Dillard’s Inc. outmaneuvered Wall Street’s expectations despite shrinking first-quarter sales and net income.
In a Nutshell: Cosmetics, shoes and women’s apparel propped up first-quarter sales.
Juniors’ and children’s apparel underperformed versus a year ago, building on a downward slide since the sluggish back-to-school season. Women’s apparel has seen erratic sales, from last year’s weak second quarter to a flat Q3. But perkier fourth quarter momentum continued into the new year.
Overall, sales slowed toward the end of the first quarter, cosigning a growing narrative suggesting people are tightening up the pursestrings.
Dillard’s retail gross margin was 45.6 percent versus 47.3 percent a year ago while operating expenses rose to $406.4 million from $400.8 million.
The Little Rock, Ark.-based company operated 247 department stores and 27 clearance centers in 29 states plus e-commerce during the quarter.
Former department store executive and now retired retail analyst Walter Loeb doesn’t believe Dillard’s results speak for the broader sector.
“Dillard’s did pretty good. It had a big first quarter last year, so comparisons were tough this time around,” Loeb said. “I expect every retailer will have negative Q1 sales.” He expects retailers will recover in Q4 after dull second and third quarters. Comparisons to last year’s mediocre holiday will work in merchants’ favor, he said. Dillard’s missed Wall Street’s revenue projection for the fourth quarter.
The broadlines and department store sector face downside risk stemming from a pressured middle class and increased spending on experiences like dining travel, according to research note from TD Cowen retail team, led by equity analyst Oliver Chen. He believes “inventory and promotional balance” have put Macy’s in a good place versus rivals like Kohl’s or Nordstrom.
What’s more, Amazon has become a destination for women’s apparel, rising to first choice among shoppers from 3.4 percent of respondents in April 2020 to 11 percent in last month, according to the TD Cowen report, citing a study conducted by Prosper. Plus, Coresight recently found that about one-third of Amazon apparel shoppers purchase Nike products, ahead of the less than one-quarter who buy the platform’s private labels. Meanwhile, price-conscious consumers shop Walmart for basics.
Net Sales: For the three months ended April 29, net sales fell 1.7 percent to $1.58 billion from $1.61 billion a year ago.
Total retail sales fell 4 percent to $1.52 billion from $1.58 billion last year, while sales in comparable stores fell 4 percent.
Earnings: For the first quarter, net income was down 19.8 percent to $201.5 million, or $11.85 a diluted share, from $251.1 million, or $13.68, in the year-ago period.
Wall Street expected adjusted diluted earnings per share of $10.77 on revenue of $1.55 billion.
First-quarter results included a pretax gain of $1.8 million related to the sale of a store property. The year-ago quarter reflected a $7.2 million pretax gain linked to a store property sale.
CEO’s Take: “We had a good quarter against a tough comparison,” said CEO William T. Dillard, II.