DILLARD'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Dillard’s, Inc.(the “Company”) have been
prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. Certain prior period balances have been reclassified to
conform with current period presentation. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating results for the
three, six and twelve month periods ended August 3, 2002 are not necessarily indicative of the results that may
be expected for the fiscal year ending February 1, 2003, due to the seasonal nature of the business.
For further information, refer to the consolidated financial statements and footnotes thereto included in the
Company’s annual report on Form 10-K for the fiscal year ended February 2, 2002.

Note 2. Earnings Per Share Data

         The following table sets forth the computation of basic and diluted  earnings per share ("EPS") for the periods  indicated (in
         thousands, except per share data).

                                              Three Months Ended          Six Months Ended         Twelve Months Ended
                                            ------------------------  -------------------------  -------------------------
                                             August 3,   August 4,      August 3,   August 4,      August 3,   August 4,
                                               2002        2001           2002         2001          2002         2001
                                            ------------------------  -------------------------  -------------------------

Basic:

 Earnings (loss) before extraordinary
     item and accounting change                $ 12,501  $ (20,568)        $ 70,265     $5,266        $130,785    $45,313
  Extraordinary gain (loss)                     (5,835)       1,963         (5,487)      5,122         (4,597)     28,042
  Cumulative effect of accounting change              -           -       (530,331)          -       (530,331)          -
                                            ------------------------  -------------------------  -------------------------
   Net earnings (loss) available for
    per-share calculations                      $ 6,666  $ (18,605)      $(465,553)    $10,388      $(404,143)    $73,355
                                            ========================  =========================  =========================

  Average shares of common stock
    outstanding                                  84,597      83,790          84,349     84,312          84,038     86,230
                                            ========================  =========================  =========================

  Per share of common stock:
  Earnings (loss) before extraordinary
     item and accounting change                 $  0.15    $ (0.24)         $  0.83     $ 0.06         $  1.56     $ 0.52
  Extraordinary gain (loss)                      (0.07)        0.02          (0.07)       0.06          (0.06)       0.33
  Cumulative effect of accounting change              -           -          (6.28)          -          (6.31)          -
                                            ------------------------  -------------------------  -------------------------
  Net income (loss)                             $  0.08    $ (0.22)        $ (5.52)     $ 0.12        $ (4.81)     $ 0.85
                                            ========================  =========================  =========================






                                                  Three Months Ended          Six Months Ended         Twelve Months Ended
                                             ------------------------  -------------------------  -------------------------
                                              August 3,   August 4,     August 3,    August 4,      August 3,   August 4,
                                                2002        2001           2002        2001            2002        2001
                                             ------------------------  -------------------------   ------------------------

Diluted:

  Earnings (loss) before extraordinary
     item and accounting change                 $ 12,501  $ (20,568)       $ 70,265      $5,266        $130,785    $45,313
  Extraordinary gain (loss)                      (5,835)       1,963        (5,487)       5,122         (4,597)     28,042
  Cumulative effect of accounting change               -           -      (530,331)           -       (530,331)          -
                                             ------------------------  -------------------------   ------------------------

  Net earnings  (loss) available for
    per-share calculations                       $ 6,666  $ (18,605)     $(465,553)     $10,388      $(404,143)    $73,355
                                             ========================  =========================   ========================

  Average shares of common stock                  84,597      83,790         84,349      84,312          84,038     86,230
    outstanding
  Stock options                                    1,223           -          1,055         538             725        297
                                             ------------------------  -------------------------   ------------------------
  Total average equivalent shares                 85,820      83,790         85,404      84,850          84,763     86,527
                                             ========================  =========================   ========================

  Per share of common stock:
  Earnings (loss) before extraordinary
     Item and accounting change                  $  0.15    $ (0.24)        $  0.82      $ 0.06         $  1.54     $ 0.52
  Extraordinary gain (loss)                       (0.07)        0.02         (0.06)        0.06          (0.05)       0.33
  Cumulative effect of accounting change               -           -         (6.21)           -          (6.26)          -
                                             ------------------------  -------------------------   ------------------------
  Net income (loss)                              $  0.08    $ (0.22)       $ (5.45)      $ 0.12        $ (4.77)     $ 0.85
                                             ========================  =========================   ========================


         Total stock options  outstanding  were  11,401,725 and  11,525,335 at August 3, 2002 and August 4, 2001. Of these,  options to
         purchase  4,132,032 and 8,944,185  shares of Class A common stock at prices ranging from $24.01 to $40.22 and $18.13 to $40.22
         per share were  outstanding at August 3, 2002 and August 4, 2001,  respectively,  but were not included in the  computation of
         diluted  earnings per share  because they would be  antidilutive.  No stock  options were  included for the three months ended
         August 4,  2001  computation  of  diluted  earnings  per share  because  they  would be  antidilutive  due to the loss  before
         extraordinary item.

Note 3. Note Repurchase and Mortgage

During the quarter ended August 3, 2002, the Company repurchased $67.1 million of its outstanding unsecured notes
prior to their related maturity dates. During the six months ended August 3, 2002, the Company repurchased $73.2 million
of its outstanding unsecured notes prior to their related maturity dates. During the quarter ended August 3, 2002,
the Company also retired the remaining $143 million of its 6.31% Reset Put Securities (“REPS”) due August 1, 2012
prior to their maturity dates. Interest rates on the repurchased securities ranged from 6.13% to 9.50%. Maturity dates ranged
from 2002 to 2028. In connection with these transactions, the Company recorded after tax extraordinary losses during the
three and six months ended August 3, 2002 of $5.8 million (net of income taxes of $3.3 million) and $5.5 million (net of income
taxes of $3.1 million), respectively.

During the quarter ended May 4, 2002, a joint venture of the Company borrowed $40 million. The mortgage note is non-recourse
with building, land and improvements of Sunrise Mall in Brownsville, Texas pledged as collateral. The variable rate mortgage note
pays interest only at the one month LIBOR plus 3% on a monthly basis with the entire unpaid principal balance due and payable
on May 4, 2004.

Note 4. Revolving Credit Agreement

During the quarter ended August 3, 2002, the Company completed the documentation process and closed on a new
$400 million revolving credit facility with Fleet Retail Finance Inc. (“Fleet”). Borrowings under the
facility accrue interest at Fleet’s Base Rate or the Eurodollar Rate plus 1.75%. The line of credit agreement
is secured by inventory of certain Company stores. The agreement expires on May 9, 2005.

Note 5. Accounts Receivable Securitization

The Company sold an additional $100 million in accounts receivable securitizations to third parties bringing the total
accounts receivable securitizations sold at August 3, 2002 to $400 million. The Company utilizes these securitizations
of its credit card receivable portfolio as a financing vehicle. The Company accounted for these transactions as off balance
sheet financing. In early May 2002, the Company amended its conduit financing agreement in a manner that prevented future
transfers of accounts receivable to its master trust from qualifying as a sale and thus receiving off balance sheet treatment.
The Company decided not to amend its agreements to allow continuing off balance sheet treatment, but to allow accounts receivable
and the related financing to be brought back onto the balance sheet. As a result of this decision, the Company
took a charge to its income statement in the amount of $3.2 million related to the amortization of the beneficial interests
recognized up front on the off balance sheet financing. The Company anticipates that an additional charge of $2.2 million will be
incurred in the third quarter of 2002. As a result, the Company put approximately $240 million of debt and the related asset on its
balance sheet as of August 3, 2002. An additional $160 million will be put on its balance sheet during the third quarter of 2002.

The Company has reclassified interest expense related to its accounts receivable securitizations from other revenue to interest
expense on its consolidated statements of operations for all periods presented.

Note 6. Goodwill

The Company adopted Statement of Financial Accounting Standards (“SFAS”)No. 142, “Goodwill and
Other Intangible Assets” effective February 3, 2002. It changes the accounting for goodwill from an amortization method
to an “impairment only” approach. Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment
annually or more frequently if certain indicators arise. The Company tested goodwill for impairment as of the adoption
date using the two-step process prescribed in SFAS No. 142. The Company identified its reporting units under SFAS No. 142 at
the store unit level. The fair value of these reporting units was estimated using the expected discounted future cash flows
and market values of related businesses, where appropriate.

Related to the 1998 acquisition of Mercantile Stores Company Inc., the Company had $570 million in goodwill recorded in its
consolidated balance sheet at the beginning of 2002. The Company completed the required impairment tests of goodwill in the
second quarter of 2002 and determined that $530 million of goodwill was impaired under the fair value test. This impairment
was the result of sequential periods of declining profits in certain of these reporting units. In accordance with SFAS No.142
and SFAS No.3, “Reporting Accounting Changes in Interim Financial Statements” (“SFAS No. 3”), when a transitional
impairment loss for goodwill (cummulative effect type accounting change) is measured in other than the first interim reporting
period it shall be recognized in the first iterim period irrespective of the period in which it is measured. The impact on income
and earnings per share (“EPS”) for the three-months ended May 4, 2002 is as follows (dollars in thousands):


                                        Net income(loss)          Basic EPS             Diluted EPS
                                        ----------------         -----------           -------------
         Reported net income             $  58,112                  $ 0.69                 $ 0.68
         Less: Impairment charge           530,331                   (6.30)                 (6.24)
                                        ----------------         -----------           -------------
         Adjusted net loss               $(472,219)                 $(5.61)                $(5.56)
                                        ================         ===========           =============

         The changes in the carrying amount of goodwill for the six months ended August 3, 2002 are as follows (in thousands):

         Goodwill balance at February 2, 2002                                              $569,545
         Cumulative effect of adopting SFAS No. 142                                        (530,331)
                                                                                       --------------
         Goodwill balance at August 3, 2002                                                 $39,214
                                                                                       ==============

The application of the nonamortization provisions of this statement resulted in an increase in net income of approximately
$3.9 million ($.05 per fully diluted share) and $7.8 million ($.09 per fully diluted share) during the three and six
months ended August 3, 2002, respectively. Application of the nonamortization provisions of this statement is expected to result
in an increase in net income of approximately $15.6 million ($.18 per fully diluted share) during the 52 weeks ended
February 1, 2003.


         The following pro forma financial information is presented as if the statement was adopted at February 4, 2001(in thousands,
         except per share amounts):

                                       Three Months Ended              Six Months Ended        Twelve Months Ended
                                   -------------------------- ---------------------------- ---------------------------
                                     August 3,    August 4,      August 3,      August 4,    August 3,     August 4,
                                      2002          2001           2002          2001          2002          2001
                                   ------------ ------------- --------------- ------------ ------------- -------------
Reported net income (loss)              $6,666     $(18,605)     $(465,553)       $10,388    $(404,143)       $73,355
Add back:
Goodwill amortization                        -         3,901              -         7,802         7,802        15,731
                                   ------------ ------------- -------------- ------------- ------------- -------------
Pro forma net income (loss)             $6,666     $(14,704)     $(465,553)       $18,190    $(396,341)       $89,086
                                   ============ ============= ============== ============= ============= =============
Net income (loss) per share
  reported   - basic                     $0.08       $(0.22)        $(5.52)         $0.12       $(4.81)         $0.85
Goodwill amortization                        -          0.05              -          0.09          0.09          0.18
                                   ------------ ------------- -------------- ------------- ------------- -------------
Pro forma net income (loss) per
  share - basic                          $0.08       $(0.17)        $(5.52)         $0.21       $(4.72)         $1.03
                                   ============ ============= ============== ============= ============= =============
Net income (loss) per share
  reported   - diluted                   $0.08       $(0.22)        $(5.45)         $0.12       $(4.77)         $0.85
Goodwill amortization                        -          0.05              -          0.09          0.09          0.18
                                  ------------ ------------- -------------- ------------- ------------- -------------
Pro forma net income (loss) per
  share  - diluted                       $0.08       $(0.17)        $(5.45)         $0.21       $(4.68)         $1.03
                                   ============ ============= ============== ============= ============= =============

Note 7. Asset Impairment and Store Closing Charges

         For the three months ended August 3, 2002,  the Company  recorded a pre-tax net gain of $.9 million for asset  impairment  and
         store  closing  charges.  The Company  recorded $7.1 million of asset  impairment  and store  closing  charges  related to six
         stores and received  forgiveness of a lease  obligation of $8.0 million in connection with the sale of a closed owned store in
         Memphis, Tennessee in satisfaction of that obligation.

Note 8. Recently Issued Accounting Standards

         In October 2001,  the FASB issued SFAS No. 144,  "Accounting  for the  Impairment or Disposal of Long-Lived  Assets." SFAS No.
         144 addresses the  accounting  and reporting for the  impairment or disposal of long-lived  assets.  The statement  provides a
         single  accounting  model for long-lived  assets to be disposed of. New criteria must be met to classify the asset as an asset
         held-for-sale.  This  statement  also  focuses  on  reporting  the  effects of a disposal  of a segment  of a  business.  This
         statement was effective for fiscal years  beginning  after December 15, 2001. The Company  adopted SFAS No. 144 as of February
         3, 2002, and the adoption did not have a material impact on the Company's financial position or results of operations.

         In April 2002,  SFAS No. 145,  "Rescission  of FASB  Statements  No. 4, 44 and 64,  Amendment  of FASB  Statement  No. 13, and
         Technical  Corrections"  ("SFAS No.  145") was issued.  SFAS No. 145  rescinds  SFAS No. 4 and 64,  which  required  gains and
         losses from  extinguishments  of debt to be classified as  extraordinary  items.  SFAS No. 145 amends SFAS No. 13  eliminating
         inconsistencies  in certain  sale-leaseback  transactions.  The  provisions  of SFAS No. 145 are  effective  for fiscal  years
         beginning  after May 15, 2002.  Any gain or loss on  extinguishment  of debt that was classified as an  extraordinary  item in
         prior  periods  presented  shall be  reclassified.  The Company  does not expect that the adoption of SFAS No. 145 will have a
         material effect on the Company's financial position or results of operations.

         In June 2002,  SFAS No.146,  Accounting for Costs  Associated with Exit or Disposal  Activities"  ("SFAS No. 146") was issued.
         SFAS No. 146 requires  companies to recognize costs associated with exit or disposal  activities when they are incurred rather
         than at the date of a  commitment  to an exit or  disposal  plan.  SFAS No. 146  supercedes  EITF Issue No.  94-3,  "Liability
         Recognition for Certain Employee  Termination  Benefits and Other Costs to Exit an Activity  (including Certain Costs Incurred
         in a  Restructuring)."  SFAS No. 146 is to be applied  prospectively to exit or disposal  activities  initiated after December
         31, 2002.  The Company has not yet determined the impact of this standard.

Item 2. Management's Discussion and Analysis of Financial
Condition And Results Of Operations

General

Net Sales.  Net sales include sales of comparable  stores,  non-comparable  stores and lease income on leased  departments.  Comparable
store sales include  sales for those stores which were in operation  for a full period in both the current month and the  corresponding
month for the prior year.  Non-comparable  store sales include sales in the current  fiscal year from stores opened during the previous
fiscal year before they are  considered  comparable  stores,  new stores  opened in the current  fiscal year and sales in the  previous
fiscal year for stores that were closed in the current fiscal year.

Service charges,  interest and other income.  Service charges,  interest and other income include interest and service charges,  net of
service charge  write-offs,  related to the Company's  proprietary  credit card sales. Other income relates to joint ventures accounted
for by the equity method and gains (losses) on the sale of property and equipment.

Cost of sales.  Cost of sales  includes the cost of  merchandise,  bank card fees,  freight to the  distribution  center,  employee and
promotional discounts and payroll for salon personnel.

Advertising,  selling,  administrative and general expenses.  Advertising,  selling, administrative and general expenses include buying
and occupancy, selling,  distribution,  warehousing,  store management and corporate expenses, including payroll and employee benefits,
insurance,  employment taxes,  advertising,  management information systems,  legal, bad debt costs 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  on  property  and  equipment  and
amortization of goodwill prior to February 3, 2002.

Rentals.  Rentals include expenses for store leases and data processing equipment rentals.

Interest and debt expense.  Interest and debt expense includes  interest  relating to the Company's  unsecured  notes,  mortgage notes,
credit card securitizations,  the Guaranteed Beneficial Interests in the Company's Subordinated  Debentures,  amortization of financing
intangibles and interest on capital lease obligations.

Asset  impairment  and store  closing  charges.  Asset  impairment  and store closing  charges  consist of write downs to fair value of
under-performing  stores  including  property and equipment and goodwill and exit costs  associated with the closure of certain stores.
Exit costs include future rent, taxes and common area maintenance expenses from the time the stores are closed.

Extraordinary  gain/loss.  Extraordinary  gain/loss consists of gains/losses on the repurchase of outstanding  unsecured notes prior to
their related maturity dates net of the write-off of unamortized deferred financing costs relating thereto.

Critical Accounting Policies and Estimates

The Company's  accounting  policies are more fully  described in Note 1of Notes to Consolidated  Financial  Statements in the Company's
Annual  Report on Form 10-K for the fiscal year ended  February 2, 2002.  As  disclosed  in Note 1 of Notes to  Consolidated  Financial
Statements,  the preparation of financial  statements in conformity with generally accepted  accounting  principles requires management
to make estimates and assumptions  about future events that affect the amounts  reported in the consolidated  financial  statements and
accompanying  notes.  Since future events and their effects cannot be determined  with absolute  certainty,  actual results will differ
from those  estimates.  The Company  evaluates  its estimates and judgments on an on-going  basis and  predicates  those  estimates and
judgments on historical  experience  and on various other factors that are believed to be reasonable  under the  circumstances.  Actual
results may differ from these under different assumptions or conditions.

Management of the Company believes the following critical  accounting  policies,  among others,  affect its more significant  judgments
and estimates used in preparation of the Consolidated Financial Statements.

Merchandise inventory.  Approximately 97% of the inventories are valued at lower of cost or market using the retail last-in,  first-out
("LIFO")  inventory  method.  Under the retail inventory  method ("RIM"),  the valuation of inventories at cost and the resulting gross
margins are calculated by applying a calculated  cost to retail ratio to the retail value of  inventories.  RIM is an averaging  method
that has been widely used in the retail  industry due to its  practicality.  Additionally,  it is  recognized  that the use of RIM will
result in valuing  inventories  at the lower of cost or market if markdowns are  currently  taken as a reduction of the retail value of
inventories.  Inherent in the RIM calculation  are certain  significant  management  judgments and estimates  including,  among others,
merchandise  markon,  markups,  and  markdowns,  which  significantly  impact the  ending  inventory  valuation  at cost as well as the
resulting  gross  margins.  Management  believes that the Company's RIM and  application of LIFO provide an inventory  valuation  which
results in a carrying value at the lower of cost or market.  The remaining 3% of the inventories are valued by the specific  identified
cost method.

Allowance for doubtful  accounts.   The  accounts  receivable  from the Company's  proprietary  credit card sales are subject to credit
losses.  The Company  maintains  allowances for doubtful accounts for estimated losses resulting from the inability of its customers to
make  required  payments.  The  adequacy  of the  allowance  is based on  historical  experience  with  similar  customers  and current
macroeconomic conditions.

Long-lived assets and joint ventures.  In evaluation of the fair value and future benefits of long-lived  assets,  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  undiscounted  cash flows,  the Company  reduces the carrying  value to its fair value,  which is generally
calculated  using  discounted  cash flows.  Various  factors  including  future  sales  growth and profit  margins are included in this
analysis.  To the extent these future projections or the Company's  strategies change, the conclusion  regarding  impairment may differ
from the Company's  current  estimates.  The Company's  joint  ventures are evaluated  based on operating  cash flows of the respective
malls. Future adverse changes to the Company's joint ventures,  from changes in real estate values,  demographics,  or the introduction
of similar retail outlets into the joint ventures  market,  could result in losses or an inability to recover the carrying value of the
malls, thereby possibly causing an impairment charge in the future.

Results of Operations

The following table sets forth the results of operations, expressed as a percentage of net sales, for the periods indicated:

                                             Three Months Ended         Six Months Ended          Twelve Months Ended
                                           -----------------------  --------------------------  ------------------------
                                            August 3,    August 4,   August 3,      August 4,    August 3,     August 4,
                                             2002         2001         2002           2001         2002         2001
                                           ----------   ----------  -----------    -----------  -----------   ----------
Net sales                                      100.0 %      100.0 %      100.0 %        100.0 %      100.0 %      100.0 %
Cost of sales                                   65.9         67.7         65.0           66.5         66.9         67.9
                                           ----------   ----------  -----------    -----------  -----------   ----------
Gross profit                                    34.1         32.3         35.0           33.5         33.1         32.1

Advertising, selling, administrative
  and general expenses                          29.2         29.4         28.2           28.8         26.6         26.7
Depreciation and amortization                    4.2          4.2          4.1            4.1          3.8          3.6
Rentals                                          0.8          0.9          0.8            0.8          0.9          0.9
Interest and debt expense                        2.6          2.8          2.5            2.6          2.3          2.6
Asset impairment and store closing charges     (0.1)          0.1          0.0            0.1          0.0          0.7
                                           ----------   ----------  -----------    -----------  -----------   ----------
     Total operating expenses                   36.7         37.4         35.6           36.4         33.6         34.5
Service charges, interest and other income       3.7          3.3          3.5            3.2          3.1          3.1
                                           ----------   ----------  -----------    -----------  -----------   ----------
Income (loss) before income taxes                1.1        (1.8)          2.9            0.3          2.6          0.7
Income taxes (benefit)                           0.4        (0.7)          1.0            0.1          1.0          0.1
                                           ----------   ----------  -----------    -----------  -----------   ----------
Income (loss) before extraordinary item
   and accounting change                         0.7        (1.1)          1.9            0.2          1.6          0.6
Extraordinary gain (loss)                      (0.3)          0.1        (0.2)            0.1        (0.1)          0.3
Cumulative effect of accounting change             -            -       (14.2)              -        (6.5)            -
                                           ----------   ----------  -----------    -----------  -----------   ----------
Net income (loss)                                0.4 %      (1.0) %     (12.5) %          0.3 %      (5.0) %        0.9 %
                                           ==========   ==========  ===========    ===========  ===========   ==========

Net Sales

Net sales  decreased 1% for the three and six month  periods  ended August 3, 2002  compared to the three and six month  periods  ended
August 4, 2001.  This decrease was  primarily  due to decreases in  comparable  store sales of 1% for the six month period ended August
3, 2002  compared to the same period in 2001 and a net decrease in total store square  footage from 2002 to 2001.  The best  performing
merchandise  categories for the three month period were women's and juniors'clothing  and children's  clothing,  which increased 3% and
4%,  respectively.  Home and men's  clothing and  decreased 7% and 5%,  respectively,  for the three month period ended August 3, 2002.
Sales declined in all  merchandising  categories  but women's and  juniors'clothing  and  children's  clothing for the six month period
ended  August 3,  2002.  The  weakest  performing  merchandise  categories  were home and men's  clothing,  which  declined  4% and 3%,
respectively.  Net sales declined 3% for the twelve month period ended August 3, 2002 compared to the same period in 2001.

Cost of Sales

Cost of sales,  as a  percentage  of net sales,  decreased to 65.9% for the quarter  ended  August 3, 2002,  from 67.7% for the quarter
ended August 4, 2001.  The  reduction of 180 basis points in cost of sales for the three months ended August 3, 2002,  is  attributable
to a higher level of initial  markups and an improved  merchandise  mix,  partially  offset by a higher level of markdowns.  Comparable
store inventories decreased by 8% from last year's second quarter following a 6% decline from the second quarter of 2000.

Cost of sales,  as a  percentage  of net  sales,  for the six  months  ended  August 3,  2002 and  August 4, 2001 was 65.0% and  66.5%,
respectively, with the decrease due to the factors discussed above.

Advertising, Selling, Administrative and General Expenses

Advertising, Selling, Administrative and General (“SG&A”) expenses, as a percentage of net sales,
decreased to 29.2% for the quarter ended August 3, 2002 from 29.4% for the quarter ended August 4, 2001. The decrease
in SG&A expenses, as a percent of net sales, is due to significant savings in payroll and services
partially offset by rising health care, worker’s compensation and insurance premiums and higher credit losses
related to the Company’s proprietary credit card resulting from increased bankruptcy levels.

The comparable relationship between SG&A expenses and net sales for the six months ended August 3,
2002 and August 4, 2001, respectively, was 28.2% and 28.8%, with the decrease due to the factors discussed above.

Depreciation and Amortization Expense

Depreciation  and  amortization  expense,  as a percentage  of net sales,  was flat for the three and six month periods ended August 3,
2002 compared to similar periods in 2001.  Depreciation  expense,  which was offset by no goodwill  amortization during 2002, increased
due primarily to new asset additions as well as increased  expenditures  in technology,  which is depreciated at a more rapid rate. The
three and six month  periods  ended August 4, 2001  contained  an  additional  $3.9 million and $7.8 million in goodwill  amortization,
respectively.  Goodwill is no longer amortized subsequent to the adoption of SFAS No. 142 on February 3, 2002.

Rentals

Rental  expense,  as a percentage of net sales,  for the three,  six and twelve month periods ended August 3, 2002 was .8% .8% and .9%,
respectively, compared to .9%, .8% and .9%, respectively, for the three, six and twelve month periods ended August 4, 2001.

Interest and Debt Expense

Interest  and debt  expense,  as a percentage  of net sales,  was 2.6% and 2.5% for the three and six month period ended August 3, 2002
compared  to 2.8% and 2.6% for three and six month  periods in 2001.  Interest  and debt  expense  was $46.9 and $92.2  million for the
three and six month  periods  ended  August 3, 2002  compared  with $51.0 and $102.1  million  for the  similar  periods in 2001.  This
reduction is due primarily to a decrease of  approximately  $360 million in the average  amount of  outstanding  debt,  excluding  debt
associated with the accounts receivable  securitizations,  in the six month period of 2002 compared to the six month period in 2001 and
to a reduction in short term interest rates from last year.

Interest and debt expense,  as a percentage of net sales,  decreased to 2.3% for the twelve month period ended August 3, 2002 from 2.6%
for the twelve month period ended August 4, 2001.

The Company has  reclassified  interest  expense  related to its accounts  receivable  securitizations  from other  revenue to interest
expense on its consolidated statements of operations for all periods presented.

Asset Impairment and Store Closing Charges

For the three months ended August 3, 2002, the Company recorded a pre-tax net gain of $.9 million for asset
impairment and store closing charges. The Company recorded $7.1 million of assetimpairment and store closing
charges related to six stores and received forgiveness of a lease obligation of $8.0 million in connection with
the sale of a closed owned store in Memphis, Tennessee in satisfaction of that obligation. For the three months
ended August 4, 2001, the Company recorded pre-tax charges of $2.0 million for asset impairment and store closing costs.

Service Charges, Interest and Other Income

Service charges, interest and other income, as a percentage of net sales, was 3.7% and 3.5% for the three
months and six months ended August 3, 2002 compared to 3.3% and 3.2% for the three and six month periods in 2001.
Service charges, interest and other income for the three months ended August 3, 2002 increased to $67.8 million
from $60.3 million for the three months ended August 4, 2001. Service charges, interest and other income for the
six months ended August 3, 2002 increased to $131.2 million from $120.5 million for the six months ended August 4, 2001.
This increase is due to an increase in the average amount of outstanding trade accounts receivable of approximately
$100 million during 2002 compared to 2001.

Income Taxes

The actual  federal  and state  income tax rates for the three and six month  period  ended  August 3, 2002 and August 4, 2001 was 36%,
exclusive of the  nondeductible  goodwill  amortization  in 2001. The Company's  actual federal and state income tax rate (exclusive of
the effect of  nondeductible  goodwill  amortization)  was reduced from 37% in fiscal 1999 to 36% in fiscal  2000.  The effect of these
reduced  rates on the  Company's  deferred  income  taxes was to reduce the income tax  provision  by $16 million for the twelve  month
period ended August 4, 2001.

Extraordinary Gain/Loss

For the three and six month period ended August 3, 2002,  the Company  recorded  extraordinary  losses of $5.8 million and $5.5 million
related to the repurchase of $67.1 million and $73.2 million of its  outstanding  unsecured notes and the retirement of $143 million of
its 6.31% REPS prior to their related  maturity  dates.  For the three and six month period ended August 4, 2001, the Company  recorded
extraordinary  gains of $2.0 million and $5.1 million  related to the  repurchase  $31.3 million and $62.1  million of its  outstanding
unsecured notes prior to their related maturity dates.

Accounting Change

For the six months  ended  August 3, 2002,  the Company  recorded a non-cash  charge of $530  million for the  write-off of goodwill in
accordance with the adoption of SFAS No. 142,  "Goodwill and Other Intangible  Assets".  The Company tested its goodwill for impairment
using the two-step  process  prescribed  in SFAS No. 142.  The fair value of the  Company's  reporting  units was  estimated  using the
expected  discounted future cash flows and market values of related businesses,  where appropriate.  The Company completed the required
impairment  tests of goodwill in the second  quarter of 2002 and  determined  that $530 million of goodwill was impaired under the fair
value test.  In  accordance  with SFAS No.142,  the Company will restate its results for the first quarter ended May 4, 2002 to reflect
the resulting $530 million non-cash goodwill impairment charge as a cumulative effect of a change in accounting principle.

Financial Condition

Cash provided by operating  activities  totaled $163.7 million and $195.8 million for the six months ended August 3, 2002 and August 4,
2001,  respectively.  The decrease in cash provided by operating  activities  is due primarily to a $42.7 million  decrease in accounts
payable from year end levels compared to a $120.5 million  increase in accounts  payable from prior year end levels partially offset by
smaller  increases in  merchandise  inventories  from the year end levels,  as well as greater  income  before  extraordinary  item and
accounting change.

The Company  invested  $107.5  million in capital  expenditures  for the six months ended August 3, 2002 compared to $140.1 million for
the six months ended August 4, 2001.

During the six months ended August 3, 2002, the Company opened its newly  constructed  98,000 square foot location at Prescott  Gateway
in  Prescott,  Arizona and its 180,000  square foot  replacement  store at  Lynnhaven  Mall in Virginia  Beach,  Virginia.  The Company
anticipates  opening an additional  four new stores in 2002,  resulting in an addition of  approximately  516,000 square feet of retail
space net of replaced  square  footage.  In addition,  the Company opened two former  Montgomery  Ward store  locations  during the six
months and  anticipates  opening two more locations in fiscal 2002. The Company closed five store  locations  during the six months and
has announced the upcoming third quarter closing of two additional stores.

Cash used in  financing  activities  totaled  $90.6  million and $196.5  million for the six months  ended August 3, 2002 and August 4,
2001,  respectively.  During the six months ended August 3, 2002,  the Company  issued $40 million of variable rate mortgage  notes due
2004.  The Company  sold an  additional  $100  million in accounts  receivable  securitizations  to third  parties  bringing  the total
accounts receivable  securitizations  sold to $400 million.  During the six months ended August 3, 2002 and August 4, 2001, the Company
reduced its level of outstanding debt by $221.1 million and $175.8 million, respectively.

During the six months ended  August 4, 2001,  the Company  repurchased  1.3 million  shares of Class A common  stock for $22.3  million
under its existing $200 million share repurchase  authorization.  Approximately $75 million in share repurchase  authorization remained
under this open-ended plan at August 3, 2002.

Management of the Company  anticipates  that it will be necessary to incur  additional  short term  borrowings  during  periods of peak
working  capital  demand in the fourth  quarter of 2002.  Although the Company has an unused  committed line of credit in the amount of
$400 million,  management  expects to accomplish these borrowings  through available  accounts  receivable  securitization  facilities.
Other than peak working capital  requirements,  management believes that cash generated from operations will be sufficient to cover its
reasonably foreseeable working capital,  capital expenditure,  stock repurchase and debt service requirements.  Depending on conditions
in the capital  markets and other  factors,  the Company will from time to time consider the issuance of debt or other  securities,  or
other possible capital market  transactions,  the proceeds of which could be used to refinance current  indebtedness or other corporate
purposes.

New Accounting Standards

In October  2001,  the FASB issued SFAS No. 144,  "Accounting  for the  Impairment  or  Disposal of  Long-Lived  Assets."  SFAS No. 144
addresses  the  accounting  and  reporting  for the  impairment  or disposal of  long-lived  assets.  The  statement  provides a single
accounting  model for  long-lived  assets to be disposed of. New criteria must be met to classify the asset as an asset  held-for-sale.
This  statement  also focuses on reporting  the effects of a disposal of a segment of a business.  This  statement  was  effective  for
fiscal years  beginning  after  December 15, 2001.  The Company  adopted SFAS No. 144 as of February 3, 2002,  and the adoption did not
have a material impact on the Company's financial position or results of operations.

In April 2002,  Statement of Financial  Accounting  Standards No. 145,  "Rescission of FASB  Statements No. 4, 44 and 64,  Amendment of
FASB  Statement  No. 13, and  Technical  Corrections"  ("SFAS No.  145") was issued.  SFAS No. 145  rescinds  SFAS No. 4 and 64,  which
required gains and losses from  extinguishments  of debt to be classified as extraordinary  items. SFAS No. 145 also amends SFAS No. 13
eliminating  inconsistencies  in certain  sale-leaseback  transactions.  The  provisions of SFAS No. 145 are effective for fiscal years
beginning  after May 15,  2002.  Any gain or loss on  extinguishment  of debt that was  classified  as an  extraordinary  item in prior
periods  presented  shall be  reclassified.  The Company does not expect that the adoption of SFAS No. 145 will have a material  effect
on the Company's financial position or results of operations.

In June 2002, SFAS No. 146,  Accounting for Costs Associated with Exit or Disposal  Activities"  ("SFAS No. 146") was issued.  SFAS No.
146 requires  companies to recognize costs  associated with exit or disposal  activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. SFAS No. 146 supercedes EITF Issue No. 94-3,  "Liability  Recognition for Certain Employee
Termination  Benefits and Other Costs to Exit an Activity  (including Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 is to
be applied  prospectively  to exit or disposal  activities  initiated  after  December 31, 2002. The Company has not yet determined the
impact of this standard.

Forward-Looking Information

Statements  in  the  Management's   Discussion  and  Analysis  of  Financial  Condition  and  Results  of  Operations  include  certain
"forward-looking  statements",  including  (without  limitation)  statements with respect to anticipated future operating and financial
performance,  growth  and  acquisition  opportunities  and other  similar  forecasts  and  statements  of  expectation.  Words  such as
"expects,"  "anticipates,"  "plans," and  "believes," and variations of these words and similar  expressions,  are intended to identify
these  forward-looking  statements.  The  Company  cautions  that  forward-looking  statements,  as such term is defined in the Private
Securities  Litigation  Reform Act of 1995,  contained in this report,  the Company's  annual report on Form 10-K or made by management
are based on estimates,  projections,  beliefs and  assumptions of 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 (without  limitation) include general industry and
economic  conditions;  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;  changes in consumer spending patterns and debt levels;  trends in personal
bankruptcies;  the impact of competitive  market factors and other economic and  demographic  changes of similar or dissimilar  nature;
changes in operating expenses,  including employee wages, commissions structures and related benefits;  possible future acquisitions of
store  properties  from other  department  store  operators  and the  continued  availability  of financing in amounts and at the terms
necessary to support the Company's future business.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

During the six months ended August 3, 2002, the Company  repurchased  $73.2 million of its  outstanding  unsecured notes prior to their
related  maturity  dates.  During the quarter  ended  August 3, 2002,  the Company  also  retired  $143  million of its 6.31% Reset Put
Securities  ("REPS") due August 1, 2012 prior to their maturity dates.  Interest rates on the repurchased  securities ranged from 6.13%
to 9.50%.  Maturity dates ranged from 2002 to 2028.

Except as disclosed  above,  there have been no material changes in the information set forth under caption "Item  7A-Quantitative  and
Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2002.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of the  stockholders  of the Company was held on May 18, 2002. The matters  submitted to a
vote of the  stockholders were as follows:

                                                                                                 Votes
                                                Votes For              Votes Against           Abstained
                                            -------------------   ------------------------   ---------------

Election of Directors

Class A Nominees
  Robert C. Connor                                  68,571,983                  2,163,712                 0
  Will D. Davis                                     68,566,863                  2,168,832                 0
  John Paul Hammerschmidt                           68,548,080                  2,187,615                 0
  John H. Johnson                                   68,565,590                  2,170,105                 0

Class B Nominees
  Calvin N. Clyde, Jr.                               3,994,068                          0                 0
  Drue Corbusier                                     3,994,068                          0                 0
  Alex Dillard                                       3,994,068                          0                 0
  William Dillard, II                                3,994,068                          0                 0
  Mike Dillard                                       3,994,068                          0                 0
  James I. Freeman                                   3,994,068                          0                 0
  Warren A. Stephens                                 3,994,068                          0                 0
  William H. Sutton                                  3,994,068                          0                 0

Item 5. Other Information

Ratio of Earnings to Fixed Charges:

The Company has  calculated  the ratio of earnings to fixed  charges  pursuant  to Item 503 of  Regulation  S-K
of the  Securities  and Exchange Act as follows:

     Six Months Ended                                      Fiscal Year Ended
- ----------------------------  ----------------------------------------------------------------------------

  August 3,      August 4,    February 2,     February 3,    January 29,     January 30,     January 31,
    2002           2001           2002           2001*           2000           1999            1998
- --------------  ------------  -------------  -------------- --------------- --------------  --------------

    2.05           1.05           1.48           1.54            2.04           1.97            3.69
==============  ============  =============  ============== =============== ==============  ==============

*  53 week year.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Number              Description

12             Statement re:  Computation of Earnings to Fixed Charges

99(a)          Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
               (18 U.S.C. 1350).

99(b)          Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
               (18 U.S.C. 1350).


(b) Reports of Form 8-K filed during the second quarter:  None

SIGNATURES

Pursuant to the  requirements  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.
                                                              (Registrant)


DATE:  September 17, 2002                                     /s/James I. Freeman
                                                              James I. Freeman
                                                              Senior Vice President & Chief Financial Officer
                                                              (Principal Financial & Accounting Officer)

I, William Dillard, II, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dillard's, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report.
Date: September 17, 2002
                                                         /s/ William Dillard, II
                                                          William Dillard, II
                                           Chairman of the Board and Chief Executive Officer

I, James I. Freeman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dillard's, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report.
Date: September 17, 2002
                                                        /s/ James I. Freeman
                                                           James I. Freeman
                                           Senior Vice-President and Chief Financial Officer



EXPLANATORY NOTE REGARDING CERTIFICATIONS:  Representations 4, 5 and 6 of the Certification as set forth in Form 10-Q have been
omitted, consistent with the Transition Provisions of SEC Exchange Act Release No. 34-46427, because this quarterly report on Form
10-Q covers a period ending before the Effective Date of Rules 13a-14 and 15d-14.