consolidated financial statements as income tax expense. The total amounts of interest and penalties were not material. The fiscal tax years that remain subject to examination for the federal tax jurisdiction are 2015, 2016 and 2018 and forward. At this time, the Company does not expect the results from any income tax audit to have a material impact on the Company's consolidated financial statements. Pension obligations. The discount rate that the Company utilizes for determining future pension obligations is based on the FTSE Above Median Pension yield curve on its annual measurement date as of the end of each fiscal year and is matched to the future expected cash flows of the benefit plans by semi-annual periods. The discount rate increased to 3.0% as ofJanuary 29, 2022 from 2.5% as ofJanuary 30, 2021 . We believe that these assumptions have been appropriate and that, based on these assumptions, the pension liability of$226.3 million is appropriately stated as ofJanuary 29, 2022 ; however, actual results may differ materially from those estimated and could have a material impact on our consolidated financial statements. A further 50 basis point change in the discount rate would increase or decrease the pension liability by approximately$13 million . The Company expects to make a contribution to the pension plan of approximately$6.2 million in fiscal 2022. The Company expects pension expense to be approximately$11.8 million in fiscal 2022. 23
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RESULTS OF OPERATIONS
The following table sets forth the results of operations and percentage of net sales, for the periods indicated:
For the years ended
January 29, 2022 January 30, 2021 February 1, 2020
% of % of % of
Net Net Net
(in thousands of dollars) Amount Sales Amount Sales Amount Sales
Net sales $ 6,492,993 100.0 % $ 4,300,895 100.0 % $ 6,203,520 100.0 %
Service charges and other income 131,274 2.0 132,290 3.1 139,691 2.3
6,624,267 102.0 4,433,185 103.1 6,343,211 102.3
Cost of sales 3,747,665 57.7 3,069,063 71.4 4,235,978 68.3
Selling, general and administrative
expenses 1,536,554 23.7 1,211,483 28.2 1,691,017 27.3
Depreciation and amortization 199,321 3.1 213,378 5.0 222,349 3.6
Rentals 22,594 0.3 22,174 0.5 26,375 0.4
Interest and debt expense, net 43,092 0.7 49,108 1.1 46,227 0.7
Other expense 11,366 0.2 8,417 0.2 7,667 0.1
(Gain) loss on disposal of assets (24,688) (0.4) 2,230 0.1 (20,293) (0.3)
Asset impairment and store closing
charges - - 10,736 0.2 - -
Income (loss) before income taxes
(benefit) 1,088,363 16.8 (153,404) (3.6) 133,891 2.2
Income taxes (benefit) 225,890 3.5 (81,750) (1.9) 22,810 0.4
Net income (loss) $ 862,473 13.3 % $ (71,654) (1.7) % $ 111,081 1.8 %
Sales
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019
Net sales:
Retail operations segment $ 6,374,753 $ 4,160,232 $ 6,012,170
Construction segment 118,240 140,663 191,350
Total net sales $ 6,492,993 $ 4,300,895 $ 6,203,520 The percent change by segment and product category in the Company's sales for the past two years is as follows:
Percent Change
Fiscal Fiscal
2021-2020 2020-2019
Retail operations segment
Cosmetics 44.1 % (23.5) %
Ladies' apparel 73.6 (43.5)
Ladies' accessories and lingerie 41.9 (25.8)
Juniors' and children's apparel 61.5 (30.5)
Men's apparel and accessories 61.1 (29.9)
Shoes 49.1 (29.9)
Home and furniture 14.6 (13.6)
Construction segment (15.9) (26.5)
2021 Compared to 2020
Net sales from the retail operations segment increased $2.2 billion during
fiscal 2021 compared to fiscal 2020, an increase of 53% primarily due to the
impact of the COVID-19 pandemic. The Company reported no comparable store sales
data for the fiscal year due to the temporary closure of its brick-and-mortar
stores in fiscal 2020 as well as the interdependence between in-store and online
sales. During fiscal 2021, sales in all product categories increased
significantly.
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Net sales from the construction segment decreased$22.4 million or 16% during fiscal 2021 as compared to fiscal 2020 due to a decrease in construction activity. The remaining performance obligations related to executed construction contracts totaled$93.9 million , increasing approximately 23% fromJanuary 30, 2021 . 2021 Compared to 2019
Net sales from the retail operations segment increased
Exclusive Brand Merchandise
Sales penetration of exclusive brand merchandise for fiscal 2021, 2020 and 2019 was 22.7%, 20.4% and 21.1% of total net sales, respectively.
Service Charges and Other Income
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 Service charges and other income: Retail operations segment Income fromWells Fargo Alliance $ 74,780 $ 78,600 $ 91,225 Leased department income 6 1,078 4,576 Shipping and handling income 41,850 39,749 28,275 Other 13,917 11,648 14,929 130,553 131,075 139,005 Construction segment 721 1,215 686 Total$ 131,274 $ 132,290 $ 139,691 2021 Compared to 2020 Service charges and other income is composed primarily of income from theWells Fargo Alliance . Income from the alliance decreased$3.8 million in fiscal 2021 compared to fiscal 2020 primarily due to decreases in finance charges partially offset by decreases in credit losses. Shipping and handling income increased during fiscal 2021 primarily due to an increase in online shopping.
2021 Compared to 2019
Income from theWells Fargo Alliance decreased$16.4 million in fiscal 2021 compared to fiscal 2019 primarily due to decreases in finance charges partially offset by decreases in credit losses. Shipping and handling income increased$13.6 million in fiscal 2021 compared to fiscal 2019 primarily due to the increase in online orders and ship-from-store capabilities.
Gross Margin
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 Gross margin: Retail operations segment$ 2,736,762 $ 1,223,614 $ 1,960,255 Construction segment 8,566 8,218 7,287 Total gross margin$ 2,745,328
42.9 % 29.4 % 32.6 %
Construction segment 7.2 5.8 3.8
Total gross margin as a percentage of net sales 42.3 28.6 31.7
2021 Compared to 2020
Gross margin as a percentage of net sales increased 1,364 basis points of sales
during fiscal 2021 compared to fiscal 2020. Gross margin from retail operations
increased 1,352 basis points of segment net sales during the same periods. The
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increase is primarily due to increased markdowns taken during fiscal 2020 as a result of the COVID-19 pandemic as well as better inventory management and stronger customer demand leading to decreased markdowns in fiscal 2021. During fiscal 2021, gross margin increased significantly in all product categories, except for cosmetics, which increased moderately. Retail store inventory decreased 1% atJanuary 29, 2022 compared toJanuary 30, 2021 . We source a significant portion of our private label and exclusive brand merchandise from countries that have experienced widespread transmission of the COVID-19 virus. Additionally, many of our branded merchandise vendors may also source a significant portion of their merchandise from these same countries. Manufacturing capacity in those countries has been significantly impacted by the pandemic and in some countries the pandemic continues to negatively impact our supply chain with shipping delays as well as increased shipping costs. Additionally, disruptions in the global transportation network, which began in fiscal 2020, continued throughout fiscal 2021, and it is unclear when these issues will be resolved. TheCalifornia ports ofLos Angeles andLong Beach , which together handle a significant portion ofUnited States merchandise imports including our own imports, have experienced and are continuing to experience delays in processing imported merchandise, thereby resulting in untimely deliveries of merchandise. At present, while monitoring the situation closely, management is unable to quantify the effects of these factors on the Company's results of operations and inventory position for fiscal 2022. Management is monitoring the continuing supply chain issues, particularly with regard to shipping delays and disruptions in the global transportation network.
Gross margin from the construction segment increased 140 basis points of segment net sales.
2021 Compared to 2019 Gross margin as a percentage of net sales increased 1,056 basis points of sales during fiscal 2021 compared to fiscal 2019. Gross margin from retail operations increased 1,033 basis points of segment net sales during the same periods. The increase is primarily due to better inventory management and stronger customer demand leading to decreased markdowns in fiscal 2021.
Gross margin from the construction segment increased 343 basis points of segment net sales.
Selling, General and Administrative Expenses ("SG&A")
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 SG&A: Retail operations segment$ 1,529,787 $ 1,205,394 $ 1,684,258 Construction segment 6,767 6,089 6,759 Total SG&A$ 1,536,554 $ 1,211,483 $ 1,691,017 SG&A as a percentage of segment net sales: Retail operations segment 24.0 % 29.0 % 28.0 % Construction segment 5.7 4.3 3.5 Total SG&A as a percentage of net sales 23.7 28.2 27.3 2021 Compared to 2020 SG&A increased$325.1 million , or 26.8%, during fiscal 2021 compared to fiscal 2020 while decreasing 451 basis points of sales. SG&A from retail operations decreased 497 basis points of segment net sales during fiscal 2021 compared to fiscal 2020. The increase in SG&A dollars was primarily due to increases in payroll expense and related payroll taxes. Payroll expense and related payroll taxes for fiscal 2021 were$1,042.7 million compared to$788.5 million for fiscal 2020, an increase of 32.2%. During fiscal 2020, theCompany (a) furloughed store associates as stores temporarily closed due to the COVID-19 pandemic and furloughed associates in certain corporate and support facility functions and (b) reduced payroll expense and related payroll taxes and benefits by$6.1 million through the employee retention credit available under the CARES Act.
With regard to continuing operational staffing needs, management is particularly focused on the existing tight labor market, seeking to hire permanent and seasonal talent across multiple functions at competitive wages.
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2021 Compared to 2019
SG&A decreased$154.5 million , or 9.1%, during fiscal 2021 compared to fiscal 2019 while also decreasing 360 basis points of sales. SG&A from retail operations decreased 401 basis points of segment net sales during fiscal 2021 compared to fiscal 2019. The decrease in SG&A dollars was primarily due to decreases in payroll expense and payroll related taxes. The Company continues to operate with reduced operating hours and fewer associates compared to fiscal 2019.
Depreciation and Amortization
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 Depreciation and amortization: Retail operations segment$ 199,061 $ 212,866 $ 221,643 Construction segment 260 512
706
Total depreciation and amortization
2021 Compared to 2020 Depreciation and amortization expense decreased$14.1 million during fiscal 2021 compared to fiscal 2020, primarily due to the timing and composition of capital expenditures.
Interest and Debt Expense, Net
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 Interest and debt expense (income), net: Retail operations segment$ 43,131 $ 49,154 $ 46,337 Construction segment (39) (46) (110)
Total interest and debt expense, net
$ 46,227 2021 Compared to 2020 Net interest and debt expense decreased$6.0 million in fiscal 2021 compared to fiscal 2020 primarily due to a decrease of short term borrowings under the credit facility. Total weighted average debt outstanding during fiscal 2021 decreased approximately$148.6 million compared to fiscal 2020 primarily due to a decrease of short term borrowings under the credit facility.
Other Expense
(in thousands of dollars) Fiscal 2021 Fiscal 2020
Fiscal 2019
Other expense:
Retail operations segment $ 11,366 $ 8,417 $ 7,667
Construction segment - - -
Total other expense $ 11,366 $ 8,417 $ 7,667
2021 Compared to 2020
Other expense increased
(Gain) Loss on Disposal of Assets
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 (Gain) loss on disposal of assets: Retail operations segment$ (24,682) $ 2,256 $ (20,294) Construction segment (6) (26) 1
Total (gain) loss on disposal of assets
$ (20,293) 27
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Fiscal 2021
During fiscal 2021, the Company received proceeds of$29.3 million primarily from the sale of three store properties, resulting in a gain of$24.7 million that was recorded in (gain) loss on disposal of assets.
Fiscal 2020
During fiscal 2020, the Company received proceeds of$1.5 million primarily from the sale of one property, resulting in a loss of$2.2 million that was recorded in (gain) loss on disposal of assets.
Asset Impairment and Store Closing Charges
(in thousands of dollars) Fiscal 2021 Fiscal 2020 Fiscal 2019 Asset impairment and store closing charges: Retail operations segment $ -$ 10,736 $ - Construction segment - - -
Total asset impairment and store closing charges $ -
Fiscal 2020
During fiscal 2020, the Company recorded
Income Taxes
The Company's estimated federal and state effective income tax rate was 20.8% in fiscal 2021, 53.3% in fiscal 2020, and 17.0% in fiscal 2019. The Company expects the fiscal 2022 federal and state effective income tax rate to approximate 22%.
Fiscal 2021
During fiscal 2021, income taxes included federal and state tax benefits of$20.1 million due to the deduction related to that portion of the Company's dividends that were paid to theDillard's, Inc. Investment and Employee Stock Ownership Plan, including the special dividend of$15 per share paid onDecember 15, 2021 . Fiscal 2020 The Company was in a net operating loss position for the fiscal year endingJanuary 30, 2021 . The CARES Act, signed into law onMarch 27, 2020 , allows for net operating loss carryback to years in which the statutory federal income tax rate was 35% rather than 21%. During fiscal 2020, income taxes included tax benefits of approximately$45.2 million related to the rate differential in the carryback year. 28
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LIQUIDITY AND CAPITAL RESOURCES
The Company's current non-operating priorities for its use of cash are strategic
investments to enhance the value of existing properties, stock repurchases 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 2021 Fiscal 2020 Fiscal 2019 2021 - 2020 2020 - 2019
Operating Activities $ 1,280,020 $ 252,946 $ 365,074 406.0 % (30.7) %
Investing Activities (69,788) (48,380) (68,092) (44.2) 28.9
Financing Activities (853,812) (121,304) (143,414) (603.9) 15.4
Total Cash Provided $ 356,420 $ 83,262 $ 153,568
Operating Activities
The primary source of the Company's liquidity is, and historically has been,
cash flows from operations. Due to the seasonality of the Company's business, we
have historically realized a significant portion of the cash flows from
operating activities during the second half of the fiscal year. Retail
operations sales are the key operating cash component, providing 96.2%, 93.8%
and 94.8% of total revenues in fiscal 2021, 2020 and 2019, respectively.
Net cash flows from operations increased
Operating cash inflows also include the Company's income and reimbursements from theWells Fargo Alliance and cash distributions from joint ventures (excluding returns of investments), if any. Operating cash outflows include payments to vendors for inventory, services and supplies, payments to employees and payments of interest and taxes. Wells Fargo owns and manages the Dillard's private label cards under theWells Fargo Alliance . Under theWells Fargo Alliance , Wells Fargo establishes and owns private label card accounts for our customers, retains the benefits and risks associated with the ownership of the accounts, provides key customer service functions, including new account openings, transaction authorization, billing adjustments and customer inquiries, receives the finance charge income and incurs the bad debts associated with those accounts. Pursuant to theWells Fargo Alliance , we receive on-going cash compensation from Wells Fargo based upon the portfolio's earnings. The compensation received from the portfolio is determined monthly and has no recourse provisions. The amount the Company receives is dependent on the level of sales on Wells Fargo accounts, the level of balances carried on Wells Fargo accounts by Wells Fargo customers, payment rates on Wells Fargo accounts, finance charge rates and other fees on Wells Fargo accounts, the level of credit losses for the Wells Fargo accounts as well as Wells Fargo's ability to extend credit to our customers. We participate in the marketing of the private label cards, which includes the cost of customer reward programs.The Wells Fargo Alliance expires inNovember 2024 .
The Company recognized income of
During fiscal 2021 and 2020, the Company received proceeds from insurance of$2.9 million and$7.7 million , respectively, for claims filed for merchandise losses related to storm damage incurred at two stores. AtJanuary 29, 2022 , the Company had purchase obligations of$1,550.5 million outstanding for merchandise and store construction commitments, all of which are expected to be paid during fiscal 2022.
Investing Activities
Cash inflows from investing activities generally include proceeds from sales of property and equipment. Investment cash outflows generally include payments for capital expenditures such as property and equipment. Capital expenditures increased$43.9 million for fiscal 2021 compared to fiscal 2020. The increase in capital expenditures was primarily related to the continued construction of two new stores during fiscal 2021. During fiscal 2021, the Company opened a new store atMesa Mall inGrand Junction, Colorado (100,000 square feet). OnMarch 11, 2022 , the Company opened a new 160,000 square foot location atUniversity Place inOrem, Utah which will replace Provo Towne 29
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Centre in the same market (200,000 square feet). The Company will replace a leased building atWestgate Mall inAmarillo, Texas with a newly remodeled owned facility in the fall of 2022. During fiscal 2020, the Company opened an 85,000 square foot expansion atColumbia Mall inColumbia, Missouri (dual-anchor location totaling 185,000 square feet). Additionally, the Company replaced a 100,000 square foot leased facility atRichland Fashion Mall inWaco, Texas with a 125,000 square foot owned facility (dual-anchor location totaling 190,000 square feet). During fiscal 2021, the Company received cash proceeds of$29.3 million and recorded a related gain of$24.7 million , primarily related to the sale of three store properties: (1) a 120,000 square foot location atCortana Mall inBaton Rouge, Louisiana , which was permanently closed and sold; (2) a 200,000 square foot location atParadise Valley Mall inPhoenix, Arizona , which was permanently sold and closed and (3) a non-operating store property inKnoxville, Tennessee . During fiscal 2021, the Company also closed its leased clearance center atValle Vista Mall inHarlingen, Texas (100,000 square feet). The Company has announced the upcoming closure of its leased clearance center atUniversity Square Mall inTampa, Florida (80,000 square feet). There were no material costs associated or expected with any of these store closures. We remain committed to closing under-performing stores where appropriate and may incur future closing costs related to such stores when they close. During fiscal 2020, the Company received cash proceeds of$1.5 million and recorded a related loss of$2.2 million , primarily for the sale of one store property inSlidell, Louisiana . During fiscal 2020, we also permanently closed the locations atCentral Mall inLawton, Oklahoma (100,000 square feet); Crossroads Center inWaterloo, Iowa (150,000 square feet); andNorth Plains Mall inClovis, New Mexico (62,000 square feet).
During fiscal 2021 and 2020, the Company received proceeds from insurance of
During fiscal 2021, the Company received proceeds from life insurance of$0.7 million related to one policy. During fiscal 2020, the Company received life insurance proceeds of$4.3 million related to four policies.
Financing Activities
Our primary source of cash inflows from financing activities is generally
borrowings from our
Cash used in financing activities increased to$853.8 million in fiscal 2021 from$121.3 million in fiscal 2020. This increase was primarily due to increases in treasury stock purchases and cash dividends paid during 2021 (primarily related to the special$15 per share dividend paid in fiscal 2021). Stock Repurchase. InMarch 2018 , the Company's Board of Directors authorized the Company to repurchase up to$500 million of the Company's Class A Common Stock under an open-ended plan ("March 2018 Stock Plan"). InMay 2021 , the Company announced that its Board of Directors approved the Company to repurchase up to$500 million of the Company's Class A Common Stock under an open ended plan ("May 2021 Stock Plan"). As ofJanuary 29, 2022 , the Company had completed the authorized purchases under theMarch 2018 Stock Plan, and$112.0 million of authorization remained under theMay 2021 Stock Plan. During fiscal 2021, the Company repurchased 3.2 million shares of Class A Common Stock for$561.1 million (including the accrual of$16.2 million of share repurchases that had not settled as ofJanuary 29, 2022 ) at an average price of$175.06 per share. During fiscal 2020, the Company repurchased 2.2 million shares of Class A Common Stock for$95.6 million at an average price of$42.83 per share. The ultimate disposition of the repurchased stock has not been determined. Revolving Credit Agreement. The Company maintains a credit facility ("credit agreement") for general corporate purposes including, among other uses, working capital financing, the issuance of letters of credit, capital expenditures and, subject to certain restrictions, the repayment of existing indebtedness and share repurchases. The credit agreement provides a borrowing capacity of$800 million , subject to certain limitations as outlined in the credit agreement, with a$200 million expansion option ("credit agreement").
As part of the Company's liquidity strategy during the COVID-19 pandemic, in
InApril 2020 , the Company amended its credit agreement (the "2020 amendment"). Pursuant to the 2020 amendment, the credit agreement became secured by certain deposit accounts of the Company and certain inventory of certain subsidiaries. The borrowings of$779 million were repaid concurrent with the execution of the 2020 amendment. During fiscal 2020, the 30
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Company paid
InApril 2021 , the Company further amended the credit agreement (the "2021 amendment"). Pursuant to the 2021 amendment, the Company pays a variable rate of interest on borrowings under the credit agreement and a commitment fee to the participating banks. The rate of interest on borrowings is LIBOR plus 1.75% if average quarterly availability is less than 50% of the total commitment, as defined in the 2021 amended credit agreement ("total commitment"), and the rate of interest on borrowings is LIBOR plus 1.50% if average quarterly availability is greater than or equal to 50% of the total commitment. The commitment fee for unused borrowings is 0.30% per annum if average borrowings are less than 35% of the total commitment and 0.25% if average borrowings are greater than or equal to 35% of the total commitment. As long as availability exceeds$80 million and certain events of default have not occurred and are not continuing, there are no financial covenant requirements under the credit agreement. The credit agreement, as amended by the 2021 amendment, matures onApril 28, 2026 . During fiscal 2021, the Company paid$3.0 million in issuance costs related to the 2021 amendment, which were recorded in other assets on the consolidated balance sheet, and the Company recognized a loss on early extinguishment of debt of$2.8 million for the write-off of certain remaining deferred financing fees related to the 2020 amendment. This charge was recorded in other expense on the consolidated statement of operations. No borrowings were outstanding atJanuary 29, 2022 . Letters of credit totaling$20.1 million were issued under the credit agreement leaving unutilized availability under the facility of$700.6 million atJanuary 29, 2022 . The Company had no borrowings during fiscal 2021, and the Company had weighted-average borrowings of$148.6 million and$76.9 million during fiscal 2020 and 2019, respectively. Long-term Debt. AtJanuary 29, 2022 , the Company had$366.0 million of long-term debt, including the current portion, comprised of unsecured notes. The unsecured notes bear interest at rates ranging from 7.000% to 7.875% with due dates from fiscal 2022 through fiscal 2028.
Long-term debt maturities over the next five years are (in millions):
Fiscal Year Long-Term Debt Maturities 2022 $ 44.8 2023 - 2024 - 2025 - 2026 96.0
During fiscal 2021 and 2020, the Company made finance lease payments of
During fiscal 2022, the Company expects to accrue interest expense of
Subordinated Debentures. As ofJanuary 29, 2022 , the Company had$200 million outstanding of its 7.5% subordinated debentures dueAugust 1, 2038 . All of these subordinated debentures were held by Dillard's Capital Trust I, a 100% owned, unconsolidated finance subsidiary of the Company. The Company has the right to defer the payment of interest on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters; however, the Company has no present intention of exercising this right to defer interest payments.
During fiscal 2022, the Company expects to accrue interest expense of
Dividends. During fiscal 2021, in addition to our typical quarterly dividends, the Board of Directors declared a special dividend of$15.00 per share that was paid on the Class A and Class B Common Stock of the Company. 31
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Fiscal 2022 Outlook
The Company expects to finance its operations during fiscal 2022 from cash on hand, cash flows generated from operations and, if necessary, utilization of our revolving credit facility. Depending upon our actual and anticipated sources and uses of liquidity, the Company will from time to time consider other possible financing transactions, the proceeds of which could be used to fund working capital or for other corporate purposes.
LIBOR
OnMarch 5, 2021 , theU.K. Financial Conduct Authority , which regulates LIBOR, announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately afterDecember 31, 2021 , in the case of the 1-week and 2-monthU.S. dollar settings; and (b) immediately afterJune 30, 2023 , in the case of the remainingU.S. dollar settings. The 2021 amendment to our credit agreement included an approach to replace LIBOR with a SOFR-based rate. We have not yet transitioned to a SOFR-based rate and will continue to monitor, assess and plan for the replacement of LIBOR with an alternative rate. We also intend to work with theWells Fargo Alliance and any other applicable agreements to determine a suitable alternative reference rate.
OFF-BALANCE-SHEET ARRANGEMENTS
The Company has not created, and is not party to, any special-purpose entities
or off-balance-sheet arrangements for the purpose of raising capital, incurring
debt or operating the Company's business. The Company does not have any
off-balance-sheet arrangements or relationships that are reasonably likely to
materially affect the Company's financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or the availability of capital resources.
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COMMERCIAL COMMITMENTS
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
(in thousands of dollars) Total Amounts After
Other Commercial Commitments Committed Within 1 year 2 - 3 years 4 - 5 years 5 years
$800 million line of credit, none
outstanding(1) $ - $ - $ - $ - $ -
Standby letters of credit 20,083 20,083 - - -
Import letters of credit - - - - -
Total commercial commitments $ 20,083 $ 20,083 $ - $ - $ -
___________________________________
(1)At
NEW ACCOUNTING PRONOUNCEMENTS
For information with respect to new accounting pronouncements and the impact of
these pronouncements on our consolidated financial statements, see Note 1 in the
"Notes to Consolidated Financial Statements" in Item 8 hereof.
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FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements. The following are or may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (a) statements including words such as "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "estimate," "continue," or the negative or other variations thereof; (b) statements regarding matters that are not historical facts; and (c) statements about the Company's future occurrences, plans and objectives, including those statements included under the headings "2022 Guidance" and "Fiscal 2022 Outlook" included in this Management's Discussion and Analysis and other statements regarding management's expectations and forecasts for the remainder of fiscal 2022 and beyond, statements concerning the opening of new stores or the closing of existing stores, statements regarding our competitive position, statements concerning capital expenditures and sources of liquidity, statements regarding the expected impact of the COVID-19 pandemic and related government responses, including the CARES Act and other subsequently-enacted COVID-19 stimulus packages, statements concerning share repurchases, statements concerning pension contributions, statements concerning changes in loss trends, settlements and other costs related to our self-insurance programs, statements regarding the expected phase out of LIBOR, statements concerning expectations regarding the payment of dividends, statements regarding the impacts of inflation in fiscal 2022 and statements concerning estimated taxes. 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) the COVID-19 pandemic and its effects on public health, our supply chain, the health and well-being of our employees and customers, and the retail industry in general; other general retail industry conditions and macro-economic conditions including inflation and changes in traffic at malls and shopping centers; 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 and interest rates on 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 the Company's ability to meet labor needs amid nationwide labor shortages and an intense competition for talent; changes in consumer spending patterns, debt levels and their ability to meet credit obligations; high levels of unemployment; 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; the elimination of LIBOR; potential disruption from terrorist activity and the effect on ongoing consumer confidence; other epidemic, pandemic or public health issues; potential disruption of international trade and supply chain efficiencies; any government-ordered restrictions on the movement of the general public or the mandated or voluntary closing of retail stores in response to the COVID-19 pandemic; global conflicts (including the recent conflict inUkraine ) and the possible impact on consumer spending patterns and other economic and demographic changes of similar or dissimilar nature, and other risks and uncertainties, including those detailed from time to time in our periodic reports filed with theSEC , particularly those set forth under the caption "Item 1A, Risk Factors" in this Annual Report. 34
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