Dive Brief:
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Dillard’s on Monday said that total Q4 retail sales (not including its construction business) fell 5% year over year to $2.1 billion, with store comps also down 5%. Cosmetics, followed by home and furniture, performed best, while juniors and children’s apparel, then ladies’ accessories, lingerie and apparel, fared worst.
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Retail gross margin narrowed slightly to 37.7% from 38.7% a year ago, according to a company press release. Inventory edged down 2% from the year before. Net income tumbled 13.4% to $250.5 million.
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For the year, retail sales fell 5% to $6.5 billion with comps down 4%. Retail gross margin contracted to 41.8% from 43% the previous year. Net income fell 17.1% to $738.8 million.
Dive Insight:
Department stores are among those retailers most dependent on a good, if not great, holiday quarter, but Dillard’s CEO William Dillard offered up a different word.
“Our fourth quarter results were respectable considering the continued weak consumer environment,” he said in a statement.
Throughout its filing on the period, Dillard’s noted “a continued challenging sales environment during the fourth quarter,” with an extra weeks of sales in 2023 unable to alter the year-on-year sales declines. The sector failed to partake of better-than-expected performance over the holidays, with GlobalData finding that department stores lost share despite their traditional position as a key seasonal shopping destination. Department sales in December fell 3.8%, with year-over-year spending falling to $16.6 billion from $17.3 billion in 2022, according to data from the U.S. Department of Commerce.
Dillard’s itself also likely lost market share, according to UBS analysts led by Mauricio Serna. The retailer will likely continue to struggle to fight margin contraction, sales and share declines, as other retailers, particularly off-pricers, offer better value — competition that if anything is under-appreciated, Serna said in a client note.
“Our research indicates Dillard's position is not strong enough to gain share within brick and mortar. We model higher online sales, but believe this growth will not offset declining store revenues,” the analysts wrote.
Still, there were some bright spots in the period, with web traffic declines, store sales declines and promotions all slowing in the fourth quarter, according to UBS research. And margins held up relatively well, thanks to the company’s tight grip on inventory, Serna said.
