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Strong Clothing Sales Drove Dillard’s Q3 Smash

Strong apparel sales drove Dillard’s third quarter earnings beat.

In a Nutshell: Fashion demand helped the department store retailer increase net income six times over.

Compared to the pre-pandemic 2019 period, sales of juniors’ and children’s apparel and men’s apparel and accessories “significantly outperformed the other categories,” Dillard’s said.

The focus on men’s, juniors’ and kids’ apparel marked a change from the second quarter, when women’s apparel and shoes drove sales.

Retail gross margin for the third quarter, excluding the company’s construction business CDI Contractors LLC (CDI), rose 46.7 percent. Management attributed the substantial improvement in gross margin to “continued strong consumer demand and better inventory management leading to decreased markdowns.”

“Management is monitoring the continuing supply chain issues, particularly with regard to shipping delays and disruptions in the global transportation network,” Dillard’s said.

Investors sent Dillard’s shares up 9.9 percent on Thursday to close at $325.30 in trading on the New York Stock Exchange. Shares climbed as high as $364.08 in intraday trading, and rose 0.1 percent to $325.61 in after-market trading.

Net Sales: For the third quarter ended Oct. 30, net sales including CDI jumped 45 percent to $1.48 billion from $1.02 billion.

Total Q3 retail sales jumped 47 percent to $1.46 billion from last year, on a comparable store sales gain of 48 percent. When compared to the same 2019 period, retail sales were up 9 percent on a comparable store sales gain of 12 percent.

Inventory fell 1 percent at the end of the quarter.

For the nine months, net sales skyrocketed 60 percent to $4.38 billion from $2.73 billion. Retail sales for the quarter rose 63 percent to $4.30 billion from a year ago, and were up 4 percent from the comparable 2019 pre-pandemic period.

Earnings: Net income leapt to $197.3 million, or $9.81 a diluted share, from $31.9 million, or $1.43, in the year-ago quarter.

Wall Street expected adjusted diluted earnings per share of $5.52 on revenue of $1.45 billion.

For the nine months, net income was $541.2 million, or $25.76 a diluted share, against a net loss of $138.7 million, or $6.05, in the year-ago period.

CEO’s Take: “We are pleased to report another record quarter. Continued strong sales combined with record gross margin and expense control produced $197 million of net income,” CEO William T. Dillard, II said.