DILLARD DEPARTMENT STORES INC, 10-K, 1996-05-02

DILLARD DEPARTMENT STORES INC
10-K, 1996-05-02
DEPARTMENT STORES

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended February 3, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from ____________ to _________________.

Commission file number 1-6140

DILLARD DEPARTMENT STORES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 71-0388071
(State or other (IRS Employer
jurisdiction of incorporation Identification or
organization) Number)

1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:
(501) 376-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class Name of each exchange on which registered
Class A Common Stock New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by checkmark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No

Indicate by checkmark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 29, 1996:
$3,664,270,540

Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of March 29, 1996:
Class A Common Stock, no par value 109,270,507
Class B Common Stock, no par value 4,016,929

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Stockholders Report for the fiscal
year ended February 3, 1996 (the "Report") are incorporated
by reference into Parts I and II.

Portions of the Proxy Statement for the Annual Meeting of
Stockholders to be held May 18, 1996 (the "Proxy Statement")
are incorporated by reference into Part III.

<PAGE>

PART I

ITEM 1. BUSINESS.

General

Dillard Department Stores, Inc. ("Company" or
"Registrant") is an outgrowth of a department store
originally founded in 1938 by William Dillard. The
Company was incorporated in Delaware in 1964. The
Company operates retail department stores located
primarily in the southwest, southeast and midwest.

The department store business is highly competitive.
The Company has several competitors on a national and
regional level as well as numerous competitors on a
local level. Many factors enter into competition for
the consumer's patronage, including price, quality,
style, service, product mix, convenience and credit
availability. The Company's earnings depend to a
significant extent on the results of operations for the
last quarter of its fiscal year. Due to holiday buying
patterns, sales for that period average approximately
one-third of annual sales.

For additional information with respect to the
Registrant's business, reference is made to information
contained on page 19, under the heading "Dillard's
Locations," page 22 under the headings "Net Sales,"
"Net Income," "Total Assets" and "Number of Employees -
Average," and page 40 of the Report, which information
is incorporated herein by reference.

Executive Officers of the Registrant

The following table lists the names and ages of all
Executive Officers of the Registrant, the nature of any
family relationship between them, and all positions and
offices with the Registrant presently held by each
person named. All of the Executive Officers listed
below have been in managerial positions with the
Registrant for more than five years.

<PAGE>

Name Age Position and Office Family Relationships

William Dillard 81 Chairman of the Board; Father of William
Chief Executive Officer Dillard, II, Drue
Corbusier, Alex
Dillard and Mike
Dillard

William Dillard, II 51 Director; President Son of
& Chief Operating Officer William Dillard

Alex Dillard 46 Director; Executive Son of
Vice President William Dillard

Mike Dillard 44 Director; Executive Son of
Vice President William Dillard

H. Gene Baker 57 Vice President None

G. Kent Burnett 51 Vice President None

Drue Corbusier 49 Director; Vice President Daughter of
William Dillard

James E. Darr, Jr. 53 Senior Vice President; None
Secretary and General
Counsel

David M. Doub 49 Vice President None

John A. Franzke 64 Vice President None

James I. Freeman 46 Director; Senior Vice None
President; Chief Financial
Officer

Randal L. Hankins 45 Vice President None

T. R. Gastman 66 Vice President None

Bernard Goldstein 63 Vice President None

Roy J. Grimes 58 Vice President None

Harry D. Passow 56 Vice President None

<PAGE>

ITEM 2. PROPERTIES.

All of the Registrant's stores are owned or leased from a
wholly-owned subsidiary or from third parties. The
Registrant's third-party store leases typically provide for
rental payments based upon a percentage of net sales with a
guaranteed minimum annual rent, while the lease terms between
the Registrant and its wholly-owned subsidiary vary. In
general, the Company pays the cost of insurance, maintenance
and any increase in real estate taxes related to these leases.
At fiscal year end there were 238 stores in operation with
gross square footage of 37,300,000. The Company owned or
leased from a wholly-owned subsidiary a total of 173 stores
with 27,400,000 square feet. The Company leased 65 stores
from third parties which totalled 9,900,000 square feet. For
additional information with respect to the Registrant's
properties and leases, reference is made to information
contained on page 19 under the heading "Dillard's Locations,"
and Notes 4, 9 and 10, "Notes to Consolidated Financial
Statements," on pages 35, 37 and 38 of the Report, which
information is incorporated herein by reference.

ITEM 3. LEGAL PROCEEDINGS.

The Company has no material legal proceedings pending against it.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

With respect to the market for the Company's common stock,
market prices, and dividends, reference is made to information
contained page 40 of the Report, which information is
incorporated herein by reference. As of March 29, 1996, there
were 6,638 record holders of the Company's Class A Common
Stock and 9 record holders of the Company's Class B Common
Stock.

ITEM 6. SELECTED FINANCIAL DATA.

Reference is made to information under the heading "Table of
Selected Financial Data" on pages 22 and 23 of the Report,
which information is incorporated herein by reference.

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

Reference is made to information under the heading
"Management's Discussion and Analysis of Financial Condition
and Results of Operation" on pages 24 through 27 of the
Report, which information is incorporated herein by reference.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements and notes thereto
included on pages 28 through 39 of the Report are incorporated
herein by reference.

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

None.
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

A. Directors of the Registrant.

Information regarding directors of the Registrant is
incorporated herein by reference to the information on
pages 4 through 6 under the heading "Nominees for
Election as Directors" and page 10 under the heading
"Section 16(a) Reporting Delinquencies" in the Proxy
Statement.

B. Executive Officers of the Registrant.

Information regarding executive officers of the
Registrant is incorporated herein by reference to Item 1
of this report under the heading "Executive Officers of
the Registrant." Reference additionally is made to the
information under the heading "Section 16(a) Reporting
Delinquencies" on page 10 in the Proxy Statement, which
information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information regarding executive compensation and compensation
of directors is incorporated herein by reference to the
information beginning on page 6 under the heading
"Compensation of Directors and Executive Officers" and
concluding on page 8 under the heading "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

Information regarding security ownership of certain beneficial
owners and management is incorporated herein by reference to
the information on page 3 under the heading "Principal Holders
of Voting Securities" and page 4 under the heading "Nominees
for Election as Directors" and continuing through footnote 11
on page 6 in the Proxy Statement.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related
transactions is incorporated herein by reference to the
information on page 10 under the heading "Certain
Relationships and Transactions" in the Proxy Statement and to
the information regarding Mr. Davis on page 8 under the
heading "Compensation Committee Interlocks and Insider
Participation" in the Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.

(a)(1) Financial Statements

The following consolidated financial statements of the Registrant
and its consolidated subsidiaries included in the Report are
incorporated herein by reference in Item 8:

Consolidated Balance Sheets - February 3, 1996 and January 28, 1995
Consolidated Statements of Income - Fiscal years ended February 3, 1996,
January 28, 1995 and January 29, 1994
Consolidated Statements of Stockholders' Equity - Fiscal years ended
February 3, 1996, January 28, 1995 and January 29, 1994
Consolidated Statements of Cash Flows - Fiscal years ended
February 3, 1996, January 28, 1995 and January 29, 1994
Notes to Consolidated Financial Statements - Fiscal years ended
February 3, 1996, January 28, 1995 and January 29, 1994

(a)(2) Financial Statement Schedules

The following consolidated financial statement schedule of the
Registrant and its consolidated subsidiaries is filed pursuant to
Item 14(d) (this schedule appears immediately following the
signature page):

Schedule II - Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
<PAGE>

(a)(3) Exhibits and Management Compensatory Plans
Exhibits

The following exhibits are filed pursuant to Item 14(c):

Number Description

* 3(a) Restated Certificate of Incorporation (Exhibit 3 to Form
10-Q for the quarter ended August 1, 1992 in 1-6140)
* 3(b) By-Laws as currently in effect. (Exhibit 3(b) to Form 10-
K for the fiscal year ended January 30, 1993 in 1-6140)
* 4(a) Indenture between the Registrant and Chemical Bank,
Trustee, dated as of October 1, 1985 (Exhibit (4) in 2-
85556)
* 4(b) Indenture between the Registrant and Chemical Bank,
Trustee, dated as of October 1, 1986 (Exhibit (4) in 33-
8859)
* 4(c) Indenture between Registrant and Chemical Bank, Trustee,
dated as of April 15, 1987 (Exhibit 4.3 in 33-13534)
* 4(d) Indenture between Registrant and Chemical Bank, Trustee,
dated as of May 15, 1988, as supplemented (Exhibit 4 in
33-21671, Exhibit 4.2 in 33-25114 and Exhibit 4(c) to
Current Report on Form 8-K dated September 26, 1990 in 1-
6140)
* 4(e) Indenture between Dillard Investment Co., Inc. and
Chemical Bank, Trustee, dated as of April 15, 1987, as
supplemented (Exhibit 4.1 in 33-13535 and Exhibit 4.2 in
33-25113)
*10(a) Retirement Contract of William Dillard dated October 17,
1990 (Exhibit (10) to Form 10-K for the fiscal year ended
February 2, 1991 in 1-6140)
*10(b) 1990 Incentive and Nonqualified Stock Option Plan
(Exhibit 10(b) to Form 10-K for the fiscal year ended
January 30, 1993 in 1-6140)
*10(c) Corporate Officers Non-Qualified Pension Plan (Exhibit
10(c) to Form 10-K for the fiscal year ended January 29,
1994 in 1-6140)
*10(d) Senior Management Cash Bonus Plan (Exhibit 10(d) to Form
10-K for the fiscal year ended January 28, 1995 in 1-6140)
11 Statement Re: Computation of Per Share Earnings
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges
13 Incorporated portions of the Annual Stockholders Report
for the fiscal year ended February 3, 1996
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
____________
* Incorporated herein by reference as indicated.

Management Compensatory Plans

Listed below are the management contracts and compensatory plans
which are required to be filed as exhibits pursuant to Item 14(c):

Retirement Contract of William Dillard dated October 17, 1990
1990 Incentive and Nonqualified Stock Option Plan
Corporate Officers Non-Qualified Pension Plan
Senior Management Cash Bonus Plan

(b) Reports on Form 8-K filed during the fourth quarter:
<PAGE>
None

See the response to Item 14(a)(3).

(d) Financial statement schedules

See the response to Item 14(a)(2).
<PAGE>

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 Department Stores, Inc.
Registrant

/s/ James I. Freeman

Date May 2,1996 James I. Freeman, Senior Vice
President and Chief Financial Officer
(Principal Financial & Accounting
Officer)

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 capacity and on the date
indicated.

/s/William Dillard /s/Drue Corbusier
William Dillard Drue Corbusier
Chairman and Chief Executive Vice President and Director
Officer (Principal Executive
Officer)

/s/Calvin N. Clyde, Jr. /s/Robert C. Connor
Calvin N. Clyde, Jr. Robert C. Connor
Director Director

/s/Will D. Davis /s/Alex Dillard
Will D. Davis Alex Dillard
Director Executive Vice President
and Director

/s/Mike Dillard /s/William Dillard, II
Mike Dillard William Dillard, II
Executive Vice President and President and Chief Operating
Director Officer and Director

/s/James I. Freeman /s/William H. Sutton
James I. Freeman William H. Sutton
Senior Vice President and Chief Director
Financial Officer and Director

/s/John Paul Hammerschmid t /s/William B. Harrison, Jr.
John Paul Hammerschmidt William B. Harrison, Jr.
Director Director

/s/J. M. Hessels /s/John H. Johnson
J. M. Hessels John H. Johnson
Director Director

/s/E. Ray Kemp
E. Ray Kemp
Director

Date May 2, 1996

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
Dillard Department Stores, Inc.
Little Rock, Arkansas

We have audited the consolidated financial statements of Dillard Department
Stores, Inc. and subsidiaries as of February 3, 1996 and January 28, 1995,
and for each of the three years in the period ended February 3, 1996, and
have issued our report thereon dated March 4, 1996; such consolidated
financial statements and report (which report includes an explanatory
paragraph relating to a change in accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of) are included in your 1995
Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the consolidated financial statement schedule
of Dillard Department Stores, Inc. and subsidiaries, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as whole, presents fairly in all material respects the information set
forth therein.

DELOITTE & TOUCHE LLP

New York, New York
March 4, 1996

<PAGE>
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

DILLARD DEPARTMENT STORES, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
COL. A COL. B COL. C COL.D COL. E COL. F

ADDITIONS
BALANCE CHARGED TO CHARGED TO BALANCE
AT BEGINNING COST AND OTHER ACCOUNTS DEDUCTIONS - AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
<C> <C> <C> <C> <C> <C> <C> <C>

Allowance for losses
on accounts receivable:

Year ended
February 3, 1996: $15,307 52,522 708 (1) 49,009 (2) $19,528

Year ended
January 28, 1995: $15,214 44,922 44,829 (2) $15,307

Year ended
January 29, 1994: $15,790 43,036 43,612 (2) $15,214

(1) Represents the allowance for losses on accounts acquired.

(2) Accounts written off and charged to allowance for losses on
accounts receivable (net of recoveries).
</TABLE>
<PAGE>

EXHIBIT INDEX

Number Description

* 3(a) Restated Certificate of Incorporation (Exhibit 3
to Form 10-Q for the quarter ended August 1, 1992
in 1-6140)
* 3(b) By-Laws as currently in effect (Exhibit 3(b) to
Form 10-K for the fiscal year ended January 30,
1993, in 1-6140)
* 4(a) Indenture between the Registrant and Chemical
Bank, Trustee, dated as of October 1, 1985
(Exhibit (4) in 2-85556)
* 4(b) Indenture between the Registrant and Chemical
Bank, Trustee, dated as of October 1, 1986
(Exhibit (4) in 33-8859)
* 4(c) Indenture between Registrant and Chemical Bank,
Trustee, dated as of April 15, 1987 (Exhibit 4.3
in 33-13534)
* 4(d) Indenture between Registrant and Chemical Bank,
Trustee, dated as of May 15, 1988, as supplemented
(Exhibit 4 in 33-21671, Exhibit 4.2 in 33-25114
and Exhibit 4(c) to Current Report on Form 8-K
dated September 26, 1990 in 1-6140)
* 4(e) Indenture between Dillard Investment Co., Inc. and
Chemical Bank, Trustee, dated as of April 15,
1987, as supplemented (Exhibit 4.1 in 33-13535 and
Exhibit 4.2 in 33-25113)
*10(a) Retirement Contract of William Dillard dated
October 17, 1990 (Exhibit (10) to Form 10-K for
the fiscal year ended February 2, 1991 in 1-6140)
*10(b) 1990 Incentive and Nonqualified Stock Option Plan
(Exhibit 10(b) to Form 10-K for the fiscal year
ended January 30, 1993 in 1-6140)
*10(c) Corporate Officers Non-Qualified Pension Plan
(Exhibit 10(c) to Form 10-K for the fiscal year
ended January 29, 1994 in 1-6140)
*10(d) Senior Management Cash Bonus Plan (Exhibit 10(d)
to Form 10-K for the fiscal year ended January 28,
1995 in 1-6140)
11 Statement Re: Computation of Per Share Earnings
12 Statement Re: Computation of Ratio of Earnings to
Fixed Charges
13 Incorporated portions of the Annual Stockholders
Report for the fiscal year ended February 3, 1996
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
__________________
* Incorporated herein by reference as indicated.
<PAGE>

EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

<TABLE>
Year Ended
February 3, January 28, January 29,
1996 1995 1994
<S> <C> <C> <C>

Average shares outstanding 113,046,620 112,999,406 112,749,923
Net effect of dilutive stock options
based on the treasury stock method
using average market price 97,222 14,592 58,339

Total 113,143,842 113,013,998 112,808,262

Net income $167,183,500 $251,790,500 $241,133,700
Less preferred dividends (22,000) (22,000) (22,000)

Income available to
common shares $167,161,500 $251,768,500 $241,111,700

Per share $1.48 $2.23 $2.14

</TABLE>

EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
Fiscal Year Ended
FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1
1996 1995 1994 1993 1992

<S> <C> <C> <C> <C> <C>
Consolidated pretax income $269,653 $406,110 $399,534 $375,330 $322,157
Fixed charges (less capitalized
interest) 139,666 145,921 152,568 142,857 128,891

EARNINGS $409,319 $552,031 $552,102 $518,187 $451,048

Interest $120,054 $124,282 $130,915 $121,940 $109,386

Capitalized interest 3,567 2,545 1,882 1,646 3,574

Interest factor in rent expense 19,612 21,639 21,653 20,917 19,505

FIXED CHARGES $143,233 $148,466 $154,450 $144,503 $132,465

Ratio of earnings to fixed charges 2.86 3.72 3.57 3.59 3.41

</TABLE>

<PAGE>
Dillard * The Corporation
Founded in 1938 by William Dillard, Dillard Department Stores, Inc. is a
regional group of traditional department stores offering a distinctive mix of
name brand and private label merchandise. With everyday pricing and special
emphasis on fashion apparel and home furnishings, Dillard's appeals to middle
and upper-middle income consumers. The corporation's philosophy continues to
embrace an ambitious program of expansion and remodeling as well as aggressive
responses to industry trends in merchandise and pricing.

<PAGE>

To Our Stockholders:

Sales for 1995 were $5.9 billion, a 7% increase over last year's sales of
$5.5 billion. Fiscal 1995 included 53 weeks. On an equivalent 52 week basis,
sales rose 5%. Sales in comparable stores increased by 2% for the year on a
comparable 52 week basis. Net income was $167.1 million (after a $78.5 million
charge for the impairment of assets) versus $251.8 last year. Net income per
share was $1.48 (after impairment charges of $.69 per share) versus $2.23 last
year.

As discussed in note 2 to the financial statements, the company recorded a
non-cash after tax charge of $78.5 million for the impairment of long-lived
assets. As a result of a new accounting standard issued in 1995, we evaluated
our investment in long-lived assets on an individual store basis and
determined that, based upon historic operating results and operating
projections, the property and equipment at several stores was impaired.

During 1995, we opened 11 new stores, two of which were
replacement stores. These stores were located in Brandon, Florida;
Clarksville, Indiana; Louisville, Kentucky (2); Greenville, South Carolina;
Colorado Springs, Colorado; High Point, North Carolina; Pembroke Pines,
Florida; Sanford, Florida; Austin, Texas; and Tampa, Florida. These new
stores, along with our remodeled and expanded stores added 2,000,000 square
feet to our retail space. At the end of 1995, we operated 238 stores in 23
states.

<PAGE>

Our store opening schedule for 1996 is the most aggressive in the
history of the company. We plan to open 16 new stores (one of which will be a
replacement store). These new stores, along with the remodeled and expanded
stores, will add 3,000,000 square feet to our store base.
Our balance sheet remains strong. Our long-term debt to total
capitalization ratio dropped to 32.2% at the end of 1995 compared to 34.1% at
the end of 1994. We are poised for growth should the right opportunity
present itself.
In March 1996, we announced the extensive realignment of our
operating divisions along geographic and climatic lines. Through this
realignment, two of our operating divisions were merged into the remaining
five divisions. We are excited about this restructuring and feel that it will
not only enhance efficiency and productivity, but will result in improved
management of our entire merchandising operation.

William Dillard
Chairman of the Board and Chief Executive Officer
March 30, 1996

<PAGE>

In March 1996, the company announced an extensive realignment of
operating divisions along geographic and climatic lines. Through this
restructuring, two of Dillard's operating divisions were merged into the
remaining divisions. Approximately 83 of the company's 244 stores were
affected.
The primary objective of the reorganization was to enhance Dillard's
overall merchandising effort by improving company efficiency and productivity.
An important ancillary benefit of the move was the cost savings that will
result. However, the savings, while significant, were not the driving force
behind the realignment. As Alex Dillard, executive vice president, said at the
time of the announcement, the move will "allow us to better serve our
customers."
Because of these changes, managers will acquire greater authority over
retailing operations. The company is confident that bringing their broad range
of experience to bear on today's diverse marketing challenges will reap
substantial rewards in enhanced service and sales.
Specifically, the Cleveland divisional buying office will be merged into
the St. Louis office, and the San Antonio divisional buying offices will be
assimilated by the Tampa and Fort Worth offices. In addition, the Fort Worth
division will now direct all stores in Texas; the Phoenix division will take
in all Colorado stores; and the Little Rock division will absorb all stores in
Oklahoma.
The resultant geographic shift in responsibilities will serve to
streamline merchandising operations and enable managers to concentrate on
retailing areas at which they have demonstrated a high degree of success. It
will also promote numerous efficiencies in ordering. Dillard's, as a result
of the move, will remain one of the lowest cost operators in the retail
industry.

<PAGE>

For almost sixty years now, the Dillard's philosophy has remained
constant: to provide our customers with the absolute best value for their
money. In recent years, we have achieved this goal through an aggressive
merchandise mix of name brands and private labels.
At Dillard's, respect for our customers is paramount. Building enduring
relationships with customers has, in large measure, accounted for our steady
growth and continued financial success. Experience has shown that we can best
earn their trust by always emphasizing value. This commitment led Dillard's
in 1990 to introduce our private label, Roundtree & Yorke men's fashions. Our
strategy was to establish exclusive brands that compared with, or exceeded,
the quality of national brands.
To a degree, this was in response to recent trends indicating that
today's sophisticated consumers are increasingly less willing to pay inflated
prices for national brands.
Where national brands have abdicated their value role, Dillard's
exclusive brands have been established.
During 1995, Dillard's private label program grew substantially. After
only five years, the program today represents one of the fastest-growing
segments of our business. The increasing importance of private label in the
Dillard's merchandise balance has produced a positive impact on overall
profitability.

<PAGE>

While other retailers emphasize private labels in their merchandise mix,
the Dillard's approach is uniquely different. Quality drives all. Our
objective is to develop brand equity in Dillard's exclusives.
Much of the success of our program is due to the fact that Dillard's chooses
to deal directly with manufacturers. (Design consultants are utilized on
as-needed basis.)
Building partnerships with proven manufacturers, wherever in the world
they may be headquartered, is a key element to our program. Today the
Dillard's private label network includes the products of numerous vendors
from many countries all around the globe. This direct-to-the-manufacturer
approach lowers costs by eliminating middlemen, enhances quality control and
allows for predictability in inventory.
Further, this arrangement enables Dillard's to deliver intrinsic value
back to the customer. Value, not price, is what sets Dillard's apart. And
while this strategy may have a longer-term payoff, the rewards are already
proving very substantial.
The Dillard's private label program is comprehensive throughout the
company's merchandise mix-including men's, women's and children's fashions;
home furnishings; and accessories. Eighty percent of Dillard's belts, for
example, now carry our highly profitable Roundtree & Yorke brand.

<PAGE>

Among Dillard's successful exclusive label fashion introductions are:
Cypress Links, Lawton Harbor, Oak Creek, Roundtree & Yorke and St. Durand
(men's fashions); Bechamel, Cabernet, Copper Key, Preston & York and Westbound
(women's fashions); Class Club (children's); Brioso and Simply Comfort
(shoes).
It is important to note, however, that Dillard's marketing emphasis
remains heavily weighted toward national brands. While private labels
allow for many distinct advantages in the company's merchandising mix,
national brands will continue to occupy the dominant position in Dillard's
retailing strategy.
Financially, the private label program presents numerous benefits to
Dillard's. It permits greater control over the company's gross margin. It
enables us to extend selling seasons by controlling the optimum time to sell.
It increases marketing flexibility by lessening dependency on vendors.
In addition, Dillard's is able to sell more merchandise at regular price,
without discounting. Most importantly, perhaps, is that the great success of
the private label program allows Dillard's to significantly reduce the impact
of fluctuating profits common to the industry; we now have more control over
our destiny.
In 1996 Dillard's will focus even more intently on aggressively growing
our private label business. It continues to be a dynamic, evolving program
with enormous potential for the future.

<PAGE>

During 1995 Dillard's took major strides in expanding our company
operations by aggressively entering new territories and significantly
strengthening existing markets. Due to the diminishing field of suitable
acquisition candidates, Dillard's has adopted a dynamic growth strategy of new
store development and expansions.
In pursuit of this objective, Dillard's in fiscal 1995 opened 11 new
stores, two of which are replacement stores. Important new territories, such
as the Louisville and Colorado Springs areas, were introduced, while market
gains in other territories, including Florida, were consolidated.
For 1996, the company plans to open 16 stores, the most the company has ever
unveiled in a single year. Vital new markets, such as Denver and Atlanta, will
be developed for the company in the coming year. Advances in technology have
brought about significant savings in time and expense of new store
construction. Elevators and escalators, for example, can be totally assembled
off-site and installed at new stores. Thanks to these and similar economies,
the average building time now stands at 11 months, down almost 45 days from
five years ago.

<PAGE>

New Stores Opened - 1995
February, Brandon, FL - Brandon Town Center -- 200,000 sq. ft.
March, Clarksville, IN - Green Tree Mall -- 140,000 sq. ft.
March, Louisville, KY - Mall St. Matthews -- 230,000 sq. ft.
April, Greenville, SC - Haywood Mall -- 220,000 sq. ft.
(replacing 125,000 sq. ft.)
August, High Point, NC - Oak Hollow Mall -- 148,000 sq. ft.
August, Pembroke Pines, FL - Pembroke Lakes Mall -- 150,000 sq. ft.
August, Colorado Springs, CO - Citadel Crossing -- 180,000 sq. ft.
August, Louisville, KY - Jefferson Mall -- 90,000 sq. ft.
September, Sanford, FL - Seminole Town Center -- 210,000 sq. ft.
October, Austin, TX - Lakeline Mall -- 210,000 sq. ft.
November, Tampa, FL - University Square -- 180,000 sq. ft.
(replacing 125,000 sq. ft.)

New Stores To Be Opened - 1996
January, Naples, FL - Coastland Mall -- 180,000 sq. ft.
(replacing 80,000 sq. ft.)
February, Winter Haven, FL - East Ridge Center -- 126,000 sq. ft.
February, Henderson, NV - Galleria at Sunset -- 200,000 sq. ft.
March, El Paso, TX - Bassett Shopping Center -- 196,000 sq. ft.
March, Sarasota, FL - Sarasota Square -- 100,000 sq. ft.
March, Sugar Land, TX - First Colony -- 200,000 sq. ft.
March, Alpharetta, GA - North Point -- 250,000 sq. ft.
May, Columbia, SC - Columbia -- 180,000 sq. ft.
July, Albuquerque, NM - Cottonwood Mall -- 180,000 sq. ft.
September, Denver, CO - Park Meadows Mall -- 240,000 sq. ft.
September, Bowling Green, KY - Greenwood Mall -- 122,000 sq. ft.
October, Ocoee, FL - West Oaks -- 200,000 sq. ft.
October, Niles, OH - Eastwood Mall -- 120,000 sq. ft.
October, Strongville, OH - South Park -- 200,000 sq. ft.
November, Vero Beach, FL - Indian River -- 127,000 sq. ft.
November, Spartanburg, SC - West Gate -- 150,000 sq. ft.

<PAGE>

Stores Expanded And Remodeled - 1995
January, Lake Jackson, TX - Brazos Mall -- A net expansion of 32,000 sq. ft.
March, Paducah, KY - Kentucky Oaks Mall -- A net expansion of 40,000 sq. ft.
August, Memphis, TN - Oak Court Mall -- A net expansion of 48,000 sq. ft.
October, St. Louis, MO - Chesterfield Mall -- A net expansion of 55,000 sq. ft.
November, Boardman, OH - Southern Park -- A net expansion of 52,000 sq. ft.
November, Charlotte, NC - Eastland -- A net expansion of 41,000 sq. ft.

Stores To Be Expanded And Remodeled - 1996
February, Las Vegas, NV - The Meadows -- 56,000 sq. ft.
August, Tulsa, OK - Promenade -- 74,000 sq. ft.
August, Fayetteville, AR - Northwest -- 100,000 sq. ft.

<PAGE>

Management

William Dillard
Chairman of the Board and Chief Executive Officer

William Dillard, II
President
Chief Operating Officer

Alex Dillard
Executive Vice President

Mike Dillard
Executive Vice President

James I. Freeman
Senior Vice President
Chief Financial Officer

James E. Darr, Jr.
Senior Vice President
Secretary and General Counsel

Vice Presidents

W.R. Appleby, II
Gregg Athy
H. Gene Baker
Jan E. Bolton
Michael Bowen
Joseph P. Brennan
G. Kent Burnett
Larry Cailteux
Wynelle Chapman
Neil Christensen
Drue Corbusier
Daniel Demicell
David M. Doub
Richard Eagan
Robert Edwards
John A. Franzke
T.R. Gastman
Bernard Goldstein
Roy J. Grimes
Randal L. Hankins
G. William Haviland
John Hawkins
Mark Killingsworth
David Kolmer
Gaston Lemoine
Denise Mahaffy
Robert G. McGushin
Michael S. McNiff
Anthony Menzie
Steven K. Nelson
Steven T. Nicoll
Harry D. Passow
M.E. Ritchie, Jr.
Richard Roberds
James Schatz
Linda Sholtis
Burt Squires
Joseph W. Story
Ralph Stuart
David Terry
Richard B. Willey

<PAGE>

Board of Directors

William Dillard
Chairman of the Board and Chief Executive Officer
Dillard Department Stores

Calvin N. Clyde, Jr.
Chairman of the Board
T.B. Butler Publishing Co., Inc., Tyler, Texas

Robert C. Connor
Investments

Drue Corbusier
Vice President
Dillard Department Stores

Will D. Davis
Partner
Heath, Davis & McCalla Attorneys, Austin, Texas

Alex Dillard
Executive Vice President
Dillard Department Stores

Mike Dillard
Executive Vice President
Dillard Department Stores

William Dillard, II
President and Chief Operating Officer
Dillard Department Stores

James I. Freeman
Senior Vice President and Chief Financial Officer
Dillard Department Stores

John Paul Hammerschmidt
Retired Member of Congress
Harrison, Arkansas

William B. Harrison, Jr.
Vice Chairman, Chemical Banking Corporation
New York, New York

J.M. Hessels
Chairman, Executive Board
Vendex Intl. N.V., Amsterdam, The Netherlands

John H. Johnson
President and Publisher
Johnson Publishing Company, Inc., Chicago, Illinois

E. Ray Kemp
Retired Vice Chairman and Chief Administrative Officer
Dillard Department Stores

William H. Sutton
Managing Partner
Friday, Eldredge & Clark Attorneys
Little Rock, Arkansas

<PAGE>

Operating Divisions

Fort Worth

Drue Corbusier
Chairman

H. Gene Baker
President

Gregg Athy
Vice President, Merchandising

Wynelle Chapman
Vice President, Merchandising

Gaston Lemoine
Vice President, Stores

Anthony Menzie
Vice President, Stores

Richard Roberds
Vice President, Stores

James Schatz
Vice President, Stores

Jeff Menn
Vice President, Sales Promotion

Little Rock

Mike Dillard
Chairman

John A. Franzke
President

David Terry
Vice President, Merchandising

Burt Squires
Vice President, Stores

Richard B. Willey
Vice President, Stores

Ken Eaton
Vice President, Sales Promotion

Phoenix

G. Kent Burnett
Chairman

Bernard Goldstein
President

Joseph P. Brennan
Vice President, Merchandising

Robert G. McGushin
Vice President, Stores

Robert E. Baker
Vice President, Sales Promotion

St. Louis

Roy J. Grimes
Chairman

Harry D. Passow
President

Daniel Demicell
Vice President, Merchandising

Mark Killingsworth
Vice President, Merchandising

Larry Cailteux
Vice President, Stores

Neil Christensen
Vice President, Stores

Richard Eagan
Vice President, Stores

David Kolmer
Vice President, Stores

Howard Hall
Vice President, Sales Promotion

Tampa

T.R. Gastman
Chairman

David M. Doub
President

W.R. Appleby, II
Vice President, Stores

Robert Edwards
Vice President, Stores

Steven T. Nicoll
Vice President, Stores

Linda Sholtis
Vice President, Stores

Louise Platt
Vice President, Sales Promotion

<PAGE>
<TABLE>
Table of Selected Financial Data
Dillard Department Stores, Inc. And Subsidiaries

(In thousands of dollars, except per share data)

1995* 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $5,918,038 $5,545,803 $5,130,648 $4,713,987 $4,036,392
Percent Increase 7% 8% 9% 17% 12%
Cost of Sales 3,893,786 3,614,628 3,306,757 3,043,438 2,565,904
Percent of Sales 65.8% 65.2% 64.4% 64.5% 63.6%
Interest and Debt Expense 120,054 124,282 130,915 121,940 109,386
Income Before Taxes 269,653 (a) 406,110 399,534 375,330 322,157
Income Taxes 102,470 154,320 158,400 138,900 116,000
Net Income 167,183 (a) 251,790 241,134 236,430 206,157
Per Common Share **
Income 1.48 2.23 2.14 2.11 1.84
Dividends 0.12 0.10 0.08 0.08 0.07
Book Value 21.91 20.55 18.42 16.28 14.19
Average Number of Shares
Outstanding ** 113,143,842 113,013,998 112,808,262 112,292,575 111,832,758

Accounts Receivable - Total 1,123,103 1,117,411 1,111,744 1,106,010 1,004,496
Merchandise Inventories 1,486,045 1,362,756 1,299,944 1,178,562 1,052,683
Property and Equipment 2,024,342 1,960,922 1,892,054 1,662,181 1,318,027
Total Assets 4,778,535 4,577,757 4,430,274 4,107,114 3,498,506

Long-term Debt 1,157,864 1,178,503 1,238,293 1,381,676 1,008,967
Capitalized Lease Obligations 20,161 22,279 31,621 32,381 29,489
Deferred Income Taxes - Total 248,468 302,801 284,981 178,311 143,463
Stockholders' Equity 2,478,327 2,323,567 2,081,647 1,832,018 1,583,475

Number of Employees - Average 40,312 37,832 35,536 33,883 32,132

Gross Square Footage (in thousands) 37,300 35,300 34,900 33,200 29,100

Number of Stores
Opened 9 7 10 11 10
Acquired 0 0 0 12 7
Closed 0 5 1 3 5
Total - End of Year 238 229 227 218 198

* 53 Weeks
** Restated 3 for 1 stock split
(a) Includes Impairment charges of $126.6 million before taxes ($78.5 million after tax).

Table of Selected Financial Data
Dillard Department Stores, Inc. And Subsidiaries

(In thousands of dollars, except per share data)

1990 1989* 1988 1987 1986
Net Sales $3,605,518 $3,049,062 $2,558,395 $2,206,347 $1,851,423
Percent Increase 18% 19% 16% 19% 16%
Cost of Sales 2,287,891 1,926,971 1,636,861 1,398,808 1,179,157
Percent of Sales 63.5% 63.2% 64.0% 63.4% 63.7%
Interest and Debt Expense 97,032 91,836 80,979 64,179 47,912
Income Before Taxes 280,778 227,892 172,529 155,223 131,858
Income Taxes 98,000 79,800 58,700 64,000 57,400
Net Income 182,778 148,092 113,829 91,223 74,458
Per Common Share **
Income 1.67 1.45 1.18 0.94 0.78
Dividends 0.07 0.06 0.05 0.05 0.04
Book Value 12.31 10.23 7.80 6.67 5.77
Average Number of Shares
Outstanding ** 109,351,914 101,890,272 96,655,737 96,571,272 95,078,094

Accounts Receivable - Total 932,544 759,803 654,333 605,299 472,639
Merchandise Inventories 889,333 716,054 527,931 500,831 385,509
Property and Equipment 1,066,562 897,847 787,210 694,991 513,421
Total Assets 3,007,979 2,496,277 2,067,517 1,888,033 1,427,639

Long-term Debt 839,490 739,597 620,956 594,773 400,319
Capitalized Lease Obligations 31,284 32,900 25,157 26,443 13,695
Deferred Income Taxes - Total 115,854 108,426 128,565 125,828 116,549
Stockholders' Equity 1,364,885 1,094,721 752,178 643,386 556,617

Number of Employees - Average 31,786 26,304 23,114 21,168 18,412

Gross Square Footage (in thousands) 26,600 23,500 20,800 18,500 15,600

Number of Stores
Opened 4 3 7 6 8
Acquired 23 19 4 17 11
Closed 3 6 0 3 5
Total - End of Year 186 162 146 135 115

* 53 Weeks
** Restated 3 for 1 stock split
(a) Includes Impairment charges of $126.6 million before taxes ($78.5 million after tax).
</TABLE>
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Opertations

Sales
Sales for 1995 increased 7% over the prior year. The 1995 fiscal year had 53
weeks. The sales increases for the past three years on a comparable 52 week
basis have been:

1995 1994 1993
Sales Increase 5% 8% 9%

Comparable store sales increases by quarter for the past three years on a
comparable 13 week basis have been:

1995 1994 1993
First Quarter 1% 7% 3%
Second Quarter 4 4 4
Third Quarter 2 5 3
Fourth Quarter 3 4 3
Year 2 5 3

Comparable store sales include sales for those stores which were in operation
for a full period in both the current quarter and the corresponding quarter
for the prior year. The slower sales gains experienced in 1995 reflect the
challenges of a difficult environment for apparel retailers. Management
believes that the majority of the increase in sales on a comparable 52 week
basis and in comparable store sales on a comparable 13 week basis was
attributable to an increase in the volume of goods sold rather than an
increase in the price of goods.

The sales mix for the past three years by category and percent of total sales
has been:

1995 1994 1993
Cosmetics 12.7% 12.5% 12.5%
Women's & Junior's Clothing 30.0 30.4 31.1
Children's Clothing 6.5 6.7 6.7
Men's Clothing & Accessories 18.9 18.6 18.1
Shoes, Accessories & Lingerie 19.5 19.1 18.6
Home 11.7 11.9 11.7
Leased Departments .7 .8 1.3

Total 100.0% 100.0% 100.0%

The Company experienced above average sales gains during 1995, 1994 and 1993
in men's clothing and in shoes. Sales gains trailed the company average in
the women's and junior's clothing area in 1995 and 1994. Sales in leased
departments have declined significantly over the past few years as the
Company has de-emphasized this area.

At year end there were 238 stores in operation. Annual gross square footage of
stores in operation at year end and approximate sales per gross square foot
for the past three years have been:

1995 1994 1993
Sales (000) $5,918,038 $5,545,803 $5,130,648
Gross Square Footage (000) 37,300 35,300 34,900
Sales per Square Foot $ 159 $ 157 $147
Gross Square Footage of
owned properties (000) 27,400 24,500 22,700

<PAGE>

Cost of Sales
Cost of sales as a percentage of sales for the past three years has been 65.8%
for 1995, 65.2% for 1994 and 64.4% for 1993. The increase in the cost of sales
for 1995 over 1994 and for 1994 over 1993 was caused principally by a higher
level of markdowns necessitated by competitive pressures.

Expenses
Expenses as a percent of sales for the past three years are as follows:

1995 1994 1993
Advertising, Selling, Administrative
& General Expenses 24.3% 24.0% 24.1%
Depreciation & Amortization 3.3 3.4 3.3
Rentals 1.0 1.2 1.3
Interest & Debt Expense 2.0 2.2 2.6

Advertising, selling, administrative and general expenses increased as a
percentage of sales in 1995 compared to 1994. This occurred because of the
slower growth rate of sales during the year as compared to prior years. During
1994, the Company incurred an $11 million pre-tax charge for the closure of
three clearance stores. This adversely affected selling, administrative and
general expenses, depreciation and amortization, and rentals. Depreciation and
amortization decreased slightly as a percentage of sales during 1995. This was
caused by the lower depreciation expense in the fourth quarter due to the
write down of the carrying values of property and equipment at certain stores
(see Impairment Charges below). Rentals decreased slightly as a percentage of
sales during 1995 and 1994, primarily due to a higher proportion of the
Company's properties being owned rather than leased. Interest and debt
expense declined as a percentage of sales in 1995 and 1994 reflecting a
relatively lower level of debt.

Impairment Charges
Effective October 29, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". The Company evaluated its
investment in long-lived assets to be held and used in operations on an
individual store basis and determined that, based upon the history of
operating results and updated operating projections, the property and
equipment at certain stores were impaired. The Company estimated the fair
value of the assets at these stores based on operating projections and future
discounted cash flows and recorded an after-tax charge of approximately $78.5
million ($.69 per share), which represents the amount required to write down
the carrying value of property and equipment to their estimated fair value of
approximately $112 million at February 3, 1996. This charge will provide a
non-cash benefit in future years from reduced depreciation expense. The
resulting reduction in depreciation expense for 1996 is expected to be
approximately $14 million.

<PAGE>

Liquidity & Capital Resources
The relevant ratios regarding liquidity and capital resources for the past
three years are:

1995 1994 1993
Working Capital (000) $1,788,545 $1,765,844 $1,660,629
Current Ratio 3.1 3.3 3.1
Long-term debt to capitalization 32.2% 34.1% 37.9%
Stockholders' equity to total assets 51.9% 50.8% 47.0%

The ratio of long-term debt to capitalization is calculated by dividing the
total amount of long-term debt and capitalized lease obligations by the sum of
the total amount of long-term debt and capitalized lease obligations plus
total equity.

The Company continues to finance the growth of the business primarily through
operating earnings. The Company sold $100 million 6.875% unsecured notes in
1995. The proceeds were used to reduce the balance of commercial paper
outstanding and for general corporate purposes. The Company did not issue
long-term debt during fiscal 1994 or fiscal 1993. At the end of 1995, the
Company had an outstanding shelf registration for unsecured notes in the
amount of $400 million.

For the past several years, Dillard Investment Co., Inc. ("DIC"), a
wholly-owned finance subsidiary has sold commercial paper in the public
market. At February 3, 1996, the amount of commercial paper outstanding was
$125 million.

The Company has line of credit agreements with various banks aggregating $110
million. Additionally, the Company and DIC have a revolving line of credit in
the amount of $500 million. No funds were borrowed under the revolving line of
credit or the line of credit agreements during fiscal 1995, 1994 or 1993.

During 1995, the Company generated $299.1 million in cash from operating
activities, as compared to $395.3 million in fiscal 1994 and $314.5 million in
fiscal 1993. The primary reason for the decrease in 1995 was an increase in
merchandise inventories. The primary reason for the increase in 1994 over 1993
is that merchandise inventories did not increase as fast as in the prior year.
Merchandise inventories increased by approximately 9% in 1995 and 5% in 1994.
There was no increase in the Company's merchandise inventories on a
comparable store basis in 1994. The increase in the Company's merchandise
inventories on a comparable store basis was 4% in 1995.

Capital expenditures for 1995 were $347.2 compared to $252.9 million for 1994,
$316.7 million for 1993.

During 1995, the Company opened 11 new stores (two of which were replacement
stores) and expanded six stores. During 1994, the Company opened nine new
stores (two of which were replacement stores), expanded two stores and closed
five stores. During 1993, the Company opened 10 stores and closed one store.

For 1996, the Company plans to open 16 stores, one of which will be a
replacement store. In addition, the Company plans to expand and remodel an
additional three stores. At February 3, 1996, the Company is committed to
incur costs of approximately $257 million to complete and equip these stores.
The Company will finance these expenditures as well as its working capital
requirements including required debt repayments from cash flows generated from
operations and by issuing new debt to the extent necessary.

<PAGE>

Income Taxes
During 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993
(the Act) which raised the federal income tax rate by 1% effective January 1,
1993. Included in income tax expense for fiscal 1993 is a charge of
approximately $6.6 million for the cumulative effect of the Act on the
Company's deferred income taxes. Excluding the above described charge, the
effective federal and state income tax rate was 38% for fiscal 1995, 1994 and
1993.

Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), which is effective for the Company beginning
February 4, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation expense to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply
Accounting Principals Board Option No. 25 (APB No. 25), which recognizes
compensation costs based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB No. 25 to its stock-based
compensation awards to employees and will disclose the required pro-forma
effects on net income and earnings per share as required by SFAS No. 123.

Realignment Of Operating Divisions
In March 1996, the Company announced a realignment of its operating divisions
along geographic and climatic lines. Through this realignment, two of the
Company's operating divisions were merged into the remaining five divisions.
Costs incurred during the first quarter of 1996 for this realignment were not
significant, and the Company expects to recognize benefits from enhanced
merchandising efforts and improved efficiency and productivity in future
periods.

<PAGE>

Independent Auditors' Report

To the Stockholders and Board of Directors of
Dillard Department Stores, Inc.
Little Rock, Arkansas

We have audited the accompanying consolidated balance sheets of Dillard
Department Stores, Inc. and subsidiaries as of February 3, 1996 and January
28, 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended February
3, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dillard Department Stores, Inc.
and subsidiaries as of February 3, 1996 and January 28, 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended February 3, 1996 in conformity with generally accepted accounting
principles.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for the impairment of long-lived assets and
for long-lived assets to be disposed of effective October 29, 1995 to conform
with Statement of Financial Accounting Standards No. 121.

/s/ Deloitte & Touche
New York, New York
March 4, 1996

<PAGE>
CONSOLIDATED BALANCE SHEETS
Dillard Department Stores, Inc. and Subsidiaries

Assets
February 3, 1996 January 28, 1995
CURRENT ASSETS:
Cash and cash equivalents $58,442 $51,095
Trade accounts receivable (net of
allowance for doubtful accounts
of $19,528 and $15,307) 1,103,575 1,102,104
Merchandise inventories 1,486,045 1,362,756
Other current assets 10,163 8,847
Total current assets 2,658,225 2,524,802
INVESTMENTS AND OTHER ASSETS 84,772 68,810
PROPERTY AND EQUIPMENT
Land and land improvements 37,038 43,884
Buildings and leasehold improvements 1,394,551 1,261,629
Furniture, fixtures and equipment 1,728,789 1,688,161
Buildings under construction 43,552 49,469
Less accumulated depreciation
and amortization (1,179,588) (1,082,221)
2,024,342 1,960,922
BUILDINGS UNDER CAPITAL LEASES - Less
amortization of $23,977 and $26,799 11,196 23,223
TOTAL ASSETS $ 4,778,535 $ 4,577,757

Liabilities And Stockholders' Equity
February 3, 1996 January 28, 1995
CURRENT LIABILITIES:
Trade accounts payable and
accrued expenses $ 559,011 $ 545,522
Commercial paper 125,310 89,906
Federal and state income taxes 51,832 65,454
Current portion of long-term debt 131,378 55,903
Current portion of capital lease obligations 2,149 2,173
Total current liabilities 869,680 758,958
LONG-TERM DEBT 1,157,864 1,178,503
CAPITAL LEASE OBLIGATIONS 20,161 22,279
DEFERRED INCOME TAXES 252,503 294,450
OPERATING LEASES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock - shares issued, 4,400 440 440
Common stock, Class A - shares issued,
109,070,691 and 109,028,595 1,091 1,090
Common stock, Class B (convertible) -
shares issued, 4,016,929 and 4,017,061 40 40
Additional paid-in capital 625,249 624,086
Retained earnings 1,851,507 1,697,911
Total stockholders' equity 2,478,327 2,323,567
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,778,535 $ 4,577,757

See notes to consolidated financial statements.

<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Dillard Department Stores, Inc. and Subsidiaries

Year Ended February 3, 1996 January 28, 1995 January 29, 1994

NET SALES, INCLUDING SALES
OF LEASED DEPARTMENTS $5,918,038 $5,545,803 $5,130,648

SERVICE CHARGES, INTEREST
AND OTHER INCOME 179,100 182,785 181,746
6,097,138 5,728,588 5,312,394

COSTS AND EXPENSES:
Cost of sales 3,893,786 3,614,628 3,306,757
Advertising, selling,
administrative and general
expenses 1,436,446 1,328,353 1,239,049
Depreciation and amortization 191,805 190,299 171,181
Rentals 58,835 64,916 64,958
Interest and debt expense 120,054 124,282 130,915
Impairment charges 126,559 - -
Total costs and expenses 5,827,485 5,322,478 4,912,860

INCOME BEFORE INCOME TAXES 269,653 406,110 399,534

INCOME TAXES 102,470 154,320 158,400

NET INCOME $ 167,183 $ 251,790 $ 241,134

NET INCOME PER COMMON SHARE $ 1.48 $ 2.23 $ 2.14

See notes to consolidated financial statements.

<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Dillard Department Stores, Inc. and Subsidiaries

Common Common Additional
Preferred Stock Stock Paid-in Retained
Stock Class A Class B Capital Earnings Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 30, 1993 $440 $1,085 $40 $605,100 $1,225,353 $1,832,018
Issuance of 469,515 shares under stock option,
employee savings and stock bonus plans
(net of 38,999 shares canceled) - 5 - 17,372 - 17,377
Tax benefit from exercise of stock options - - - 162 - 162
Net income - - - - 241,134 241,134
Cash dividends:
Preferred stock, $5 per share - - - - (22) (22)
Common stock, $.08 per share - - - - (9,022) (9,022)

BALANCE, JANUARY 29, 1994 $440 $1090 $40 $622,634 $1,457,443 $2,081,647
Issuance of 53,937 shares under stock option,
employee savings and stock bonus plans - - - 1,452 - 1,452
Net income - - - - 251,790 251,790
Cash dividends:
Preferred stock, $5 per share - - - - (22) (22)
Common stock, $.10 per share - - - - (11,300) (11,300)

BALANCE, JANUARY 28, 1995 $440 $1,090 $40 $624,086 $1,697,911 $2,323,567
Issuance of 41,964 shares under stock option,
employee savings and stock bonus plans - 1 - 1,163 - 1,164
Net income - - - - 167,183 167,183
Cash dividends:
Preferred stock, $5 per share - - - - (22) (22)
Common stock, $.12 per share - - - - (13,565) (13,565)

BALANCE, FEBRUARY 3, 1996 $440 $1,091 $40 $625,249 $1,851,507 $2,478,327

See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dillard Department Stores, Inc. and Subsidiaries

Year Ended February 3, 1996 January 28, 1995 January 29, 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $167,183 $251,790 $241,134
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 193,313 191,870 72,839
Deferred income taxes (54,332) 17,820 23,500
Impairment charges 126,559 - -
Changes in operating assets and liabilities:
Increase in trade accounts receivable (1,471) (5,574) (6,310)
Increase in merchandise inventories (123,289) (62,812) (121,382)
(Increase) decrease in other current assets (1,316) 129 (3,463)
Increase in investments and other assets (23,176) (18,271) (2,309)
Increase in trade accounts payable and
accrued expenses and income taxes 15,653 20,342 10,532
Net cash provided by operating
activities 299,124 395,294 314,541

INVESTING ACTIVITIES:
Purchase of property and equipment (347,202) (252,974) (316,695)
Net cash used in investing activities (347,202) (252,974) (316,695)

FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper 35,404 (55,370) 88,655
Proceeds from long-term borrowings 100,000 - -
Principal payments on long-term debt and
capital lease obligations (64,155) (78,359) (136,347)
Dividends paid (16,988) (10,192) (9,033)
Common stock issued 1,164 1,452 17,539
Net cash provided by (used in) financing
activities 55,425 (142,469) (39,186)

INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 7,347 (149) (41,340)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 51,095 51,244 92,584

CASH AND CASH EQUIVALENTS, END OF YEAR $ 58,442 $ 51,095 $ 51,244

See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended February 3, 1996, January 28, 1995, and January 29, 1994
Dillard Department Stores, Inc. and Subsidiaries

1. Description Of Business And Summary Of Significant Accounting Policies

Description of Business - Dillard Department Stores, Inc. (the "Company")
operates retail department stores located primarily in the Southeastern,
Southwestern and Midwestern areas of the United States. The Company's fiscal
year ends on the Saturday nearest January 31. Fiscal year 1995 ended on
February 3, 1996 and included 53 weeks. The fiscal years 1994 and 1993 ended
on January 28, 1995, and January 29, 1994 respectively, and each included 52
weeks.

Consolidation - The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, including its real
estate subsidiary, Construction Developers, Inc. (which leases property
principally to the Company), its finance subsidiary, Dillard Investment Co.,
Inc. ("DIC"), and Dillard National Bank ("DNB"), a wholly-owned subsidiary of
DIC (which grants credit card loans to the Company's customers). Intercompany
accounts and transactions are eliminated in consolidation. Investments in and
advances to joint ventures in which the Company has a 50% ownership interest
are accounted for by the equity method.

Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles 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. Actual results could differ from those estimates.

Revenues - Retail sales are recorded on the accrual basis and include leased
department sales of $38.5 million, $46.2 million and $66.5 million for fiscal
1995, 1994 and 1993, respectively.

Costs, Expenses and Related Balance Sheet Accounts - The retail last-in,
first-out ("LIFO") inventory method is used to value merchandise inventories.
At February 3, 1996 and January 28, 1995, the LIFO cost of merchandise was
approximately equal to the first-in, first-out ("FIFO") cost of merchandise.

Property and equipment owned by the Company is stated at cost, which includes
related interest costs incurred during the construction period, less
accumulated depreciation and amortization. Capitalized interest was $3.6
million, $2.5 million and $1.9 million in fiscal 1995, 1994 and 1993,
respectively. For tax reporting purposes, accelerated depreciation or cost
recovery methods are used and the related deferred income taxes are included
in noncurrent deferred income taxes in the consolidated balance sheet. 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 capital leases are stated at an amount equal to the present value of the
minimum lease payments during the lease term, less accumulated amortization.
The properties under capital leases and leasehold improvements under operating
leases are being amortized on the straight-line method over the shorter of
their useful lives or their related lease terms. The provision for
amortization of leased properties is included in depreciation and amortization
expense.

Preopening costs of new stores are expensed in the fourth quarter of the year
in which such costs are incurred.

Income Taxes - Effective January 31, 1993, the Company adopted Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income
taxes reflect the future tax consequences of differences between the tax bases
of assets and liabilities and their financial reporting amounts at year-end.
Financial statements for prior years have not been restated and the cumulative
effect of the accounting change was to increase the Company's assets
(principally property and equipment) and liabilities (principally deferred
income taxes) by approximately $87 million.

<PAGE>

Accounts Receivable - Customer accounts receivable are classified as current
assets and include some which are due after one year, consistent with industry
practice. Concentrations of credit risk with respect to customer receivables
are limited due to the large number of customers comprising the Company's
credit card base, and their dispersion across the country.

Earnings per Common Share - Earnings per common share have been computed based
on the weighted average of Class A and Class B common shares outstanding,
after deducting preferred dividend requirements and giving effect to
outstanding stock options. Shares used in computing earnings per common share
were 113,143,842; 113,013,998 and 112,808,262 for fiscal 1995, 1994 and 1993,
respectively.

Cash Equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.

Employees' Retirement Plan - The Company has a retirement plan with a 401(k)
salary deferral feature for eligible employees. Under the terms of the plan,
employees may contribute up to 5% of gross earnings which will be matched 100%
by the Company. The contributions are used to purchase Class A Common Stock
of the Company for the account of the employee. The terms of the plan provide
a five-year cliff vesting schedule for the Company contribution to the plan.

2. Impairment Of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" which provides
guidance on when to assess and how to measure impairment of long-lived assets,
certain intangibles and goodwill related to those assets to be held and used,
and for long-lived assets and certain identifiable intangibles to be disposed
of. The Company adopted this statement as of October 29, 1995.

The Company evaluated its investment in long-lived assets to be held and used
in operations on an individual store basis and determined that based upon the
history of operating results and updated operating projections, the property
and equipment at certain stores was impaired. The Company estimated the fair
value of the assets at these stores based on operating projections and future
discounted cash flows. As a result, the Company recorded an after-tax charge
of approximately $78.5 million ($.69 per share) representing the amount
required to write down the carrying value of the property and equipment to
their estimated fair value of approximately $112 million at February 3, 1996.

3. Commercial Paper And Revolving Credit Agreement
DIC commercial paper generally matures within 45 days from the date of issue
at effective interest rates ranging from 5.21% to 5.52% at February 3, 1996.
At February 3, 1996 and January 28, 1995, the weighted average interest rate
of outstanding commercial paper was 5.46% and 5.56%, respectively. The average
amount of commercial paper outstanding during fiscal 1995 was $101 million, at
a weighted average interest rate of 5.98%.

At February 3, 1996, the Company and DIC had revolving line of credit
agreements with various banks aggregating $500 million. The line of credit
agreements require that consolidated stockholders' equity be maintained at $1
billion or more. These agreements expire on July 13, 1999. A commitment fee of
.10% of the committed amount is paid to the banks to secure these line of
credit agreements, which cannot be withdrawn except in the case of defaults by
the Company or DIC. Interest may be fixed for periods from one to six months
at the election of the Company or DIC. Interest is payable at the lead bank's
certificate of deposit rate, alternative base rate or Eurodollar rate. In
addition, at February 3, 1996, the Company had line of credit agreements with
various banks aggregating $110 million. The agreements have no fixed date of
expiration, and interest on amounts drawn fluctuates daily based on market
rates. There were no funds borrowed under the revolving line of credit
agreements or line of credit agreements during fiscal 1993 through fiscal
1995.

<PAGE>

4. Long-Term Debt
Long-term debt consists of the following (in thousands of dollars):

February 3, 1996 January 28, 1995
Unsecured notes at rates ranging from
6.875% to 9.625%, due 1996 through 2023 $ 950,000 $ 900,000
Unsecured 5.7% note to bank, due June 3, 1996 75,000 75,000
Unsecured 9.25% notes of DIC due 1997 through 2001 175,000 175,000
Mortgage notes, payable monthly or quarterly (some
with balloon payments) over periods up to
31 years from inception and bearing interest
at rates ranging from 6.75% to 13.25% 89,242 84,406
1,289,242 1,234,406
Current portion (131,378) (55,903)
$ 1,157,864 $ 1,178,503

Building, land, land improvements and equipment with a carrying value of
$105.9 million at February 3, 1996 are pledged as collateral on the mortgage
notes. During the year, the Company assumed mortgage notes in the amount of
$16.8 million related to the purchase of three stores which were previously
leased.

Maturities of long-term debt over the next five years are $131.4 million,
$181.1 million, $107.4 million, $108.2 million and $109.0 million.

Interest and debt expense consists of the following (in thousands of dollars):

Fiscal 1995 Fiscal 1994 Fiscal 1993
Long-term debt:
Interest $107,572 $110,945 $118,377
Amortization of debt expense 1,400 1,404 1,484
108,972 112,349 119,861
Interest on capital lease obligations 2,241 2,324 2,831
Commercial paper interest 6,014 5,692 4,386
Other 2,827 3,917 3,837
$120,054 $124,282 $130,915

Interest paid during fiscal 1995, 1994 and 1993 was approximately $121.4
million, $123.9 million and $124.6 million, respectively.

5. Trade Accounts Payable And Accrued Expenses
Trade accounts payable and accrued expenses are comprised of the following (in
thousands of dollars):

February 3, 1996 January 28, 1995
Trade accounts payable $376,363 $350,801
Accrued expenses:
Taxes, other than income 48,644 45,211
Salaries, wages, and employee benefits 46,120 48,200
Interest 30,370 36,162
Rent 13,688 13,777
Other 43,826 51,371
$559,011 $545,522

<PAGE>

6. Income Taxes
The provision for Federal and state income taxes is summarized as follows (in
thousands of dollars):

Fiscal 1995 Fiscal 1994 Fiscal 1993
Current:
Federal $138,102 $120,200 $118,200
State 18,700 16,300 16,700
156,802 136,500 134,900

Deferred:
Federal (47,832) 16,400 20,400
State (6,500) 1,420 3,100
(54,332) 17,820 23,500
$102,470 $154,320 $158,400

A reconciliation between income taxes computed using the effective income tax
rate and the federal statutory income tax rates is presented below (in
thousands of dollars):

Fiscal 1995 Fiscal 1994 Fiscal 1993
Income tax at the statutory Federal rate $94,379 $142,139 139,837
State income taxes net of Federal benefit 7,970 10,686 12,983
Cumulative effect of tax rate increase on
deferred income tax balances - - 6,595
Other 121 1,495 (1,015)
$102,470 $154,320 $158,400

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of February 3, 1996
and January 28, 1995 are as follows (in thousands):

February 3, 1996 January 28, 1995
Property and equipment basis and
depreciation differences $213,497 $252,253
State income taxes 28,466 31,216
Differences between book and tax basis of inventory 20,191 27,737
Other 5,606 10,769
Total deferred tax liabilities 267,760 321,975
Accruals not currently deductible (16,985) (17,113)
State income taxes (2,306) (2,061)
Total deferred tax assets (19,291) (19,174)
Net deferred tax liability $248,469 $302,801

Deferred tax assets and liabilities are presented as follows in the
accompanying consolidated balance sheets:

February 3, 1996 January 28, 1995
Net deferred tax liability - noncurrent $252,503 $294,450
Net deferred tax (asset) liability - current (4,034) 8,351
Net deferred tax liability $248,469 $302,801

Income taxes paid during fiscal 1995, 1994 and 1993 were approximately $158.0
million, $131.1 million and $102.1 million, respectively.

<PAGE>

7. Stockholders' Equity
Capital stock is comprised of the following:
Shares Shares Issued and Outstanding
Type Par Value Authorized February 3, 1996 January 28, 1995
Preferred (5% cumulative) $100 5,000 4,400 4,400
Additional preferred $.01 10,000,000
Class A, common $.01 289,000,000 109,070,691 109,028,595
Class B, common $.01 11,000,000 4,016,929 4,017,061

Holders of Class A are empowered as a class to elect one-third of the members
of the Board of Directors and the holders of Class B are empowered as a class
to elect two-thirds of the members of the Board of Directors. Shares of Class
B are convertible at the option of any holder thereof into shares of Class A
at the rate of one share of Class B for one share of Class A.

8. Stock Options
The Company's 1990 Incentive and Nonqualified Stock Option Plan provides for
the granting of options to purchase 12 million shares of Class A common stock
to certain key employees of the Company. Exercise terms for options granted
under this plan are determined at each grant date. All options were granted
at not less than fair market value at dates of grant. No compensation expense
was recognized in connection with the granting of stock options. There were
3,946,866 options exercisable at prices ranging from $31.25 to $40.54 per
share and 4,365,805 available for grant under the 1990 plan at the end of
fiscal 1995. At February 3, 1996, 10,813,811 shares of Class A common stock
were reserved for issuance under the 1990 stock option plan.

Option transactions are summarized as follows:

Shares Under Option Option Price per share
Fiscal 1995 Fiscal 1994 Fiscal 1995 Fiscal 1994
Outstanding, beginning
of year 4,537,521 2,630,026 $28.50 - 45.13 $33.67 - 45.13
Granted 1,990,450 1,975,680 27.25 - 28.88 28.50 - 31.25
Exercised - (12,500) - 31.25
Canceled (79,965) (55,685) 28.50 - 45.13 33.67 - 45.13
Outstanding, end of year 6,448,006 4,537,521 $27.25 - 45.13 $28.50 - 45.13

9. Capital Leases
Future minimum payments under capital leases as of February 3, 1996 are as
follows (in thousands of dollars):

Fiscal Year Amount
1996 $ 4,129
1997 3,862
1998 3,862
1999 3,586
2000 3,224
After 2000 18,270
Total minimum lease payments 36,933
Less amount representing interest (14,623)
Present value of net minimum lease
payments (of which $2,149 is currently payable) $ 22,310

<PAGE>

10. Operating Leases And Commitments
Rental expense consists of the following (in thousands of dollars):

Fiscal 1995 Fiscal 1994 Fiscal 1993
Operating leases:
Buildings:
Minimum rentals $30,034 $33,290 $33,922
Contingent rentals 13,625 13,456 11,796
Equipment 14,015 16,910 18,107
57,674 63,656 63,825
Contingent rentals on capital leases 1,161 1,260 1,133
$58,835 $64,916 $64,958

Contingent rentals on certain leases are based on a percentage of annual sales
in excess of specified amounts. Other contingent rentals are based entirely on
a percentage of sales.

The future minimum rental commitments as of February 3, 1996 for all
noncancelable operating leases for buildings and equipment are as follows (in
thousands):

Fiscal Year Amount
1996 $ 34,013
1997 29,714
1998 26,460
1999 24,624
2000 23,922
After 2000 159,537
$ 298,270

Renewal options from three to twenty-five years exist on the majority of
leased properties. At February 3, 1996, the Company is committed to incur
costs of approximately $257 million to complete and furnish certain stores.

11. Fair Value Disclosures
The estimated fair values of financial instruments which are presented herein
have been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is
required in interpreting market data to develop estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
amounts the Company could realize in a current market exchange.

The fair value of trade accounts receivable is determined by discounting the
estimated future cash flows at current market rates, after consideration of
credit risks and servicing costs using historical rates. The fair value of the
Company's long-term debt is based on market prices or dealer quotes (for
publicly traded unsecured notes) and on discounted future cash flows using
current interest rates for financial instruments with similar characteristics
and maturity (for bank notes and mortgage notes).

The fair value of the Company's cash and cash equivalents, trade accounts
receivable and commercial paper borrowings approximates their carrying values
at February 3, 1996 and January 28, 1995 due to the short-term maturities of
these instruments. The fair value of the Company's long-term debt at
February 3, 1996 and January 28, 1995 was $1,431 million and $1,240 million,
respectively. The carrying value of the Company's long-term debt at February
3, 1996 and January 28, 1995 was $1,289 million and $1,234 million,
respectively.

<PAGE>

12. Quarterly Results Of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of operations
for the years ended February 3, 1996 and January 28, 1995 (in thousands,
except per share data):

Fiscal 1995 Three Months Ended
April 29 July 29 October 28 February 3
Net sales $1,326,754 $1,265,066 $1,405,626 $1,920,592
Gross profit 444,826 440,120 490,10 649,205
Net income 48,379 38,633 51,025 29,146(a)
Income per common share .43 .34 .45 .26

(a) Includes a $78.5 million charge for the early adoption of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." See Note 2.

Fiscal 1994 Three Months Ended
April 30 July 30 October 29 January 28
Net sales $1,283,941 $1,184,316 $1,333,630 $1,743,916
Gross profit 430,862 409,518 467,381 623,414
Net income 48,306 33,755 50,802 118,927
Income per common share .43 .30 .45 1.05

<PAGE>

Annual Meeting
Saturday, May 18, 1996, at 9:30 a.m., Board Room, First Commercial Bank
Building
Capitol and Broadway, Little Rock, Arkansas 72201

Form 10-K
Copies of the Company's 10-K Annual Report may be obtained by written
request to:
James I. Freeman, Senior Vice President and Chief Financial Officer
Post Office Box 486, Little Rock, Arkansas 72203

Corporate Headquarters
1600 Cantrell Road, Little Rock, Arkansas 72201

Mailing Address
Post Office Box 486, Little Rock, Arkansas 72203
Telephone: 501-376-5200
Telex: 910-722-7322
Fax: 501-376-5917

Transfer Agent And Registrar
Boatmen's Trust Company, Post Office Box 14737, St. Louis, Missouri 63178

Listing
New York Stock Exchange, Ticker Symbol "DDS"

Stock Prices And Dividends By Quarter
Sales Prices - Common Shares
1995 1994 Dividends Per Share
Quarter High Low High Low 1995 1994
First $29.00 $24.00 $36.63 $32.13 $0.03 $0.02
Second 32.13 24.63 35.25 29.00 0.03 0.02
Third 33.88 27.13 33.38 25.63 0.03 0.03
Fourth 30.63 27.13 30.38 24.63 0.03 0.03

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT.

STATE OF NAME UNDER WHICH
NAME INCORPORATION SUBSIDIARY IS DOING BUSINESS

Dillard Investment Co., Inc. Delaware Dillard Investment Company

Construction Developers,
Incorporated Arkansas Construction Developers, Inc.

The Higbee Company Delaware Dillard's

J. B. Ivey & Company North Carolina Dillard's

Dillard National Bank National Banking Dillard National Bank
Association

Dillard Travel, Inc. Arkansas Dillard Travel, Inc.

Pulaski Realty Company Arkansas Pulaski Realty Company

Dillard USA, Inc. Nevada Dillard USA, Inc.

Dillard's Utah, Inc. Utah Dillard's Utah, Inc.

Dillard International, Inc. Nevada Dillard International, Inc.

Dillard Distribution, Inc. Arkansas Dillard Distribution, Inc.

Dillard's Wyoming, Inc. Wyoming Dillard's

Dillard Ticketing Systems, Inc. Arizona Dillard Ticketing Systems, Inc.

INDEPENDENT AUDITOR'S CONSENT

We consent to the incorporation by reference in Registration
Statement Number 33-42500 on Form S-8, in Registration Number
33-42553 on Form S-8, in Registration Statement Number 33-
42499 on Form S-8, and in Registration Statement Number 33-
64355 on Form S-3, of our reports (which express an
unqualified opinion and include an explanatory paragraph
relating to a change in accounting for the impairment of long-
lived assets and for long-lived assets to be disposed of)
dated March 4, 1996, appearing in and incorporated by
reference in this Annual Report on Form 10-K of Dillard
Department Stores, Inc. and subsidiaries for the year ended
February 3, 1996.

DELOITTE & TOUCHE LLP

New York, New York
April 25, 1996

<ARTICLE> 5
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 58,442
<SECURITIES> 0
<RECEIVABLES> 1,103,575
<ALLOWANCES> 19,528
<INVENTORY> 1,486,045
<CURRENT-ASSETS> 2,658,225
<PP&E> 3,215,126
<DEPRECIATION> 1,179,588
<TOTAL-ASSETS> 4,778,535
<CURRENT-LIABILITIES> 869,680
<BONDS> 1,178,025
0
440
<COMMON> 1,131
<OTHER-SE> 2,476,756
<TOTAL-LIABILITY-AND-EQUITY> 4,778,535
<SALES> 5,918,038
<TOTAL-REVENUES> 6,097,138
<CGS> 3,893,786
<TOTAL-COSTS> 3,893,786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 52,522
<INTEREST-EXPENSE> 120,054
<INCOME-PRETAX> 269,653
<INCOME-TAX> 102,470
<INCOME-CONTINUING> 167,183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,183
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48

</TABLE>