DILLARD'S, INC.

(DDS)
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DILLARD'S, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

12/03/2021 | 04:32pm EDT
The following discussion should be read in conjunction with the condensed
consolidated financial statements and the footnotes thereto included elsewhere
in this report, as well as the financial and other information included in our
Annual Report on Form 10-K for the year ended January 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


In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus (COVID-19) as a pandemic, which continues to impact the United
States and global economies. The COVID-19 pandemic has had and may continue to
have a significant impact on the Company's business, results of operations and
financial position. The Company began closing stores on March 19, 2020 as
mandated by state and local governments, and by April 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 ended May 30, 2020 (fiscal May), we re-opened most of our
full-line stores, and by June 2, 2020 all Dillard's store locations had been
re-opened. Following our re-opening, a very small number of our locations were
temporarily closed to in-store shopping due to government mandate. All stores
are currently open and are operating at reduced hours from fiscal 2019 operating
hours. While the availability of vaccinations has led to re-openings across the
country and the easing of restrictions, the continuing financial impact of
COVID-19 to fiscal 2021 cannot be reasonably estimated at this time.

The Company's results for the three months ended October 30, 2021 improved
significantly compared to the three months ended October 31, 2020, marking a
third sequential record quarterly performance. The strong consumer demand that
began in the first quarter continued through the second and third quarters,
leading to a 48% increase in comparable retail sales for the third quarter of
2021 compared to the third quarter of 2020 and a 12% increase compared to the
third quarter of 2019.

Retail gross margin increased significantly to 46.7% during the three months
ended October 30, 2021 compared to 36.6% during the three months ended
October 31, 2020. The Company attributes this improvement to continued strong
consumer demand combined with better inventory management which led to decreased
markdowns compared to the prior year third quarter. Accordingly, the Company
reduced inventory by approximately 1% compared to the prior year third quarter.
Selling, general and administrative expenses ("SG&A") increased to $393.2
million (26.5% of sales) compared to $318.2 million (31.0% of sales) for the
prior year third quarter primarily due to decreases in payroll expense in the
prior year third quarter as store traffic, while recovering, was not to
pre-pandemic levels. Increased retail sales during the third quarter of 2021
compared to the third quarter of 2020 provided support for these increased
expenses as SG&A declined 450 basis points of sales. The Company reported net
income of $197.3 million ($9.81 per share) compared to net income of $31.9
million ($1.43 per share) for the prior year third quarter.

Included in net income for the quarter ended October 31, 2020 is a net tax
benefit of $32.4 million ($1.46 per share) related to The Coronavirus Aid,
Relief and Economic Security ("CARES") Act, signed into law on March 27, 2020,
which allowed for net operating loss carryback to years in which the federal
income tax rate was 35%. Also included in net income for the quarter 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.

During the three months ended October 30, 2021, the Company repurchased 1.2
million shares of its outstanding Class A Common Stock for $239.2 million under
its stock repurchase plans authorized by the Company's Board of Directors in
March 2018 (the "March 2018 Plan") and May 2021 (the "May 2021 Plan"). As of
October 30, 2021, the Company had completed the authorized purchases under the
March 2018 Plan, and $262.9 million of authorization remained under the May 2021
Plan.

As of October 30, 2021, the Company had working capital of $1,079.4 million
(including cash and cash equivalents of $619.7 million) and $566.0 million of
total debt outstanding, excluding finance lease liabilities and operating lease
liabilities, with no scheduled maturities until the end of fiscal 2022.  Cash
flows provided by operating activities were $728.1 million for the nine months
ended October 30, 2021.

On November 18, 2021, the Company announced that its Board of Directors declared
a special dividend of $15.00 per share. The dividend is payable on the Class A
and Class B Common Stock of the Company on December 15, 2021 to shareholders of
record as of November 29, 2021.

The Company maintained 280 Dillard's stores, including 30 clearance centers, and an internet store at October 30, 2021.

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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, have continued throughout fiscal 2021, and it is unclear when these
issues will be resolved. The California ports of Los Angeles and Long Beach,
which together handle a significant portion of United 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 2021.

With regard to operational staffing, management is particularly focused on the
existing tight labor market, seeking to hire permanent and seasonal talent
across multiple functions. In addition to existing labor market pressures, the
Occupational Safety and Health Administration ("OSHA") issued an Emergency
Temporary Standard ("ETS") on November 5, 2021 requiring all employers with 100
or more employees to mandate COVID-19 vaccination or testing effective January
4, 2022. Implementation of the ETS has been suspended pending further
developments in litigation filed against OSHA. The Company continues to monitor
the status of the litigation and the potential impact of the ETS on retaining
and hiring employees and additional costs that may be incurred if this standard
goes into effect.


Key Performance Indicators

We use a number of key indicators of financial condition and operating performance to evaluate our business, including the following:

Three Months Ended

                                                                          October 30,           October 31,
                                                                             2021                  2020
Net sales (in millions)                                                 $    1,481.0          $    1,024.9
Retail stores sales trend                                                         47  %                (25) %
Comparable retail stores sales trend                                              48  %                (24) %
Gross profit (in millions)                                              $      684.7          $      366.2
Gross profit as a percentage of net sales                                       46.2  %               35.7  %
Retail gross profit as a percentage of net sales                                46.7  %               36.6  %

Selling, general and administrative expenses as a percentage of net sales

                                                                       26.5  %               31.0  %
Cash flow provided by (used in) operations (in millions)*               $      728.1          $      (62.9)
Total retail store count at end of period                                        280                   282
Retail sales per square foot                                            $         31          $         21
Retail store inventory trend                                                      (1) %                (22) %
Annualized retail merchandise inventory turnover                                 2.5                   1.8


*Cash flow from operations data is for the nine months ended October 30, 2021 and October 31, 2020.


General

Net sales. Net sales includes merchandise sales of comparable and non-comparable
stores and revenue recognized on contracts of CDI 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.

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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. Customers who 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 with
Wells 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 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, data processing and other equipment rentals and office space leases.


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
agreement.  Interest and debt expense also includes the 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 related to the Company's unfunded, nonqualified defined benefit plan and charges related to the write-off of deferred financing fees, if any.


(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 insurance proceeds in excess of the cost basis of insured assets,
if any.

LIBOR

On March 5, 2021, the U.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 after December 31,
2021, in the case of the 1-week and 2-month U.S. dollar settings; and (b)
immediately after June 30, 2023, in the case of the remaining U.S. dollar
settings. Going forward, we intend to work with our lenders to use a suitable
alternative reference rate for the 2021 amended credit agreement, the Wells
Fargo Alliance and any other applicable agreements. We will continue to monitor,
assess and plan for the phase out of LIBOR.

Seasonality


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.






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RESULTS OF OPERATIONS

The following table sets forth the results of operations as a percentage of net sales for the periods indicated (percentages may not foot due to rounding):

                                                                         Three Months Ended                                        Nine Months Ended
                                                               October 30,                    October 31,               October 30,               October 31,
                                                                  2021                           2020                      2021                      2020
Net sales                                                                 100.0  %                    100.0  %                100.0  %                    100.0  %
Service charges and other income                                            2.1                         2.7                     2.1                         3.2

                                                                          102.1                       102.7                   102.1                       103.2

Cost of sales                                                              53.8                        64.3                    57.0                        72.8
Selling, general and administrative expenses                               26.5                        31.0                    25.0                    

32.1

Depreciation and amortization                                               3.4                         5.2                     3.3                         5.7
Rentals                                                                     0.3                         0.5                     0.3                         0.6
Interest and debt expense, net                                              0.7                         1.2                     0.8                         1.4
Other expense                                                               0.1                         0.2                     0.2                         0.2
(Gain) loss on disposal of assets                                             -                         0.2                    (0.6)                    

0.1


Income (loss) before income taxes                                          17.2                           -                    15.9                        (9.6)
Income taxes (benefit)                                                      3.9                        (3.1)                    3.6                        (4.5)

Net income (loss)                                                          13.3  %                      3.1  %                 12.4  %                     (5.1) %




Net Sales
                                     Three Months Ended
                                October 30,      October 31,
(in thousands of dollars)          2021             2020          $ Change
Net sales:
Retail operations segment      $ 1,460,184      $   994,588      $ 465,596
Construction segment                20,815           30,311         (9,496)
Total net sales                $ 1,480,999      $ 1,024,899      $ 456,100



The percent change in the Company's sales by segment and product category for
the three months ended October 30, 2021 compared to the three months ended
October 31, 2020 as well as the sales percentage by segment and product category
to total net sales for the three months ended October 30, 2021 are as follows:
                                        % Change          % of
                                       2021 - 2020      Net Sales
Retail operations segment
Cosmetics                                   31.6  %          13  %
Ladies' apparel                             61.2             22
Ladies' accessories and lingerie            29.1             14
Juniors' and children's apparel             65.0             11
Men's apparel and accessories               60.5             20
Shoes                                       44.4             16
Home and furniture                           8.1              3
                                                             99
Construction segment                       (31.3)             1
Total                                                       100  %


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Net sales from the retail operations segment increased $466 million, or
approximately 47%, and sales in comparable stores increased approximately 48%,
during the three months ended October 30, 2021 compared to the three months
ended October 31, 2020, primarily due to the impact of the COVID-19 pandemic.
Sales in all product categories increased significantly over the third quarter
last year.

Compared to the third quarter of fiscal 2019, net sales from the retail
operations segment for the three months ended October 30, 2021 and November 2,
2019 were $1,460.2 million and $1,334.2 million, respectively, increasing $126.0
million or approximately 9% while sales in comparable stores increased
approximately 12%.

We recorded a return asset of $11.0 million and $7.5 million and an allowance
for sales returns of $22.3 million and $12.5 million as of October 30, 2021 and
October 31, 2020, respectively.

During the three months ended October 30, 2021, net sales from the construction
segment decreased $9.5 million, or approximately 31%, compared to the three
months ended October 31, 2020 due to a decrease in construction activity. The
remaining performance obligations related to executed construction contracts
totaled $84.2 million as of October 30, 2021, increasing approximately 10% from
January 30, 2021 and decreasing approximately 13% from October 31, 2020,
respectively. We expect these remaining performance obligations to be earned
over the next nine to eighteen months.

                                     Nine Months Ended
                                October 30,      October 31,
(in thousands of dollars)          2021             2020           $ Change
Net sales:
Retail operations segment      $ 4,296,316      $ 2,638,831      $ 1,657,485
Construction segment                83,604           91,767           (8,163)
Total net sales                $ 4,379,920      $ 2,730,598      $ 1,649,322



The percent change in the Company's sales by segment and product category for
the nine months ended October 30, 2021 compared to the nine months ended
October 31, 2020 as well as the sales percentage by segment and product category
to total net sales for the nine months ended October 30, 2021 are as follows:

                                        % Change          % of
                                       2021 - 2020      Net Sales
Retail operations segment
Cosmetics                                   48.9  %          13  %
Ladies' apparel                             79.3             23
Ladies' accessories and lingerie            53.6             15
Juniors' and children's apparel             69.6             10
Men's apparel and accessories               69.9             19
Shoes                                       61.5             15
Home and furniture                          22.3              3
                                                             98
Construction segment                        (8.9)             2
Total                                                       100  %



Net sales from the retail operations segment increased $1,657.5 million, or
approximately 63%, during the nine months ended October 30, 2021 compared to the
nine months ended October 31, 2020 primarily due to the impact of the COVID-19
pandemic. The Company reported no comparable store sales data for the period due
to the temporary closure of its brick-and-mortar stores during a portion of the
first nine months of 2020 as well as the interdependence between in-store and
online sales. Sales in all product categories increased significantly over the
first nine months of fiscal 2020.

Compared to the first nine months of fiscal 2019, net sales from the retail
operations segment for the nine months ended October 30, 2021 and November 2,
2019 were $4,296.3 million and $4,132.9 million, respectively, increasing $163.4
million or approximately 4% while sales in comparable stores increased
approximately 7%.
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During the nine months ended October 30, 2021, net sales from the construction
segment decreased $8.2 million, or approximately 9%, compared to the nine months
ended October 31, 2020 due to a decrease in construction activity.

Service Charges and Other Income

                                                                Three Months Ended                         Nine Months Ended                 Three Months         Nine Months
                                                          October 30,         October 31,          October 30,           October 31,         $ Change 2021          $ Change
(in thousands of dollars)                                     2021                2020                2021                  2020                - 2020             2021-2020
Service charges and other income:
Retail operations segment
Income from Wells Fargo Alliance                         $    18,701        

$ 16,472 $ 54,143 $ 51,958 $ 2,229

          $     2,185
Shipping and handling income                                   9,672              7,917                28,376                28,140               1,755                  236
Leased department income                                           1                212                     4                 1,075                (211)              (1,071)
Other                                                          2,664              2,562                 7,865                 6,600                 102                1,265
                                                              31,038             27,163                90,388                87,773               3,875                2,615
Construction segment                                            (125)                50                   571                   500                (175)                  71
Total service charges and other income                   $    30,913          $  27,213          $     90,959          $     88,273          $    3,700          $     2,686



Service charges and other income is composed primarily of income from the Wells
Fargo Alliance. Income from the alliance increased $2.2 million during the three
months ended October 30, 2021 compared to the three months ended October 31,
2020 primarily due to decreases in credit losses. Income from the alliance
increased $2.2 million during the nine months ended October 30, 2021 compared to
the nine months ended October 31, 2020 primarily due to decreases in credit
losses.

Shipping and handling income increased during the three and nine months ended
October 30, 2021 compared to the three and nine months ended October 31, 2020,
respectively, due to an increase in online shopping. The smaller increase for
the nine-month period compared to the three-month period was primarily due to an
increase in online orders in the first quarter of 2020 as customer shopping
patterns shifted to dillards.com as COVID-19 infection levels increased and
brick-and-mortar stores were temporarily closed.

Compared to the third quarter of fiscal 2019, shipping and handling income for
the three months ended October 30, 2021 and November 2, 2019 was $9.7 million
and $6.7 million, respectively, increasing $3.0 million or 45.0%. Shipping and
handling income for the nine months ended October 30, 2021 and November 2, 2019
was $28.4 million and $18.9 million, respectively, increasing $9.5 million or
50.1%.

Leased department income consisted primarily of commissions from a principal
licensed department of an upscale women's apparel vendor located in certain
stores. By the end of July 2020, our agreement with this principal licensed
department had been terminated. We expect future leased department income to be
minimal.

Gross Profit

                                  October 30,      October 31,
(in thousands of dollars)            2021              2020           $ Change        % Change
Gross profit:
Three months ended
Retail operations segment        $   682,317      $    364,232      $   318,085         87.3  %
Construction segment                   2,406             1,983              423         21.3
Total gross profit               $   684,723      $    366,215      $   318,508         87.0  %

Nine months ended
Retail operations segment        $ 1,876,558      $    737,673      $ 1,138,885        154.4  %
Construction segment                   5,787             5,925             (138)        (2.3)
Total gross profit               $ 1,882,345      $    743,598      $ 1,138,747        153.1  %



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                                                                    Three Months Ended                                          Nine Months Ended
                                                         October 30,                     October 31,                October 30,                October 31,
                                                             2021                            2020                       2021                       2020
Gross profit as a percentage of segment
net sales:
Retail operations segment                                             46.7  %                      36.6  %                  43.7  %                      28.0  %
Construction segment                                                  11.6                          6.5                      6.9                        

6.5

Total gross profit as a percentage of net
sales                                                                 46.2                         35.7                     43.0                         27.2


Gross profit, as a percentage of sales, increased to 46.2% from 35.7% during the three months ended October 30, 2021 compared to the three months ended October 31, 2020, respectively.


Gross profit from retail operations, as a percentage of sales, increased to
46.7% from 36.6% during the three months ended October 30, 2021 compared to the
three months ended October 31, 2020, respectively, primarily due to increased
markdowns taken during the third quarter of fiscal 2020 as a result of the
impact of the COVID-19 pandemic as well as better inventory management and
stronger customer demand leading to decreased markdowns in the third quarter of
fiscal 2021. Gross margin increased significantly in all product categories
except cosmetics which increased moderately.

Compared to the third quarter of fiscal 2019, gross profit from retail
operations, as a percentage of sales, increased 1,221 basis points of sales to
46.7% during the three months ended October 30, 2021 compared to 34.5% during
the three months ended November 2, 2019 primarily due to better inventory
management and customer demand leading to decreased markdowns in the third
quarter of fiscal 2021.

Gross profit, as a percentage of sales, increased to 43.0% from 27.2% during the
nine months ended October 30, 2021 compared to the nine months ended October 31,
2020, respectively.

Gross profit from retail operations, as a percentage of sales, increased to
43.7% from 28.0% during the nine months ended October 30, 2021 compared to the
nine months ended October 31, 2020, respectively, primarily due to increased
markdowns taken during the first nine months of fiscal 2020 as a result of the
impact of the COVID-19 pandemic as well as better inventory management and
customer demand leading to decreased markdowns in the first nine months of
fiscal 2021. Gross margin increased significantly in all product categories
except cosmetics which increased moderately.

Compared to the first nine months of fiscal 2019, gross profit from retail
operations, as a percentage of sales, increased 1000 basis points of sales to
43.7% during the nine months ended October 30, 2021 compared to 33.7% during the
nine months ended November 2, 2019 primarily due to better inventory management
and customer demand leading to decreased markdowns in the first nine months of
fiscal 2021.

Inventory decreased 1% in total as of October 30, 2021 compared to October 31,
2020.  A 1% change in the dollar amount of markdowns would have impacted net
income by approximately $1 million and $5 million for the three and nine months
ended October 30, 2021, respectively.

Management is monitoring the continuing supply chain issues, particularly with regard to shipping delays and disruptions in the global transportation network.

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Selling, General and Administrative Expenses ("SG&A")

                                  October 30,      October 31,
(in thousands of dollars)            2021              2020          $ Change       % Change
SG&A:
Three months ended
Retail operations segment        $   391,463      $    316,738      $  74,725         23.6  %
Construction segment                   1,728             1,480            248         16.8
Total SG&A                       $   393,191      $    318,218      $  74,973         23.6  %

Nine months ended
Retail operations segment        $ 1,090,818      $    871,096      $ 219,722         25.2  %
Construction segment                   4,855             4,630            225          4.9
Total SG&A                       $ 1,095,673      $    875,726      $ 219,947         25.1  %



                                                                    Three Months Ended                                          Nine Months Ended
                                                         October 30,                     October 31,                October 30,                October 31,
                                                             2021                            2020                       2021                       2020
SG&A as a percentage of segment net sales:
Retail operations segment                                             26.8  %                      31.8  %                  25.4  %                      33.0  %
Construction segment                                                   8.3                          4.9                      5.8                          5.0
Total SG&A as a percentage of net sales                               26.5                         31.0                     25.0                         32.1



SG&A decreased to 26.5% of sales during the three months ended October 30, 2021
compared to 31.0% of sales during the three months ended October 31, 2020, while
increasing $75.0 million.  SG&A from retail operations decreased to 26.8% of
sales for the three months ended October 30, 2021 compared to 31.8% of sales for
the three months ended October 31, 2020, while increasing $74.7 million. The
increase in SG&A dollars was primarily due to increases in payroll expense and
related payroll taxes.

SG&A decreased to 25.0% of sales during the nine months ended October 30, 2021
compared to 32.1% of sales during the nine months ended October 31, 2020, while
increasing $219.9 million. SG&A from retail operations decreased to 25.4% of
sales for the nine months ended October 30, 2021 compared to 33.0% of sales for
the nine months ended October 31, 2020, while increasing $219.7 million. 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 the three months ended October 30,
2021 was $261.5 million compared to $207.5 million for the three months ended
October 31, 2020, increasing $53.9 million. Payroll expense and related payroll
taxes for the nine months ended October 30, 2021 was $733.5 million compared to
$560.1 million for the nine months ended October 31, 2020, increasing $173.4
million. During the first nine months of fiscal 2020, the Company (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.

Compared to the third quarter of fiscal 2019, SG&A from retail operations for
the three months ended October 30, 2021 and November 2, 2019 were $391.5 million
(26.8% of sales) and $416.7 million (31.2% of sales), respectively, decreasing
$25.2 million. SG&A from retail operations for the nine months ended October 30,
2021 was $1,090.8 million (25.4% of sales) compared to $1,227.6 million (29.7%
of sales) for the nine months ended November 2, 2019, decreasing $136.8 million
primarily due to decreases in payroll expense and related payroll taxes. The
Company continues to operate with reduced operating hours and fewer associates.
With regard to operational staffing, management is particularly focused on the
existing tight labor market, seeking to hire permanent and seasonal talent
across multiple functions.

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Depreciation and Amortization

                                           October 30,       October 31,
(in thousands of dollars)                      2021              2020          $ Change      % Change
Depreciation and amortization:
Three months ended
Retail operations segment                 $     50,122      $     53,290      $ (3,168)        (5.9) %
Construction segment                                66                87           (21)       (24.1)
Total depreciation and amortization       $     50,188      $     53,377      $ (3,189)        (6.0) %

Nine months ended
Retail operations segment                 $    146,441      $    154,806      $ (8,365)        (5.4) %
Construction segment                               198               423          (225)       (53.2)
Total depreciation and amortization       $    146,639      $    155,229    

$ (8,590) (5.5) %




Depreciation and amortization expense decreased $3.2 million and $8.6 million
during the three and nine months ended October 30, 2021 compared to the three
and nine months ended October 31, 2020 primarily due to the timing and
composition of capital expenditures.

Interest and Debt Expense, Net

                                                                   October 30,           October 31,
(in thousands of dollars)                                             2021                  2020               $ Change              % Change
Interest and debt expense (income), net:
Three months ended
Retail operations segment                                        $     10,557          $     12,167          $  (1,610)                   (13.2) %
Construction segment                                                       (7)                   (5)                (2)                   (40.0)
Total interest and debt expense, net                             $     10,550          $     12,162          $  (1,612)                   (13.3) %

Nine months ended
Retail operations segment                                        $     32,889          $     37,343          $  (4,454)                   (11.9) %
Construction segment                                                      (33)                  (38)                 5                     13.2
Total interest and debt expense, net                             $     32,856          $     37,305          $  (4,449)                   (11.9) %



Net interest and debt expense decreased $1.6 million and $4.4 million during the
three and nine months ended October 30, 2021 compared to the three and nine
months ended October 31, 2020, respectively, primarily due to a decrease of
short-term borrowings under the credit facility. Total weighted average debt
decreased by $75.7 million and $186.1 million during the three and nine months
ended October 30, 2021 compared to the three and nine months ended October 31,
2020, respectively, primarily due to a decrease of short-term borrowings under
the credit facility.

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Other Expense
                                  October 30,       October 31,
(in thousands of dollars)             2021              2020          $ Change      % Change
Other expense:
Three months ended
Retail operations segment        $      2,134      $      2,105      $     29          1.4  %
Construction segment                        -                 -             -            -
Total other expense              $      2,134      $      2,105      $     29          1.4  %

Nine months ended
Retail operations segment        $      9,232      $      6,313      $  2,919         46.2  %
Construction segment                        -                 -             -            -
Total other expense              $      9,232      $      6,313      $  2,919         46.2  %



Other expense increased $2.9 million during the nine months ended October 30,
2021 compared to the nine months ended October 31, 2020 primarily due 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

                                                  October 30,       October 

31,

    (in thousands of dollars)                         2021              

2020 $ Change

(Gain) loss on disposal of assets:

Three months ended

    Retail operations segment                    $         (4)     $      

2,234 $ (2,238)

    Construction segment                                    -               (13)            13
    Total (gain) loss on disposal of assets      $         (4)     $      2,221      $  (2,225)

    Nine months ended
    Retail operations segment                    $    (24,683)     $      2,261      $ (26,944)
    Construction segment                                   (3)              (26)            23

Total (gain) loss on disposal of assets $ (24,686) $ 2,235 $ (26,921)




During the nine months ended October 30, 2021, the Company recorded 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.

During the three and nine months ended October 31, 2020, the Company recorded
proceeds of $1.5 million primarily from the sale of one store property,
resulting in a loss of $2.2 million that was recorded in (gain) loss on disposal
of assets.

Income Taxes

The Company's estimated federal and state effective income tax rate was
approximately 22.5% for the three and nine months ended October 30, 2021. During
the three and nine months ended October 30, 2021, income tax expense differed
from what would be computed using the statutory federal income tax rate
primarily due to the effects of state and local income taxes.

The Company was in a net operating loss position for the fiscal year ended
January 30, 2021. The CARES Act, signed into law on March 27, 2020, allows for
net operating loss carryback to years in which the statutory federal income tax
rate was 35% rather than the current 21%. The Company's estimated federal and
state effective income tax rate was approximately 46.9% for the nine months
ended October 31, 2020. During the three and nine months ended October 31, 2020,
income tax benefit differed from what would be computed using the current
statutory federal income tax rate of 21% primarily due to the recognition of a
net tax benefit of $32.4 million and $64.6 million, respectively, related to the
rate differential in the carryback year. Income tax benefit for the three and
nine months also included the effects of state and local income taxes.

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The Company expects the fiscal 2021 federal and state effective income tax rate
to approximate 20% to 21%. This rate includes an expected federal income tax
benefit due to a one-time deduction related to that portion of the special
dividend of $15 per share to be paid to the Dillard's, Inc. Investment and
Employee Stock Ownership Plan. This rate may change if results of operations for
fiscal 2021 differ from management's current expectations. Changes in the
Company's assumptions and judgments can materially affect amounts recognized in
the condensed consolidated financial statements.


FINANCIAL CONDITION

A summary of net cash flows for the nine months ended October 30, 2021 and October 31, 2020 follows:

Nine Months Ended

                                                                         October 30,           October 31,
(in thousands of dollars)                                                   2021                  2020                $ Change
Operating Activities                                                   $    728,083          $    (62,938)         $   791,021
Investing Activities                                                        (45,179)              (50,352)               5,173
Financing Activities                                                       (423,522)             (102,663)            (320,859)
Total Increase (Decrease) in Cash and Cash Equivalents                 $    

259,382 $ (215,953) $ 475,335




Net cash flows from operations increased $791.0 million during the nine months
ended October 30, 2021 compared to the nine months ended October 31, 2020 due to
significant increases in net income, primarily due to increases in gross profit,
and changes in working capital. Compared to the first nine months of fiscal
2019, net cash flows provided by operations were $728.1 million for the nine
months ended October 30, 2021 and $23.0 million for the nine months ended
November 2, 2019, an increase of $705.1 million.

Wells Fargo owns and manages the Dillard's private label cards under the Wells
Fargo Alliance. Under the Wells 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 the Wells Fargo Alliance, we receive ongoing 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 in fiscal 2024.

The Company received income of $54.1 million and $52.0 million from the Wells
Fargo Alliance during the nine months ended October 30, 2021 and October 31,
2020, respectively.  The Company cannot reasonably predict whether there will be
any ongoing impact or the magnitude of any such impact of the COVID-19 pandemic
on the portfolio's future earnings and the ongoing cash compensation from the
Wells Fargo Alliance.

During the nine months ended October 30, 2021 and October 31, 2020, the Company
received proceeds from insurance of $2.9 million and $8.7 million, respectively,
for claims filed for merchandise losses related to storm damage incurred at two
stores.

Capital expenditures were $79.7 million and $52.1 million for the nine months
ended October 30, 2021 and October 31, 2020, respectively. The capital
expenditures were primarily related to equipment purchases and the continued
construction of two new stores during the current year. During the nine months
ended October 30, 2021, the Company opened a new store at Mesa Mall in Grand
Junction, Colorado (100,000 square feet). The Company has also announced plans
to open a new store at University Place in Orem, Utah in the Spring of 2022
(160,000 square feet). Both opportunities arose from peer closures at those
centers.

During the nine months ended October 30, 2021, the Company received cash
proceeds of $29.3 million and recorded a related gain of $24.7 million,
primarily from the sale of three store properties: (1) a 120,000 square foot
location at Cortana Mall in Baton Rouge, Louisiana, which was permanently closed
and sold; (2) a 200,000 square foot location at Paradise Valley Mall in Phoenix,
Arizona, which was sold during our first fiscal quarter and closed during our
second fiscal quarter and (3) a
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non-operating store property in Knoxville, Tennessee. The Company also closed
its leased clearance center at Valle Vista Mall in Harlingen, Texas (100,000
square feet) during the third quarter. 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 the nine months ended October 31, 2020, the Company received cash
proceeds of $1.5 million and recorded a loss of $2.2 million, primarily for the
sale of one store property in Slidell, Louisiana.
During the nine months ended October 30, 2021, the Company received proceeds
from insurance of $3.8 million for claims filed for building losses related to
storm damage incurred at two stores.

The Company had cash on hand of $619.7 million as of October 30, 2021.  During
the first quarter of fiscal 2020 and as part of our overall liquidity management
strategy and for peak working capital requirements, the Company maintained an
unsecured credit facility that provided a borrowing capacity of $800 million
with a $200 million expansion option ("credit agreement"). As part of the
Company's liquidity strategy during the COVID-19 pandemic, in March 2020, the
Company borrowed $779 million under the credit agreement.

The credit agreement was amended in April 2020 and became secured by certain
deposit accounts of the Company and certain inventory of certain subsidiaries
(the "2020 amended credit agreement"). The borrowings of $779 million were
repaid concurrent with the execution of the 2020 amended credit agreement.
During the nine months ended October 31, 2020, the Company paid $3.2 million in
issuance costs related to the 2020 amended credit agreement, which were recorded
in other assets on the condensed consolidated balance sheet.

In April 2021, the Company further amended its secured credit agreement (the
"2021 amended credit agreement"). See Note 7, Revolving Credit Agreement, in the
"Notes to Condensed Consolidated Financial Statements," in Part I, Item I hereof
for additional information. During the nine months ended October 30, 2021, the
Company paid $3.0 million in issuance costs related to the 2021 amended credit
agreement, which were recorded in other assets on the condensed consolidated
balance sheet, and the Company recognized a loss on the early extinguishment of
debt of $2.8 million for the write-off of certain remaining deferred financing
fees related to the 2020 amended credit agreement. This charge was recorded in
other expense on the condensed consolidated statement of operations.

At October 30, 2021, no borrowings were outstanding, and letters of credit totaling $20.1 million were issued under the 2021 amended credit agreement leaving unutilized availability under the credit facility of $779.9 million.


During the nine months ended October 30, 2021, the Company repurchased 2.6
million shares of Class A Common Stock at an average price of $158.40 per share
for $410.3 million under its stock repurchase plans. During the nine months
ended October 31, 2020, the Company (a) repurchased 2.2 million shares of Class
A Common Stock at an average price of $42.83 per share for $95.6 million under
its stock repurchase plan and (b) paid $7.3 million for share repurchases that
had not yet settled but were accrued at February 1, 2020. As of October 30,
2021, the Company had completed the authorized purchases under the March 2018
Plan, and $262.9 million of authorization remained under the May 2021 Plan. The
ultimate disposition of the repurchased stock has not been determined. See Note
8, Stock Repurchase Programs, in the "Notes to Condensed Consolidated Financial
Statements," in Part I, Item I hereof for additional information.
The COVID-19 pandemic has had and may continue to have a significant impact on
the Company's business, results of operations and financial position. Because
there is still significant uncertainty around the effects of the COVID-19
pandemic on the Company's business operations, our profitability and liquidity
may be further impacted if we are unable to appropriately manage our inventory
levels and expenses relative to any change in consumer demand.
The Company expects to finance its operations during fiscal 2021 from cash on
hand, cash flows generated from operations and, if necessary, through the
utilization of the 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.
On November 18, 2021, the Company announced that its Board of Directors declared
a special dividend of $15.00 per share. The dividend is payable on the Class A
and Class B Common Stock of the Company on December 15, 2021 to shareholders of
record as of November 29, 2021. The Company expects to fund the dividend from
cash flows from operations.
There have been no material changes in the information set forth under caption
"Commercial Commitments" in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, in the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 2021.
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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.


NEW ACCOUNTING STANDARDS

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2, Accounting Standards, in the "Notes to Condensed Consolidated Financial Statements," in Part I, Item I hereof.

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 statements regarding management's expectations and
forecasts for the remainder of fiscal 2021 and beyond, statements concerning the
opening of new stores or the closing of existing stores, 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 regarding the expected phase out of LIBOR 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 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; 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; 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 January 30, 2021, 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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