Dive Brief:
- Dillard’s total Q4 retail sales (excluding its construction business) dropped more than 5% compared to last year, when there was an extra week. Adjusting for that, retail sales fell 1% to $1.9 billion, with store comps also down 1%. Men’s apparel, accessories and shoes were especially weak performers.
- Retail gross margin contracted to 36.1% from 37.7% a year ago, with flat margins in juniors’ and children’s apparel, ladies’ accessories and lingerie. Gross margin fell slightly in shoes, cosmetics and men’s apparel and accessories, and significantly in home, furniture and ladies’ apparel. Net income fell more than 14% to $214.4 million.
- For the year, total retail sales reached $6.2 billion; comparing 52-week periods in 2023 and 2024, they fell 2%. Retail gross margin shrank slightly from 41.8% to 41%, while net income plummeted nearly 20% to $593.5 million.
Dive Insight:
Thanks to its strong merchandising, good customer service and rational footprint, Dillard’s is considered by many analysts to be a standout among department stores. Last year activist investors went so far as to urge Macy’s to be more like its Southern regional rival.
Over the holidays, earnings were better than expected thanks in part to expense controls, according to CFRA analyst Zachary Warring. Foot traffic last year at Macy’s, Belk and J.C. Penney declined to varying degrees, but at Dillard’s was up 2.3%, according to Placer.ai.
Recent declines in sales and margins prove that Dillard’s is not immune to the downturn in the space, however, analysts said.
“We believe [Dillard’s] is operating the best of all Department stores, however, the sub industry continues to experience a slow decline,” Warring said by email. “We see little to get us excited as the share buyback pace has declined in recent quarters.”
Dillard’s CEO William Dillard said in a statement that, given the sales challenges, the company had worked to control its expenses in the period but acknowledged it “lost some steam in gross margin.”
Last week UBS analysts led by Mauricio Serna anticipated the Q4 comp sales drop, and the fact that it would be an improvement over Q3’s 4% decline. But they expressed long-term pessimism, noting that search trend declines since early 2022 suggest that “Dillard’s may be losing relevance among U.S. consumers.” Over the holidays, search fell 11% year over year, UBS found.
“Our research indicates Dillard's position is not strong enough to gain share within brick and mortar,” Serna said last week. “We model higher online sales, but believe this growth will not offset declining store revenues.”
Online visits to Dillard’s website were down by low-double-digits, according to UBS research. Moreover, Dillard’s store comp result in the period indicates market share loss, Serna said. Department stores in general are yielding share to value players like off-price retailers, according to research from UBS and others.
