Dillard's(DDS) - 2026 Q4 - Annual Report

Store Operations - As of January 31, 2026, Dillard's operated 271 stores, including 28 clearance centers, and an e-commerce site at dillards.com[11] - The company employed approximately 29,100 associates as of December 20, 2025, with 87% of full-time associates working in retail stores[26][28] - The company operates 271 retail stores across 30 states, totaling approximately 46.0 million square feet, with 43.0 million square feet owned[103][105] Financial Performance - The company reported a net income of $570.2 million for fiscal 2025, maintaining a retail gross margin of 40.8%[128] - Total retail sales for fiscal 2025 were $6.232 billion, unchanged compared to $6.219 billion in fiscal 2024[128] - Comparable store sales for the same period were also unchanged, indicating stable performance in existing locations[128] - The company paid $484.9 million in dividends during fiscal 2025, including the largest special dividend in its history[128] - Stock repurchases amounted to $107.8 million, contributing to a strong financial position with approximately $1.1 billion in cash and cash equivalents at year-end[128] - Net income for fiscal 2025 was $570.2 million, or $36.42 per share, down from $593.5 million, or $36.82 per share, in fiscal 2024[131] - Cash flow from operations was $717.0 million for fiscal 2025, slightly up from $714.1 million in fiscal 2024[133] - Net sales for fiscal 2025 were $6,473.6 million, a decrease from $6,482.6 million in fiscal 2024[135] - Selling, general and administrative expenses for fiscal 2025 were $1,759.2 million, representing 27.2% of sales, up from 26.7% in fiscal 2024[131] - The company returned a record $592.6 million to stockholders through dividends and share repurchases during fiscal 2025[133] Credit Card Program - Dillard's entered into a new 10-year agreement with Citibank for its private label credit card program, replacing the previous Wells Fargo program[19] - Dillard's aims to expand its private label credit card usage through customer incentives and marketing support from Citibank[22] - The income and cash flow from the Citibank Alliance depend on various factors, including sales levels on Citi accounts and credit loss rates, which can significantly impact the company's operating results[71] - The company recognized income of $39.6 million from the Citibank Alliance in fiscal 2025, down from $54.1 million in fiscal 2024[159] Market and Competition - In Fiscal 2025, the retail operations segment accounted for 96% of net sales, with cosmetics, ladies' apparel, and men's apparel contributing 16%, 20%, and 19% respectively[12] - The holiday season significantly impacts sales, with approximately one-third of annual sales occurring in the last quarter of the fiscal year[23] - The company anticipates continued competition in the retail market, particularly in e-commerce, which may affect revenues and market share[37] - Seasonal fluctuations in revenue can disproportionately affect overall financial results, particularly during the last quarter of the fiscal year[38] Risks and Challenges - The company faces risks related to customer payment methods, including potential fraud and compliance with payment network rules, which could increase operating costs[74] - Regulatory changes affecting credit card operations may limit credit availability or increase costs, adversely impacting the company's earnings[72] - The company is subject to cybersecurity risks, including potential data breaches that could disrupt operations and lead to significant financial exposure[83] - Employee wage increases and healthcare costs are significant expenses that could impact the company's financial results and cash flows[89] - Variations in vendor allowances for advertising, payroll, and margin maintenance could negatively impact operating income and sales, particularly if payroll reimbursements decrease[44] - A decrease in cash flows from operations and constraints on accessing financing sources could limit the company's ability to fund operations, capital projects, and dividends[45] - The company's profitability may be adversely impacted by weather conditions, which could affect inventory compatibility with consumer needs and reduce sales[48] - Changes in economic, financial, and political conditions could adversely affect consumer confidence and spending, impacting sales and results of operations[51] Investments and Expenditures - The company has made significant investments in its trademark and license portfolio to enhance product quality and market responsiveness[16] - The company is expanding its private label merchandise program, which includes brands like Antonio Melani and Gianni Bini, but this expansion carries risks related to compliance and reputation[56] - Fluctuations in the price of merchandise, raw materials, and labor could increase costs and negatively impact financial results[57] - Purchase obligations for merchandise and store construction commitments totaled $1,254.8 million, expected to be paid during fiscal 2026[204] - Capital expenditures decreased by $11.2 million in fiscal 2025, with no new locations opened during the year[206] Cybersecurity Measures - The company has implemented a comprehensive information security program, including regular risk assessments and third-party monitoring, to mitigate cybersecurity threats[92] - The company is committed to maintaining a robust cybersecurity framework, with oversight from senior management and the Board of Directors[101] - The company has established incident response plans for cybersecurity threats, ensuring preparedness for potential disruptions[97] Pension and Employee Benefits - The company expects to make a pension plan contribution of approximately $8.5 million in fiscal 2026, with pension expense anticipated to be around $26.1 million[172] - The discount rate for determining future pension obligations decreased to 5.4% as of January 31, 2026, from 5.6% as of February 1, 2025[172] - A 50 basis point change in the discount rate would increase or decrease the pension liability by approximately $16 million[172]