Business Segments

6 Months Ended

Aug. 01, 2020

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, the Company determined its operating segments on a store by store basis. Each store’s operating performance has been aggregated into one reportable segment. The Company’s operating segments are aggregated for financial reporting purposes because they 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 operating segments would not provide meaningful additional information.

The following table summarizes the percentage of net sales by segment and major product line:


	Three Months Ended						Six Months Ended
	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Retail operations segment
Cosmetics	14	%	13	%	14	%	13	%
Ladies’ apparel	21		24		21		24
Ladies’ accessories and lingerie	16		16		16		15
Juniors’ and children’s apparel	9		8		9		10
Men’s apparel and accessories	20		19		18		17
Shoes	13		14		14		15
Home and furniture	4		3		4		3
	97		97		96		97
Construction segment	3		3		4		3
Total	100	%	100	%	100	%	100	%

The following tables summarize certain segment information, including the reconciliation of those items to the Company’s consolidated operations:


(in thousands of dollars)	Retail Operations		Construction		Consolidated
Three Months Ended August 1, 2020:
Net sales from external customers	$	893,216	$	25,828	$	919,044
Gross profit	277,407		1,790		279,197
Depreciation and amortization	50,784		167		50,951
Interest and debt expense (income), net	12,885		(12)		12,873
(Loss) income before income taxes	(33,699)		373		(33,326)

Total assets	3,056,320		26,916		3,083,236

Three Months Ended August 3, 2019:
Net sales from external customers	$	1,378,163	$	48,700	$	1,426,863
Gross profit	395,137		(288)		394,849
Depreciation and amortization	54,207		176		54,383
Interest and debt expense (income), net	12,278		(30)		12,248
Loss before income taxes	(50,929)		(1,222)		(52,151)

Total assets	3,463,087		48,992		3,512,079

Six Months Ended August 1, 2020:
Net sales from external customers	$	1,644,243	$	61,456	$	1,705,699
Gross profit	373,441		3,942		377,383
Depreciation and amortization	101,516		336		101,852
Interest and debt expense (income), net	25,176		(33)		25,143
(Loss) income before income taxes	(262,366)		895		(261,471)

Total assets	3,056,320		26,916		3,083,236

Six Months Ended August 3, 2019
Net sales from external customers	$	2,798,685	$	93,619	$	2,892,304
Gross profit	931,508		1,015		932,523
Depreciation and amortization	106,401		346		106,747
Interest and debt expense (income), net	23,542		(57)		23,485
Income (loss) before income taxes	49,799		(1,178)		48,621

Total assets	3,463,087		48,992		3,512,079

Intersegment construction revenues of $6.9 million and $6.2 million for the three months ended August 1, 2020 and August 3, 2019, respectively, and $18.3 million and $14.6 million for the six months ended August 1, 2020 and August 3, 2019, 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 loyalty program and through the issuances of gift cards. The loyalty program liability and a portion of the gift card liability is 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
(in thousands of dollars)	August 1, 2020		February 1, 2020		August 3, 2019		February 2, 2019
Contract liabilities	$	58,186	$	75,229	$	63,041	$	72,852

During the six months ended August 1, 2020 and August 3, 2019, the Company recorded $29.8 million and $37.6 million, respectively, in revenue that was previously included in the retail operations contract liability balances of $75.2 million and $72.9 million, at February 1, 2020 and February 2, 2019, 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 in the condensed consolidated balance sheets, respectively. The amounts included in the condensed consolidated balance sheets are as follows:



Construction
(in thousands of dollars)	August 1, 2020		February 1, 2020		August 3, 2019		February 2, 2019
Accounts receivable	$	19,222	$	28,522	$	36,276	$	31,867
Costs and estimated earnings in excess of billings on uncompleted contracts	722		2,179		2,927		1,165
Billings in excess of costs and estimated earnings on uncompleted contracts	7,212		5,737		10,358		7,414

During the six months ended August 1, 2020 and August 3, 2019, the Company recorded $4.7 million and $6.8 million, respectively, in revenue that was previously included in billings in excess of costs and estimated earnings on uncompleted contracts of $5.7 million and $7.4 million at February 1, 2020 and February 2, 2019, respectively.

The remaining performance obligations related to executed construction contracts totaled $127.0 million, $156.5 million and $108.4 million at August 1, 2020, February 1, 2020 and August 3, 2019, respectively.