DDS US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

At February 1, 2025, Dillard’s, Inc. operates 272 retail department stores spanning 30 states and an Internet store at dillards.com. 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 the National Retail Federation fiscal reporting calendar and our bylaws, the fiscal 2024 reporting period presented and discussed below ended February 1, 2025 and contained 52 weeks. The fiscal 2023 reporting period presented and discussed below ended February 3, 2024 and contained 53 weeks. The fiscal 2022 reporting period presented and discussed below ended January 28, 2023 and contained 52 weeks. For comparability purposes, where noted, some of the information discussed below is based upon comparison of the 52 weeks ended February 1, 2025 to the 52 weeks ended February 3, 2024. Additionally, some of the information discussed below is based upon comparison of the 52 weeks ended January 27, 2024 to the 52 weeks ended January 28, 2023.

A discussion regarding results of operations and analysis of financial condition for the year ended February 3, 2024 as compared to the year ended January 28, 2023 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 ended February 3, 2024.

EXECUTIVE OVERVIEW

Fiscal 2024

In a continued challenging consumer environment in fiscal 2024, we achieved net income of $593.5 million with a comparable store sales decline of 3%. We focused on gross margin performance as well as expense control to protect profitability as sales remained weak. Shareholder return remained a priority, and we paid $413.8 million in dividends and repurchased $121.0 million of treasury stock. We ended the year in a strong financial position with $1,043.5 million in cash and cash equivalents and short-term investments.

Total retail sales for the 52 weeks ended February 1, 2025 and 53 weeks ended February 3, 2024 were $6.219 billion and $6.480 billion, respectively. Total retail sales decreased 2% for the 52-week period ended February 1, 2025 compared to the 52-week period ended February 3, 2024. Sales in comparable stores for the same period decreased 3%.

​

Consolidated gross margin for fiscal 2024 was 39.5% of sales compared to 40.3% of sales for fiscal 2023. Retail gross margin for fiscal 2024 was 41.0% of sales compared to 41.8% of sales for fiscal 2023. Inventory increased 7% at February 1, 2025 compared to February 3, 2024.

​

Consolidated selling, general and administrative expenses (“operating expenses”) for fiscal 2024 were $1,731.2 million (26.7% of sales) compared to $1,717.4 million (25.4% of sales) for fiscal 2023. The increase in operating expenses is primarily due to increased payroll and payroll-related expenses largely occurring in the first half of the year. We intensified our expense control efforts in the back half of the year and made notable progress with such.

​

We reported net income for fiscal 2024 of $593.5 million, or $36.82 per share, compared to $738.8 million, or $44.73 per share, for fiscal 2023. Included in net income for fiscal 2024 are federal and state income tax benefits of $30.8 million ($1.91 per share) due to a deduction related to that portion of the special dividend of $25.00 per share that was paid to the Dillard's, Inc. Investment and Employee Stock Ownership Plan during the year.

​

Included in net income for the prior year (fiscal 2023) is a pretax gain of $6.1 million ($4.7 million after tax or $0.28 per share) primarily related to the sale of two store properties. Also included in net income for fiscal 2023 are the following tax-related benefits:

20

Table of Contents

​

Cash flow from operations was $714.1 million for fiscal 2024 and $883.6 million for fiscal 2023. During fiscal 2024, we returned $534.8 million of cash to stockholders in the form of dividends and share repurchases. At February 1, 2025, authorization of $273.0 million remained under the share repurchase program.

​

At February 1, 2025, we had working capital of $1,533.2 million (including cash and cash equivalents and short-term investments totaling $1,043.5 million) and total debt outstanding of $521.6 million excluding operating lease liabilities.

​

Key Performance Indicators

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

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Gross margin as a percentage of net sales ​ 39.5 % ​ 40.3 % 42.0 %

Retail gross margin as a percentage of retail net sales ​ 41.0 % ​ 41.8 % 43.0 %

Cash flow provided by operations (in millions) ​ $ 714.1 ​ ​ $ 883.6 ​ $ 948.4 ​

Total retail store count at end of period ​ 272 ​ ​ 273 ​ 277 ​

Retail sales per square foot ​ $ 137 ​ ​ $ 143 ​ $ 146 ​

Retail stores sales trend ​ (2) % * (5) % ** 5 %

Comparable retail store sales trend ​ (3) % * (4) % ** 5 %

Retail store inventory trend ​ 7 % ​ (2) % 4 %

Retail merchandise inventory turnover ​ 2.6 ​ ​ 2.8 ​ 2.9 ​

Trends and Uncertainties

Fluctuations in the following key trends and uncertainties may have a material effect on our operating results.

21

Table of Contents

At present, a number of economic and geopolitical factors are affecting the U.S. and world economies (including countries from which we source some of our merchandise): trade restrictions (including tariffs), inflation and the continuing impact of elevated United States wages. The extent to which our business will be affected by these factors depends on our customer’s continuing ability and willingness to accept price increases. Accordingly, the related financial impact to fiscal 2025 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.

The Company was affected by inflation during fiscal 2024 and 2023. Our business will likely be affected by inflation in fiscal 2025, the extent of which depends on our customers’ continuing ability and willingness to accept price increases.

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.

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 Company’s private label credit card portfolio alliances. These alliances include the former marketing and servicing alliance with Wells Fargo Bank, N.A. (“Wells Fargo Alliance”), which terminated in September 2024, and the Company’s new long-term marketing and servicing alliance with Citibank, N.A (“Citibank Alliance”), which replaced the Wells Fargo Alliance upon its termination. Other income includes rental income, shipping and handling fees and gift card breakage.

22

Table of Contents

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 (income) expense, net. Interest and debt (income) expense includes interest, net of interest income from demand deposits and short-term investments and capitalized interest, relating to the Company’s unsecured notes, subordinated debentures and commitment fees and borrowings, if any, under the Company’s credit agreement. Interest and debt expense also includes the amortization of financing costs and interest on finance lease obligations, if any.

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 certain deferred financing fees in connection with the amendment and extension of the Company’s secured revolving credit facility, if any.

Gain on disposal of assets. Gain 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.

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 in the 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

23

Table of Contents

realizable value. At February 1, 2025 and February 3, 2024, 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 2024, 2023 or 2022. A 1% change in the dollar amount of markdowns would have impacted net income by approximately $8 million for fiscal 2024.

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 generally performed no less frequently than annually, 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 $21.5 million and $21.9 million and return assets of $13.0 million and $12.8 million as of February 1, 2025 and February 3, 2024, 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 2024, 2023 and 2022.

The Company’s share of income under the Citibank Alliance and the former 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 $54.1 million, $67.2 million and $67.8 million from the alliances in fiscal 2024, 2023 and 2022, 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 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.

24

Table of Contents

Cooperative advertising allowances are reported as a reduction of advertising expense in the period in which the advertising occurred. 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 of February 1, 2025 and February 3, 2024, insurance accruals of $40.1 million and $41.0 million, respectively, were recorded in trade accounts payable and accrued expenses and other liabilities. A 10% change in our self-insurance reserve would have affected net income by approximately $3 million for fiscal 2024.

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 negative industry or economic trends;

● 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.

As such, these estimates may require adjustment in the future as additional information becomes available 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.

25

Table of Contents

The total amount of unrecognized tax benefits as of February 1, 2025 was $8.0 million, of which, $5.8 million would, if recognized, affect the Company’s effective tax rate. The total amount of unrecognized tax benefits as of February 3, 2024 was $8.1 million, of which $6.0 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 and major state tax jurisdictions are 2021 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 5.6% as of February 1, 2025 from 5.1% as of February 3, 2024. We believe that these assumptions have been appropriate and that, based on these assumptions, the pension liability of $298.9 million is appropriately stated as of February 1, 2025; however, actual results may differ materially from those estimated and could have a material impact on our consolidated financial statements. A 50 basis point change in the discount rate would increase or decrease the pension liability by approximately $15 million. The Company expects to make a contribution to the pension plan of approximately $8.2 million in fiscal 2025. The Company expects pension expense to be approximately $25.9 million in fiscal 2025.

​

26

Table of Contents

RESULTS OF OPERATIONS

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

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ For the years ended ​

​ ​ Amount % of Net Sales ​ Amount % of Net Sales ​ Amount % of Net Sales ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

​

Sales

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022

Net sales: ​ ​ ​

​

The percent change by segment and product category in the Company’s sales for the past two years is as follows:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Percent Change

Retail operations segment ​ ​ ​ ​ ​

Ladies’ apparel (4.7) ​ (2.9) (4.1) ​ (5.6) ​

Ladies’ accessories and lingerie (2.7) ​ (1.3) (6.4) ​ (7.7) ​

Juniors’ and children’s apparel (5.7) ​ (3.9) (7.3) ​ (8.7) ​

Men’s apparel and accessories (7.1) ​ (5.6) (4.4) ​ (5.8) ​

Home and furniture (0.1) ​ 1.2 (1.0) ​ (2.4) ​

Construction segment (3.1) ​ N/A 61.1 ​ N/A ​

​

27

Table of Contents

2024 Compared to 2023

Net sales from the retail operations segment decreased $261.1 million during the 52-week period ended February 1, 2025 compared to the 53-week period ended February 3, 2024, decreasing 4% in total store sales. Sales in comparable stores decreased 3% for the 52-week period ended February 1, 2025 compared to the 52-week period ended February 3, 2024. During the same 52-week periods, sales of men’s apparel and accessories decreased significantly, while sales of shoes, juniors’ and children’s apparel and ladies’ apparel decreased moderately. Sales of ladies’ accessories and lingerie decreased slightly. Sales of home and furniture increased slightly, while sales of cosmetics increased moderately.

The number of sales transactions during the 52-week period ended February 1, 2025 decreased 7% over the 53-week period ended February 3, 2024, while the average dollars per sales transaction increased 3%.

Net sales from the construction segment decreased $8.4 million or 3% during fiscal 2024 compared to fiscal 2023 due to a decrease in construction activity. The remaining performance obligations related to executed construction contracts totaled $202.8 million at February 1, 2025, increasing approximately 24% from February 3, 2024.

Exclusive Brand Merchandise

Sales penetration of exclusive brand merchandise for fiscal 2024, 2023 and 2022 was 22.7%, 23.5% and 23.8% of total net sales, respectively.

Service Charges and Other Income

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022

Service charges and other income: ​ ​ ​ ​ ​ ​

Retail operations segment ​ ​ ​ ​ ​ ​

​

Service charges and other income is composed primarily of income from the Citibank Alliance and former Wells Fargo Alliance. During the third quarter of fiscal 2024, the Company transitioned to its new agreement with Citi to provide a credit card program for Dillard’s customers, replacing the existing Wells Fargo Alliance. While future cash flows under this new program are difficult to predict, the Company expects income from the new program to initially be less than historical earnings from the Wells Fargo Alliance. The extent to which future cash flows will vary over the term of the new program from historical cash flows cannot be reasonably estimated at this time. Income from the alliances decreased $13.2 million in fiscal 2024 compared to fiscal 2023.

28

Table of Contents

Gross Margin

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022 ​

Gross margin: ​ ​ ​ ​ ​ ​ ​

Gross margin as a percentage of segment net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Retail operations segment ​ ​ 41.0 % ​ 41.8 % ​ 43.0 %

Construction segment ​ ​ 4.7 ​ 4.4 5.1

Total gross margin as a percentage of net sales ​ ​ 39.5 ​ 40.3 42.0

​

2024 Compared to 2023

Consolidated gross margin and gross margin from retail operations decreased 80 basis points of sales during fiscal 2024 compared to fiscal 2023. During fiscal 2024, gross margin decreased moderately in home and furniture and ladies’ apparel, while gross margin decreased slightly in shoes and cosmetics. Gross margin was essentially flat in juniors’ and children’s apparel, men’s apparel and accessories and ladies’ accessories and lingerie. Retail store inventory increased 7% at February 1, 2025 compared to February 3, 2024.

Inflation and trade restrictions, including tariffs, are a concern for management. The extent to which our business will be affected by these factors depends on our customers’ continuing ability and willingness to accept higher costs.

Gross margin from the construction segment increased 30 basis points of segment net sales during fiscal 2024 compared to fiscal 2023.

Selling, General and Administrative Expenses (“SG&A”)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022

SG&A: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

SG&A as a percentage of segment net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Retail operations segment ​ ​ 27.7 % ​ 26.4 % ​ 24.9 %

Construction segment ​ ​ 3.9 ​ 3.5 4.6

Total SG&A as a percentage of net sales ​ ​ 26.7 ​ 25.4 24.4

​

2024 Compared to 2023

SG&A increased $13.8 million and 130 basis points of sales during the 52 weeks ended February 1, 2025 compared to the 53 weeks ended February 3, 2024. The increase in operating expenses is primarily due to increased payroll and payroll-related expenses, largely occurring in the first half of the year.

Payroll and payroll-related expenses for fiscal 2024 were $1,231.4 million compared to $1,217.3 million for fiscal 2023, an increase of 1.2%. The Company plans to continue its focus of aligning expenses with sales performance.

​

29

Table of Contents

Interest and Debt (Income) Expense, Net

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022

Interest and debt (income) expense, net: ​ ​ ​ ​ ​ ​

Construction segment ​ (890) ​ (673) ​ (87)

​

2024 Compared to 2023

Net interest and debt (income) expense improved $9.1 million in fiscal 2024 compared to fiscal 2023 primarily due to an increase in interest income. Interest income was $53.5 million and $45.2 million in fiscal 2024 and fiscal 2023, respectively.

Other Expense

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022

Other expense: ​ ​ ​ ​ ​ ​ ​ ​ ​

Construction segment ​ — ​ — ​ —

​

2024 Compared to 2023

Other expense increased $5.8 million in fiscal 2024 compared to fiscal 2023 primarily due to an increase in the interest cost and the amortization of the net actuarial loss related to the Company’s pension plan.

Gain on Disposal of Assets

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Fiscal 2024 Fiscal 2023 Fiscal 2022

Gain on disposal of assets: ​ ​ ​

Construction segment ​ (33) ​ (23) ​ (1)

Total gain on disposal of assets ​ $ (475) ​ $ (6,053) ​ $ (21,047)

​

Fiscal 2023

During fiscal 2023, the Company received proceeds of $6.3 million primarily from the sale of two store properties, resulting in a gain of $6.1 million that was recorded in gain on disposal of assets.

Income Taxes

The Company’s estimated federal and state effective income tax rate was 18.7% in fiscal 2024, 19.4% in fiscal 2023 and 19.6% in fiscal 2022. The Company expects the fiscal 2025 federal and state effective income tax rate to approximate 23%.

Fiscal 2024

During fiscal 2024, income taxes included federal and state tax benefits of $30.8 million due to the deduction related to that portion of the special dividend of $25.00 per share that was paid to the Dillard’s, Inc. Investment and Employee Stock Ownership Plan on January 6, 2025.

​

30

Table of Contents

Fiscal 2023

During fiscal 2023, income taxes included federal and state tax benefits of $26.1 million due to the deduction related to that portion of the special dividend of $20.00 per share that was paid to the Dillard’s, Inc. Investment and Employee Stock Ownership Plan on January 8, 2024. Income taxes also included a net $9.8 million income tax benefit due to the release of valuation allowances primarily related to increases in the expected future utilization of state net operating loss carryforwards.

On August 16, 2022, the Inflation Reduction Act of 2022 ("the Act") was signed into law. The Act includes, among other provisions, a new 15% corporate alternative minimum tax (“CAMT”), effective January 1, 2023, which had no impact on the Company’s consolidated financial results for the years ended February 1, 2025 and February 3, 2024.

31

Table of Contents

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:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar Change

​

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 94.4%, 94.3% and 95.8% of total revenues in fiscal 2024, 2023 and 2022, respectively.

Net cash flows from operations decreased $169.5 million during fiscal 2024 compared to fiscal 2023 primarily due to reduced sales and lower margins.

Operating cash inflows also include the Company’s income from the Citibank Alliance, former Wells Fargo Alliance and cash distributions from joint ventures (excluding returns of investments), if any. Operating cash outflows include net payments to vendors for inventory, services and supplies, payments to employees and payments of interest and taxes.

Wells Fargo Bank, N.A. (“Wells Fargo”) previously owned and managed Dillard’s private label credit cards, including credit cards co-branded with American Express under a long-term marketing and servicing alliance (“Wells Fargo Alliance”). In January 2024, the Company announced that it entered into a new agreement with Citibank, N.A. (“Citi”) to provide the private label credit card program for Dillard’s customers under a new alliance (“Citibank Alliance”), replacing the existing credit card program under the Wells Fargo Alliance upon its termination in September 2024. The new program launched on August 19, 2024 for new Dillard’s credit applicants. Existing accounts transferred from Wells Fargo to Citi on September 16, 2024. The term of the new Citi agreement is 10 years with automatic extensions for successive two-year terms unless the agreement is terminated by either party in accordance with the terms and conditions of the agreement.

Under the Citibank Alliance, Citi establishes, owns and manages Dillard’s private label credit cards, including a new co-branded Mastercard Incorporated card (“Mastercard,” collectively, the “private label cards”). The new co-branded Mastercard replaced the previous co-branded card. Citi retains the benefits and risks associated with the ownership of the private label card 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 Citibank Alliance, we receive on-going cash compensation from Citi based upon the portfolio’s earnings. The compensation received from the portfolio is determined monthly and has no recourse provisions. The Company recognized income of $54.1 million, $67.2 million and $67.8 million from the Citibank Alliance and the former Wells Fargo Alliance during fiscal 2024, 2023 and 2022, respectively.

​

While future cash flows under the new program are difficult to predict, the Company expects income from the new program to initially be less than historical earnings from the Wells Fargo Alliance. The extent to which future cash flows

32

Table of Contents

will vary over the term of the new program from historical cash flows cannot be reasonably estimated at this time. Any material decrease could adversely affect our operating results and cash flows.

At February 1, 2025, the Company had purchase obligations of $1,248.2 million outstanding for merchandise and store construction commitments, all of which are expected to be paid during fiscal 2025.

Investing Activities

Cash inflows from investing activities generally include proceeds from sales of property and equipment and maturities of short-term investments. Cash outflows from investing activities generally include payments for capital expenditures such as property and equipment and purchases of short-term investments.

Cash used in investing activities increased $154.1 million during fiscal 2024 compared to fiscal 2023 primarily due to a net increase in short-term investments.

Capital expenditures decreased $28.4 million for fiscal 2024 compared to fiscal 2023. During fiscal 2024, the Company opened a new location at The Empire Mall in Sioux Falls, South Dakota (140,000 square feet) marking its 30th state of operation. During fiscal 2023, the Company opened a 100,000 square foot expansion at Gateway Mall in Lincoln, Nebraska.

During fiscal 2024, the Company closed (1) itsEastwood Mall Clearance Center in Niles, Ohio (120,000 square feet) and (2) its leased facility at Stones River Town Centre in Murfreesboro, Tennessee (145,000 square feet). There were no material costs associated or expected with any of these store closures. We remain committed to closing stores where appropriate and may incur future closing costs related to such stores when they close.

During fiscal 2023, the Company received cash proceeds of $6.3 million and recorded a related gain of $6.1 million, primarily from the sale of two store properties: (1) an 85,000 square foot location at Sunland Park Mall in El Paso, Texas and (2) a 240,000 square foot location at MacArthur Center in Norfolk, Virginia.

During fiscal 2023, the Company also closed (1) an owned location at Santa Rosa Mall in Mary Esther, Florida (115,000 square feet), (2) a leased location at Conestoga Mall in Grand Island, Nebraska (80,000 square feet) and (3) an owned clearance center at Metrocenter Mall in Phoenix, Arizona (90,000 square feet).

During fiscal 2023, the Company received proceeds from life insurance of $4.5 million related to two policies.

During fiscal 2024 and 2023, the Company purchased certain treasury bills for $696.7 million and $295.4 million, respectively, that are classified as short-term investments. During fiscal 2024 and 2023, the Company received proceeds of $530.9 million and $301.9 million, respectively, related to maturities of its short-term investments.

Financing Activities

Our primary source of cash inflows from financing activities is generally borrowings from our $800 million senior secured revolving credit facility. Financing cash outflows generally include the repayment of borrowings under the revolving credit facility, the repayment of long-term debt, finance lease obligations, the payment of dividends and the purchase of treasury stock.

Cash used in financing activities improved to $534.8 million in fiscal 2024 from $620.0 million in fiscal 2023 due to decreases in treasury stock purchases during 2024.

Stock Repurchase. In May 2021, 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 (“May 2021 Stock Plan”). In February 2022, 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 (“February 2022 Stock Plan”). In May 2023, the Company’s Board of Directors authorized the Company to repurchase up to $500 million of the Company’s Class A

33

Table of Contents

Common Stock under an open-ended plan (“May 2023 Stock Plan”). As of February 1, 2025, the Company had completed the authorized purchases under the May 2021 Stock Plan and the February 2022 Stock Plan, and $273.0 million of authorization remained under the May 2023 Stock Plan.

During fiscal 2024, the Company repurchased 0.3 million shares of Class A Common Stock for $121.0 million at an average price of $367.33 per share. During fiscal 2023, the Company repurchased 0.9 million shares of Class A Common Stock for $281.4 million at an average price of $306.66 per share. The ultimate disposition of the repurchased stock has not been determined.

On August 16, 2022, the Inflation Reduction Act of 2022 ("the Act") was signed into law. Under the Act share repurchases after December 31, 2022 are subject to a 1% excise tax. At February 1, 2025, the Company had accrued $1.2 million of excise tax related to its share repurchase program.

Revolving Credit Agreement. The Company maintains a revolving 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 is secured by certain deposit accounts of the Company and certain inventory of certain subsidiaries and provides a borrowing capacity of $800 million, subject to certain limitations as outlined in the credit agreement, with a $200 million expansion option.

Effective June 16, 2023, the Company amended the credit agreement (the "2023 amendment") to reflect the changes necessary for the phaseout of LIBOR. Pursuant to the 2023 amendment, the Company pays a variable rate of interest on borrowings under the credit agreement and a commitment fee to the participating banks. Pursuant to the 2023 amendment, borrowings under the credit agreement bore interest, at our option, at a rate per annum equal to (1) the then alternative base rate plus the applicable rate or (2) adjusted term or daily simple SOFR, in each case plus 0.10% per annum, plus the applicable rate. The applicable rate was defined as (A) (x) 1.50% per annum in the case of term benchmark and RFR loans and (y) 0.50% per annum in the case of base rate loans when average quarterly availability is greater than or equal to 50% of the total commitments and (B) (x) 1.75% per annum in the case of term benchmark and RFR loans and (y) 0.75% per annum in the case of base rate loans when average quarterly availability is less than 50% of the total commitments. The commitment fee for unused borrowings was 0.30% per annum if average borrowings were less than 35% of the total commitment and 0.25% per annum if average borrowings were greater than or equal to 35% of the total commitment. As long as availability exceeds $80 million and no specified event of default has occurred or is continuing, there are no financial covenant requirements under the credit agreement. The credit agreement, as amended by the 2023 amendment, was scheduled to mature on April 28, 2026.

No borrowings were outstanding at February 1, 2025. Letters of credit totaling $25.3 million were issued under the credit agreement leaving unutilized availability under the facility of $774.7 million at February 1, 2025. The Company had no borrowings during fiscal 2024, 2023 and 2022.

In March 2025, the Company amended and extended its revolving credit facility (the "2025 amendment") replacing the Company's previous amended credit agreement. The new amended credit agreement remains at $800 million with a $200 million expansion option, and the new maturity date is March 12, 2030. There are no financial covenant requirements under the amended credit agreement provided availability exceeds $80 million and no specified event of default has occurred or is continuing. The 2025 amendment continues to have the 0.10% per annum credit spread adjustment to the interest rate for term benchmark and RFR loans but reduced the applicable rate to (A) (x) 1.25% per annum in the case of term benchmark and RFR loans and (y) 0.25% per annum in the case of base rate loans when average quarterly availability is greater than or equal to 50% of the total commitments and (B) (x) 1.50% per annum in the case of term benchmark and RFR loans and (y) 0.50% per annum in the case of base rate loans when average quarterly availability is less than 50% of the total commitments. The 2025 amendment also reduced the unused commitment fee to (A) 0.25% per annum when the average amount utilized is less than 50% of the total commitment and (B) 0.20% per annum when the average amount utilized is greater than or equal to 50% of the total commitment. The facility was arranged by JPMorgan Chase Bank, N.A. The new amended credit agreement is available to the Company for general corporate purposes including, among other uses, working capital financing, the issuance of letters

34

Table of Contents

of credit, capital expenditures and, subject to certain restrictions, the repayment of existing indebtedness and share repurchases.

Long-term Debt. At February 1, 2025, the Company had $321.6 million of long-term debt, comprised of unsecured notes. The unsecured notes bear interest at rates ranging from 7.000% to 7.750% with due dates from fiscal 2026 through fiscal 2028.

Long-term debt maturities over the next five years are (in millions):

​ ​ ​ ​

Fiscal Year Long-Term DebtMaturities

​

During fiscal 2025, the Company expects to accrue interest expense of $23.8 million on its long-term debt.

Subordinated Debentures. As of February 1, 2025, the Company had $200 million outstanding of its 7.5% subordinated debentures due August 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 2025, the Company expects to accrue interest expense of $15.0 million on its subordinated debentures.

Dividends. During fiscal 2024 and 2023, in addition to our typical quarterly dividends, the Board of Directors declared a special dividend of $25.00 per share and $20.00 per share, respectively, that was paid on the Class A Common Stock and Class B Common Stock of the Company.

Outlook

The Company expects to finance its operations in the short-term and the long-term 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.

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.

​

35

Table of Contents

COMMERCIAL COMMITMENTS

AMOUNT OF COMMITMENT EXPIRATION PER PERIOD

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands of dollars) Total Amounts ​ ​ ​ ​ ​ ​ After

$800 million line of credit, none outstanding (1) ​ $ — ​ $ — ​ $ — ​ $ — ​ $ —

Import letters of credit ​ — ​ — ​ — ​ — ​ —

Total commercial commitments ​ $ 25,345 ​ $ 25,045 ​ $ 300 ​ $ — ​ $ —

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.

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 heading “Outlook” included in this Management’s Discussion and Analysis and other statements regarding management’s expectations and forecasts for the remainder of fiscal 2025 and beyond, statements regarding future income and cash flows from our new credit program with Citi, statements concerning the opening of new stores or the closing of existing stores, statements concerning capital expenditures and sources of liquidity, 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 concerning expectations regarding the payment of dividends, statements regarding the impacts of inflation, trade restrictions, including tariffs, 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) general retail industry conditions and macro-economic conditions including inflation, economic recession 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 and governmental regulations, affecting trade restrictions, including tariffs, and such matters as the cost of employee benefits or credit card income, such as the Consumer Financial Protection Bureau’s amendment to Regulation Z to limit the dollar amounts credit card companies can charge for late fees; 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

36

Table of Contents

support the Company’s future business; fluctuations in SOFR and other base borrowing rates; potential disruption from terrorist activity and the effect on ongoing consumer confidence; epidemic, pandemic or public health issues and their effects on public health, our supply chain, the health and well-being of our employees and customers and the retail industry in general; potential disruption of international trade and supply chain efficiencies; global conflicts (including the ongoing conflicts in the Middle East and Ukraine) 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 the Securities and Exchange Commission, particularly those set forth under the caption “Item 1A, Risk Factors” in this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The table below provides information about the Company’s obligations that are sensitive to changes in interest rates. The table presents maturities of the Company’s long-term debt and subordinated debentures along with the related weighted-average interest rates by expected maturity dates.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Expected Maturity Date ​ ​ ​ ​ ​

​ ​ (fiscal year) ​ ​ ​ ​ ​

Average interest rate ​ — ​ — ​ — ​ — ​ — ​ 7.5 % 7.5 % ​

​

The Company is exposed to market risk from changes in the interest rates under its $800 million revolving credit agreement, which is secured by certain deposit accounts of the Company and certain inventory of certain subsidiaries. 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. At February 1, 2025, borrowings under the credit agreement bore interest, at our option, at a rate per annum equal to (1) the then alternative base rate plus the applicable rate or (2) adjusted term or daily simple SOFR, in each case plus 0.10% per annum, plus the applicable rate. The applicable rate was defined as (A) (x) 1.50% per annum in the case of term benchmark and RFR loans and (y) 0.50% per annum in the case of base rate loans when average quarterly availability is greater than or equal to 50% of the total commitments and (B) (x) 1.75% per annum in the case of term benchmark and RFR loans and (y) 0.75% per annum in the case of base rate loans when average quarterly availability is less than 50% of the total commitments. The commitment fee for unused borrowings was 0.30% per annum if average borrowings were less than 35% of the total commitments and 0.25% per annum if average borrowings were greater than or equal to 35% of the total commitments. The Company had no weighted average borrowings under this facility during fiscal 2024.

In March 2025, the Company amended and extended its senior secured revolving credit facility (the "2025 amendment") replacing the Company's previous amended credit agreement. The 2025 amendment, among other things, continues to have the 0.10% per annum credit spread adjustment to the interest rate for term benchmark and RFR loans but reduced the applicable rate to (A) (x) 1.25% per annum in the case of term benchmark and RFR loans and (y) 0.25% per annum in the case of base rate loans when average quarterly availability is greater than or equal to 50% of the total commitments and (B) (x) 1.50% per annum in the case of term benchmark and RFR loans and (y) 0.50% per annum in the case of base rate loans when average quarterly availability is less than 50% of the total commitments. The 2025 amendment also reduced the unused commitment fee to (A) 0.25% per annum when the average amount utilized is less than 50% of the total commitments and (B) 0.20% per annum when the average amount utilized is greater than or equal to 50% of the total commitments. See Note 15, Subsequent Event, for additional information regarding the 2025 amendment.

37

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements of the Company and notes thereto required by this item are included in this report beginning on page F-1, which immediately follows the signature page to this report, and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). The Company’s management, with the participation of our Principal Executive Officer and Co-Principal Financial Officers, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the fiscal year covered by this annual report, and based on that evaluation, the Company’s Principal Executive Officer and Co-Principal Financial Officers have concluded that these disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officer and Co-Principal Financial Officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in 2013 Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of February 1, 2025.

Our independent registered public accounting firm, KPMG LLP (“KPMG”), has audited our consolidated financial statements included in this Annual Report and has issued a report on the effectiveness of our internal control over financial reporting as of February 1, 2025. Please refer to KPMG’s “Report of Independent Registered Public Accounting Firm” on page F-2 of this Annual Report.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the three months ended February 1, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

(b) During the three months ended February 1, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

​

​

38

Table of Contents

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information called for by this item regarding directors of the Company is incorporated herein by reference from the information under the headings “Proposal No. 1. Election of Directors”, “Audit Committee Report”, “Information Regarding the Board and Its Committees” and “Delinquent Section 16(a) Reports” in the Proxy Statement.

Information regarding executive officers of the Company is included in Part I of this report under the heading “Information About Our Executive Officers.” Reference additionally is made to the information under the heading “Delinquent Section 16(a) Reports” in the Proxy Statement, which information is incorporated herein by reference.

The Company’s Board of Directors (“Board”) has adopted a Code of Conduct that applies to all Company employees, including the Company’s executive officers, and, when appropriate, the members of the Board. As stated in the Code of Conduct, there are certain limited situations in which the Company may waive application of the Code of Conduct to employees or members of the Board. For example, since non-employee members of the Board rarely, if ever, deal financially with vendors and other suppliers of the Company on the Company’s behalf, it may not be appropriate to seek to apply the Code of Conduct to their dealings with these vendors and suppliers on behalf of other organizations which have no relationship to the Company. To the extent that any such waiver applies to an executive officer or a member of the Board, the waiver requires the express approval of the Board, and the Company intends to satisfy the disclosure requirements of Form 8-K regarding any such waiver from, or an amendment to, any provision of the Code of Conduct, by posting such waiver or amendment on the Company’s website. The current version of the Code of Conduct is available free of charge on the Company’s investor relations website, investor.dillards.com, and is available in print to any stockholder who requests copies by contacting Julie J. Guymon, Director of Investor Relations, at the Company’s corporate executive offices at 1600 Cantrell Road, Little Rock, AR 72201.

The information called for by this item regarding insider trading policies of the Company is incorporated herein by reference from the information under the heading “Information Regarding the Board and Its Committees” in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information called for by this item is incorporated herein by reference from the information under the headings “2024 Director Compensation”, “Compensation Discussion and Analysis”, “Compensation Committee Report” and “Executive Compensation” in the Proxy Statement.

39

Table of Contents

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Equity Compensation Plan Information

​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ Number of securities

​ ​ ​ ​ ​ ​ ​ remaining available for

​ ​ Number of securities to be ​ Weighted average ​ future issuance under

​ ​ issued upon exercise of ​ exercise prices of ​ equity compensation plans

​ ​ outstanding options, ​ outstanding options, ​ (excluding securities

​ ​ warrants and rights ​ warrants and rights ​ reflected in column (a))

Plan Category ​ (a) ​ (b) ​ (c)

Equity compensation plans approved by stockholders* ​ — ​ $ — ​ 8,196,085

Equity compensation plans not approved by stockholders ​ — ​ ​ — ​ —

​ ​ ​

​ Number of securities

​ ​ available for future

Equity compensation plan ​ issuance

1990 Incentive and Nonqualified Stock Option Plan ​ 5,125,417

1998 Incentive and Nonqualified Stock Option Plan ​ 1,760,905

2000 Incentive and Nonqualified Stock Option Plan 382,705

Dillard's, Inc. Stock Bonus Plan 678,367

Dillard's, Inc. Stock Purchase Plan 131,605

Dillard's, Inc. 2005 Non-Employee Director Restricted Stock Plan 117,086

​

There are no non-stockholder approved plans. Balances presented in the table above are as of February 1, 2025.

Additional information called for by this item is incorporated herein by reference from the information under the headings “Security Ownership of Certain Beneficial Holders” and “Security Ownership of Management” in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information called for by this item is incorporated herein by reference from the information under the headings “Certain Relationships and Transactions” and “Information Regarding the Board and Its Committees” in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information called for by this item is incorporated herein by reference from the information under the heading “Independent Accountant Fees” in the Proxy Statement.

​

​

40

Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) and (2) Financial Statements

An “Index of Financial Statements” has been filed as a part of this report beginning on page F-1 hereof.

(a)(3) Exhibits and Management Compensatory Plans

The “Exhibit Index” beginning on page 42 hereof identifies exhibits incorporated herein by reference or filed with this report.

​

41

Table of Contents

Exhibit Index

​ ​ ​

Number Description

​ ​

​ ​

​ ​ ​

​ ​

​ ​

​ ​

​ ​

​ ​

​ ​

​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

42

Table of Contents

​ ​ ​

Number Description

​ ​ ​

​ ​ ​

​ ​ ​

19 ​ Dillard’s, Inc. Insider Trading Policy

​ ​ ​

21 ​ Subsidiaries of Registrant.

​ ​ ​

23 ​ Consent of Independent Registered Public Accounting Firm.

​ ​

​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​

101.SCH Inline XBRL Taxonomy Extension Schema Document

​

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

​

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

​

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

​

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

​ ​ ​

* Incorporated by reference as indicated.

+ A management contract or compensatory plan or arrangement.

43

Table of Contents

ITEM 16. FORM 10-K SUMMARY.

None.

​

44

Table of Contents

SIGNATURES

​

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

​

​ ​ ​

Dillard’s, Inc. ​

​ By: /s/ Phillip R. Watts

​ ​ Phillip R. Watts

​ By: /s/ Chris B. Johnson

​ ​ Chris B. Johnson

​ ​ Senior Vice President and Co-Principal FinancialOfficer

Date: March 28, 2025

​

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

​

​ ​ ​

/s/ William Dillard, II /s/ Chris B. Johnson

/s/ Alex Dillard ​ /s/ Phillip R. Watts

/s/ Mike Dillard ​ /s/ Drue Matheny

/s/ Denise Mahaffy ​ /s/ William Dillard, III

/s/ Robert C. Connor ​ /s/ William E. Connor, II

Robert C. ConnorDirector​ ​ William E. Connor, IIDirector​

/s/ James I. Freeman ​ /s/ H. Lee Hastings, III

James I. FreemanDirector​ ​ H. Lee Hastings, IIIDirector​

/s/ Rob C. Holmes ​ /s/ Reynie Rutledge

Rob C. HolmesDirector​ ​ Reynie RutledgeDirector​

/s/ Warren A. Stephens ​ /s/ J. C. Watts, Jr.

Warren A. StephensDirector​ J. C. Watts, Jr.Director​

/s/ Nick White ​ ​

Nick WhiteDirector ​ ​

​

Date: March 28, 2025

​

45

Table of Contents

INDEX OF FINANCIAL STATEMENTS

DILLARD’S, INC. AND SUBSIDIARIES

Year Ended February 1, 2025

​ ​

​ Page

Consolidated Balance Sheets—February 1, 2025 and February 3, 2024 F-4

​

​

​

​

F-1

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Dillard's, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dillard's, Inc. and subsidiaries (the Company) as of February 1, 2025 and February 3, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended February 1, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended February 1, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are

F-2

Table of Contents

recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Pension Plan projected benefit obligation

As discussed in Notes 1 and 8 to the consolidated financial statements, the Company had an unfunded, non-qualified defined benefit plan (Pension Plan) with a projected benefit obligation of $298.9 million as of February 1, 2025. The Pension Plan’s costs are accounted for using actuarial valuations. The discount rate that the Company utilizes for determining the projected benefit obligation is based on the FTSE Above Median Pension yield curve as of the end of each fiscal year.

We identified the evaluation of the Company’s measurement of the Pension Plan projected benefit obligation as a critical audit matter. Subjective auditor judgment was required to evaluate the discount rate used to determine the projected benefit obligation, as minor changes in the rate could have a significant impact on the projected benefit obligation. Additionally, the assessment of the discount rate required specialized actuarial skills and knowledge.

The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s benefit obligation process, including a control related to the actuarial determination of the discount rate used in the measurement of the projected benefit obligation. Additionally, we involved an actuarial professional with specialized skills and knowledge, who assisted in the evaluation of the Company’s discount rate by:

​

/s/ KPMG LLP

We have served as the Company’s auditor since 2011.

Dallas, Texas

March 28, 2025

F-3

Table of Contents

Consolidated Balance Sheets

Dollars in Thousands

​ ​ ​ ​ ​ ​ ​

Assets ​ ​

Current assets: ​ ​

Property and equipment: ​ ​ ​ ​ ​

Less accumulated depreciation and amortization ​ ​ (2,774,081) ​ ​ (2,638,167)

Liabilities and stockholders’ equity ​ ​

Current liabilities: ​ ​

Trade accounts payable and accrued expenses ​ $ 795,023 ​ $ 782,545

Current portion of operating lease liabilities ​ ​ 11,411 ​ ​ 11,252

Commitments and contingencies ​ ​

Stockholders’ equity: ​ ​

Accumulated other comprehensive loss ​ (49,851) ​ (87,208)

​

See notes to consolidated financial statements.

​

F-4

Table of Contents

Consolidated Statements of Income

Dollars in Thousands, Except Per Share Data

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

Earnings per share: ​ ​ ​

​

See notes to consolidated financial statements.

​

F-5

Table of Contents

Consolidated Statements of Comprehensive Income

Dollars in Thousands

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Years Ended

Other comprehensive income: ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

See notes to consolidated financial statements.

​

F-6

Table of Contents

Consolidated Statements of Stockholders’ Equity

Dollars in Thousands, Except Share and Per Share Data

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Retained ​ Treasury ​ ​ ​

​ ​ Class A Class B Capital Loss Earnings Stock Total

Other comprehensive loss ​ — ​ — ​ — ​ (42,924) ​ — ​ — ​ (42,924)

Issuance of 19,062 shares under equity plans ​ — ​ — ​ 6,186 ​ — ​ — ​ — ​ 6,186

Cash dividends declared: ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive loss ​ — ​ — ​ — ​ (21,486) ​ — ​ — ​ (21,486)

Issuance of 12,754 shares under equity plans ​ — ​ — ​ 4,509 ​ — ​ — ​ — ​ 4,509

Cash dividends declared: ​ ​ ​ ​ ​ ​ ​

Other comprehensive income ​ — ​ — ​ — ​ 37,357 ​ — ​ — ​ 37,357

Issuance of 9,174 shares under equity plans ​ 1 ​ — ​ 4,176 ​ — ​ — ​ — ​ 4,177

Cash dividends declared: ​ ​ ​ ​ ​ ​ ​

​

See notes to consolidated financial statements.

​

F-7

Table of Contents

Consolidated Statements of Cash Flows

Dollars in Thousands

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Years Ended

Operating activities: ​ ​ ​ ​

Gain from insurance proceeds ​ ​ — ​ ​ — ​ ​ (160)

Accrued interest on short-term investments ​ ​ (11,757) ​ ​ (5,679) ​ ​ (3,206)

Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​

Decrease (increase) in accounts receivable ​ 4,847 ​ (3,595) ​ (17,175)

(Increase) decrease in merchandise inventories ​ (78,048) ​ 26,209 ​ (40,030)

Decrease (increase) in other current assets ​ 2,277 ​ (7,819) ​ (5,359)

(Decrease) increase in income taxes payable ​ (2,407) ​ 5,392 ​ (1,257)

Investing activities: ​ ​ ​ ​

Proceeds from insurance ​ — ​ 4,477 ​ 4,886

Financing activities: ​ ​ ​ ​

Principal payments on long-term debt ​ — ​ — ​ (44,800)

Non-cash transactions of investing and financing activities: ​ ​ ​

Accrued purchases of treasury stock and excise taxes ​ ​ 1,168 ​ ​ 2,770 ​ ​ —

​

See notes to consolidated financial statements.

​

F-8

Table of Contents

Notes to Consolidated Financial Statements

1. Description of Business and Summary of Significant Accounting Policies

Description of Business—Dillard’s, Inc. (“Dillard’s” or the “Company”) operates retail department stores, located primarily in the southeastern, southwestern and midwestern areas of the United States, and a general contracting construction company based in Little Rock, Arkansas. The Company’s fiscal year ends on the Saturday nearest January 31 of each year. Fiscal year 2024 ended on February 1, 2025 and included 52 weeks. Fiscal year 2023 ended on February 3, 2024 and included 53 weeks. Fiscal year 2022 ended on January 28, 2023 and included 52 weeks.

Consolidation—The accompanying consolidated financial statements include the accounts of Dillard’s, Inc. and its wholly owned subsidiaries (excluding Dillard’s Capital Trust I; see Note 7 for more information). Intercompany accounts and transactions are eliminated in consolidation. Investments in and advances to joint ventures are accounted for by the equity method where the Company does not have control.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include merchandise inventories, self-insured accruals, future cash flows and real estate values for impairment analysis, pension discount rate and taxes. Actual results could differ from those estimates.

Seasonality—The Company’s business is highly seasonal, and historically the Company has realized a significant portion of its sales, net income and cash flow in the last quarter of our fiscal year. Due to holiday buying patterns, sales for the fourth quarter average approximately one-third of annual sales. Additionally, working capital requirements fluctuate during the year, increasing in the third quarter in anticipation of the holiday season.

Cash Equivalents—The Company considers all highly liquid investments with an original maturity of 3 months or less when purchased or certificates of deposit with no early withdrawal penalty to be cash equivalents. The Company considers receivables from charge card companies to be cash equivalents because they settle the balances within 2 to 3 days.

Restricted Cash—Restricted cash consists of cash proceeds from the sale of property held in escrow for the acquisition of replacement property under like-kind exchange agreements. The escrow accounts are administered by an intermediary. Pursuant to the like-kind exchange agreements, the cash remains restricted for a maximum of 180 days from the date of the property sale pending the acquisition of replacement property.

Accounts Receivable—Accounts receivable primarily consists of construction receivables of the Company’s general contracting construction company, CDI Contractors, LLC (“CDI”), and the monthly settlements of Dillard’s share of earnings from its long-term marketing and servicing private label credit card portfolio alliances. Construction receivables are based on amounts billed to customers. The Company provides any allowance for doubtful accounts considered necessary based upon a review of outstanding receivables, historical collection information and existing economic conditions. Accounts receivable are ordinarily due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance by the owner. Accounts that are past due more than 120 days are considered for write-off based on individual credit evaluation and specific circumstances of the customer.

Short-term Investments—Short-term investments are securities with original maturities of greater than three months but less than twelve months and are comprised of U.S. Treasury Bills. The Company determines the classification of these securities as trading, available for sale or held to maturity at the time of purchase and re-evaluates these determinations at each balance sheet date. The Company’s short-term investments are classified as held-to-maturity for the periods presented as it has the positive intent and ability to hold these investments to maturity. The Company’s held-to-maturity investments are stated at amortized cost, which approximated fair value, and are periodically assessed for other-than-temporary impairment.

F-9

Table of Contents

Merchandise Inventories—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 February 1, 2025 and February 3, 2024, 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 2024, 2023 or 2022.

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 generally performed no less frequently than annually, with the recorded amount of merchandise inventory being adjusted to coincide with these physical counts.

Property and Equipment—Property and equipment owned by the Company is stated at cost, which includes related interest costs incurred during periods of construction, less accumulated depreciation and amortization. Interest capitalized during fiscal 2024, 2023, and 2022 was $2.0 million, $2.2 million and $1.9 million, respectively. For financial reporting purposes, depreciation is computed by the straight-line method over estimated useful lives:

​

​ ​ ​

Buildings and leasehold improvements 20 - 40 years

Furniture, fixtures and equipment ​ 3 - 10 years

​

Properties leased by the Company under lease agreements which are determined to be finance leases are stated at an amount equal to the present value of the minimum lease payments during the lease term, less accumulated amortization. The assets under finance leases and leasehold improvements under operating leases are amortized on the straight-line method over the shorter of their useful lives or the related lease terms. The provision for amortization of assets under finance leases is included in depreciation and amortization expense, if any.