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Dillard’s CEO: ‘Inventory Control Remains a Priority’

Dillard’s Inc. saw comparable store sales rise again in the third quarter, with men’s apparel and accessories continuing to drive sales.

In a Nutshell: “While we were up against an unprecedented third quarter, we achieved a 3 percent comparable store sales increase and reported our seventh consecutive quarter of gross margin over 40 percent,” CEO William T. Dillard II, said.

Dillard’s said its stronger performing categories included cosmetics, men’s apparel and accessories, home and furniture and shoes. Juniors’ and children’s apparel were the weakest performing sectors.

Men’s apparel and accessories have been driving sales at Dillard’s since the first quarter. While women’s apparel buoyed sales in the first quarter, the category turned out to be the weakest in the second quarter. For the third quarter, women’s apparel was neither a top performer nor a laggard. Juniors’ and children’s apparel, a top category sales driver in the first quarter, seems to be slipping sequentially from the second quarter to the third. One category that has done well for each of the three quarters has been cosmetics, suggesting that a recession-minded behavioral shift has been underway.

Dillard’s said consolidated gross margin for third quarter slipped to 44.6 percent of sales versus 46.2 percent of sales for the same year-ago quarter. Retail gross margin dipped to 45.7 percent versus 46.7 percent a year ago.

Dillard’s closed two stores during the quarter. One was in Sikes Senter in Wichita Falls, Tex. and the other was in East Hills Mall in St. Joseph, Mo. Last week, Dillard’s opened a newly remodeled unit at Westgate Mall in Amarillo, Tex.

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Dillard’s ended the quarter operating 249 Dillard’s doors and 28 clearance centers across 29 states, as well as its online site at dillards.com.

The retailer also revealed it had acquired $24.3 million, or 99,000 shares, of Class A Common Stock at an average price of $245 per share under its share repurchase program. To date, the company has purchased $436.6 million, or a little over 1.7 million shares, of Class A Common Stock at an average price of $255.49.

On Tuesday, Dillard’s and Macerich said the retailer will construct a new, larger store to replace its existing operations at South Plains Mall in Lubbock, Texas. The new, flagship 220,000-square-foot store will take over a former Sears site, replacing the two locations Dillard’s currently occupies at the mall.

Construction is slated to begin immediately, with an anticipated opening date in early 2024. The department store first opened its South Plains Mall location in July 1972. 

“We are pleased to enhance our presence at South Plains Mall, further solidifying the center as one of West Texas’ premier shopping destinations,” Dillard said. “Today’s announcement underscores and celebrates our 50-year service commitment to our Lubbock-area customers.”

The new store will feature Dillard’s latest enhancements in store design, merchandising and technology and feature a premium lineup of brands tailored specifically to the tastes and preferences of Dillard’s West Texas customers.

“We could not be more pleased that Dillard’s is expanding its presence at South Plains, Lubbock’s leading retail destination,” said Ed Coppola, president of Macerich in a statement. “Shoppers across the U.S. rely upon Dillard’s curated selection of smart, high-quality fashion lines, beauty offerings and items for the home. The brand’s expansion in Lubbock speaks to Dillard’s long history of delighting customers with desirable products and stellar service, its strength as a company, and the continued appeal of South Plains Mall.”

Net Sales: Net sales for the third quarter ended Oct. 29 rose 4.3 percent to $1.54 billion from $1.48 billion, which included the operations of the retailer’s construction business, CDI Contractors LLC. Total retail sales for the quarter, excluding CDI, were up 2.7 percent to $1.5 billion from $1.46 billion, with comparable store sales rising 3 percent.

For the nine months, net sales rose 8.3 percent to $4.74 billion from $4.38 billion. Total retail sales rose 7.8 percent to $4.63 billion from $4.3 billion, with comparable store sales up 8 percent.

Earnings: For the quarter, net income fell 4.8 percent to $187.9 million, or $10.96 a diluted share, from $197.3 million, or $9.81, a year ago.

For the year ending Jan. 28, 2023, Dillard’s said it expects to spend $130 million in capital expenditures, up 25 percent from $104 million in 2021.

For the nine months, net income rose 11.3 percent to $602.5 million, or $34.05 a diluted share, from $541.2 million, or $25.76, in the same year-ago period.

CEO’s Take: “Inventory control remains a priority as we have seen its powerful effects on our business,” Dillard said. “To date this year, our net income is up 11 percent over last year’s strong performance and earnings per share is up 32 percent.”