| Business Segments |
Note 3. Business Segments The Company operates in two reportable segments: the operation of retail department stores (“retail operations”) and a general contracting construction company (“construction”). For the Company’s retail operations segment, the Company determined its operating segments on a store by store basis. Each store’s operating performance has been aggregated into one reportable segment for financial reporting purposes because stores are similar in each of the following areas: economic characteristics, class of consumer, nature of products and distribution methods. Revenues from external customers are derived from merchandise sales, and the Company does not rely on any major customers as a source of revenue. Across all stores, the Company operates one store format under the Dillard’s name where each store offers the same general mix of merchandise with similar categories and similar customers. The Company believes that disaggregating its retail operations segment would not provide meaningful additional information. The Company’s chief operating decision maker is the Executive Committee of the Board of Directors, which is comprised of Dillard’s Chief Executive Officer and its President. The members of Dillard’s Executive Committee use their experience in the retail industry and extensive and specific knowledge of the Dillard’s businesses when assessing segment performance and deciding how to allocate resources. The following table summarizes the percentage of net sales by segment and major product line: | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | | August 2, | | August 3, | | August 2, | | August 3, | | | | 2025 | | 2024 | | 2025 | | 2024 | | Retail operations segment: | | | | | | | | | | Cosmetics | | 15 | % | 15 | % | 15 | % | 15 | % | Ladies’ apparel | | 22 | | 22 | | 22 | | 23 | | Ladies’ accessories and lingerie | | 15 | | 14 | | 14 | | 13 | | Juniors’ and children’s apparel | | 8 | | 8 | | 9 | | 9 | | Men’s apparel and accessories | | 20 | | 20 | | 19 | | 19 | | Shoes | | 13 | | 14 | | 14 | | 14 | | Home and furniture | | 3 | | 3 | | 3 | | 3 | | | | 96 | | 96 | | 96 | | 96 | | Construction segment | | 4 | | 4 | | 4 | | 4 | | Total | | 100 | % | 100 | % | 100 | % | 100 | % |
The following tables summarize certain segment information, including the reconciliation of those items to the Company’s consolidated operations: | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended August 2, 2025 | | | Three Months Ended August 3, 2024 | | (in thousands of dollars) | | Retail Operations | | Construction | | Consolidated | | | Retail Operations | | Construction | | Consolidated | | Net sales from customers | | $ | 1,446,843 | | $ | 74,073 | | $ | 1,520,916 | | | $ | 1,426,431 | | $ | 70,815 | | $ | 1,497,246 | | Elimination of intersegment revenues | | | - | | | (7,086) | | | (7,086) | | | | - | | | (7,308) | | | (7,308) | | Net sales from external customers | | | 1,446,843 | | | 66,987 | | | 1,513,830 | | | | 1,426,431 | | | 63,507 | | | 1,489,938 | | | | | | | | | | | | | | | | | | | | | | | Reconciliation of revenue | | | | | | | | | | | | | | | | | | | | | Service charges and other income | | | 22,140 | | | 33 | | | 22,173 | | | | 24,681 | | | 27 | | | 24,708 | | Total net sales and service charges and other income | | | 1,468,983 | | | 67,020 | | | 1,536,003 | | | | 1,451,112 | | | 63,534 | | | 1,514,646 | | | | | | | | | | | | | | | | | | | | | | | Less: (a) | | | | | | | | | | | | | | | | | | | | | Cost of sales | | | 895,918 | | | 63,388 | | | 959,306 | | | | 869,233 | | | 61,098 | | | 930,331 | | Payroll expense (b) | | | 268,311 | | | 1,857 | | | 270,168 | | | | 270,352 | | | 1,784 | | | 272,136 | | Depreciation and amortization | | | 44,577 | | | 82 | | | 44,659 | | | | 46,213 | | | 163 | | | 46,376 | | Rentals | | | 4,496 | | | 55 | | | 4,551 | | | | 4,903 | | | 53 | | | 4,956 | | Interest and investment income | | | (11,298) | | | (233) | | | (11,531) | | | | (13,521) | | | (216) | | | (13,737) | | Interest and debt expense | | | 10,074 | | | - | | | 10,074 | | | | 9,803 | | | - | | | 9,803 | | Other segment items (c) | | | 163,647 | | | 544 | | | 164,191 | | | | 166,652 | | | 1,016 | | | 167,668 | | Income before income taxes | | $ | 93,258 | | $ | 1,327 | | | 94,585 | | | $ | 97,477 | | $ | (364) | | | 97,113 | | Income taxes | | | | | | | | | 21,750 | | | | | | | | | | 22,630 | | Net income | | | | | | | | $ | 72,835 | | | | | | | | | $ | 74,483 | | | | | | | | | | | | | | | | | | | | | | | Gross margin (d) | | $ | 550,925 | | $ | 3,599 | | $ | 554,524 | | | $ | 557,198 | | $ | 2,409 | | $ | 559,607 | | Gross margin percentage | | | 38.1 | % | | 5.4 | % | | 36.6 | % | | | 39.1 | % | | 3.8 | % | | 37.6 | % | | | | | | | | | | | | | | | | | | | | | | Total assets | | $ | 3,608,508 | | $ | 75,965 | | $ | 3,684,473 | | | $ | 3,584,664 | | $ | 77,198 | | $ | 3,661,862 | | Capital expenditures | | $ | 26,641 | | $ | 33 | | $ | 26,674 | | | $ | 25,892 | | $ | 19 | | $ | 25,911 | |
| (a) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. |
| (b) | Payroll expense does not include amounts capitalized on the balance sheet or included within other expense categories. |
| (c) | Other segment items for each reportable segment includes: |
●All selling, general and administrative expenses other than payroll expense ●Other expense ●Gain on disposal of assets | (d) | The calculation of gross margin is net sales from external customers less cost of sales. |
Intersegment construction revenues of $7.1 million and $7.3 million for the three months ended August 2, 2025 and August 3, 2024, respectively, were eliminated during consolidation and have been excluded from net sales for the respective periods. | | | | | | | | | | | | | | | | | | | | | | Six Months Ended August 2, 2025 | | Six Months Ended August 3, 2024 | | (in thousands of dollars) | | Retail Operations | | Construction | | Consolidated | | Retail Operations | | Construction | | Consolidated | | Net sales from customers | | $ | 2,914,780 | | $ | 141,362 | | $ | 3,056,142 | | $ | 2,919,074 | | $ | 136,654 | | $ | 3,055,728 | | Elimination of intersegment revenues | | | - | | | (13,449) | | | (13,449) | | | - | | | (16,739) | | | (16,739) | | Net sales from external customers | | | 2,914,780 | | | 127,913 | | | 3,042,693 | | | 2,919,074 | | | 119,915 | | | 3,038,989 | | | | | | | | | | | | | | | | | | | | | | Reconciliation of revenue | | | | | | | | | | | | | | | | | | | | Service charges and other income | | | 40,222 | | | 59 | | | 40,281 | | | 48,340 | | | 126 | | | 48,466 | | Total net sales and service charges and other income | | | 2,955,002 | | | 127,972 | | | 3,082,974 | | | 2,967,414 | | | 120,041 | | | 3,087,455 | | | | | | | | | | | | | | | | | | | | | | Less: (a) | | | | | | | | | | | | | | | | | | | | Cost of sales | | | 1,695,590 | | | 121,407 | | | 1,816,997 | | | 1,672,691 | | | 115,465 | | | 1,788,156 | | Payroll expense (b) | | | 531,672 | | | 3,436 | | | 535,108 | | | 537,045 | | | 3,777 | | | 540,822 | | Depreciation and amortization | | | 88,990 | | | 154 | | | 89,144 | | | 92,264 | | | 231 | | | 92,495 | | Rentals | | | 9,035 | | | 112 | | | 9,147 | | | 9,864 | | | 116 | | | 9,980 | | Interest and investment income | | | (22,248) | | | (443) | | | (22,691) | | | (26,842) | | | (460) | | | (27,302) | | Interest and debt expense | | | 20,412 | | | - | | | 20,412 | | | 19,836 | | | - | | | 19,836 | | Other segment items (c) | | | 325,435 | | | 1,140 | | | 326,575 | | | 329,872 | | | 1,675 | | | 331,547 | | Income before income taxes | | $ | 306,116 | | $ | 2,166 | | | 308,282 | | $ | 332,684 | | $ | (763) | | | 331,921 | | Income taxes | | | | | | | | | 71,630 | | | | | | | | | 77,400 | | Net income | | | | | | | | $ | 236,652 | | | | | | | | $ | 254,521 | | | | | | | | | | | | | | | | | | | | | | Gross margin (d) | | $ | 1,219,190 | | $ | 6,506 | | $ | 1,225,696 | | $ | 1,246,383 | | $ | 4,450 | | $ | 1,250,833 | | Gross margin percentage | | | 41.8 | % | | 5.1 | % | | 40.3 | % | | 42.7 | % | | 3.7 | % | | 41.2 | % | | | | | | | | | | | | | | | | | | | | | Total assets | | $ | 3,608,508 | | $ | 75,965 | | $ | 3,684,473 | | $ | 3,584,664 | | $ | 77,198 | | $ | 3,661,862 | | Capital expenditures | | $ | 43,461 | | $ | 66 | | $ | 43,527 | | $ | 61,033 | | $ | 53 | | $ | 61,086 | |
| (a) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. |
| (b) | Payroll expense does not include amounts capitalized on the balance sheet or included within other expense categories. |
| (c) | Other segment items for each reportable segment includes: |
| ● | All selling, general and administrative expenses other than payroll expense |
| ● | Gain on disposal of assets |
| (d) | The calculation of gross margin is net sales from external customers less cost of sales. |
Intersegment construction revenues of $13.4 million and $16.7 million for the six months ended August 2, 2025 and August 3, 2024, respectively, were eliminated during consolidation and have been excluded from net sales for the respective periods. The retail operations segment gives rise to contract liabilities through the customer loyalty program associated with Dillard’s private label cards and through the issuances of gift cards. The customer loyalty program liability and a portion of the gift card liability are included in trade accounts payable and accrued expenses, and a portion of the gift card liability is included in other liabilities on the condensed consolidated balance sheets. Our retail operations segment contract liabilities are as follows: | | | | | | | | | | | | | Retail | | | | | | | | | | | | | | | August 2, | | February 1, | | August 3, | | February 3, | (in thousands of dollars) | | 2025 | | 2025 | | 2024 | | 2024 | Contract liabilities | | $ | 64,740 | | $ | 76,667 | | $ | 70,207 | | $ | 85,227 |
During the six months ended August 2, 2025 and August 3, 2024, the Company recorded $32.7 million and $38.1 million, respectively, in revenue that was previously included in the retail operations contract liability balances of $76.7 million and $85.2 million at February 1, 2025 and February 3, 2024, respectively. Construction contracts give rise to accounts receivable, contract assets and contract liabilities. We record accounts receivable based on amounts expected to be collected from 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, in the condensed consolidated balance sheets. The amounts included in the condensed consolidated balance sheets are as follows: | | | | | | | | | | | | | Construction | | | | | | | | | | | | | | | August 2, | | February 1, | | August 3, | | February 3, | (in thousands of dollars) | | 2025 | | 2025 | | 2024 | | 2024 | Accounts receivable | | $ | 45,130 | | $ | 46,646 | | $ | 53,548 | | $ | 47,240 | Costs and estimated earnings in excess of billings on uncompleted contracts | | | 1,713 | | | 3,913 | | | 3,685 | | | 1,695 | Billings in excess of costs and estimated earnings on uncompleted contracts | | | 10,753 | | | 6,983 | | | 9,543 | | | 6,307 |
During the six months ended August 2, 2025 and August 3, 2024, the Company recorded $6.6 million and $5.4 million, respectively, in revenue that was previously included in billings in excess of costs and estimated earnings on uncompleted contracts of $7.0 million and $6.3 million at February 1, 2025 and February 3, 2024, respectively. The remaining performance obligations related to executed construction contracts totaled $129.5 million, $202.8 million and $234.0 million at August 2, 2025, February 1, 2025 and August 3, 2024, respectively.
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