Dive Brief:
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Dillard’s on Thursday reported that Q3 retail net sales (excluding its construction business) fell 3.8% year over year to $1.4 billion, with store comps down 4%.
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Cosmetics was the strongest performing category, and the weakest were juniors’ apparel, children’s apparel, men’s apparel and men’s accessories. Inventory was up 3%.
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Gross margin in the retail business contracted to 44.5% from 45.3% a year ago, according to a company press release. Net income fell 19.8% to $124.6 million, which includes a pretax gain of $4 million primarily related to the sale of a store property.
Dive Insight:
Dillard’s focus in Q3 was on expense management and gross margin, CEO William Dillard said in a statement Thursday. Consolidated selling, general and administrative expenses in the period fell by 0.7% or $2.9 million to $418.9 million; those operating expenses were 29.4% of sales, compared to 28.6% a year ago, per the company’s release.
“We are looking forward to welcoming our customers and serving them this holiday season,” Dillard also said.
The holiday season isn’t the slam dunk it once was for department stores like Dillard’s, however. Just a third of consumers say they’ll shop for the holidays at department stores, while nearly twice as many say they’ll head to discounters, according to ICSC’s 2024 Holiday Shopping Intentions survey. And less than half plan to shop in physical stores this year, according to research from Experian.
Fortunately for Dillard’s, whose outlook S&P Global Ratings analysts rate as “stable,” the retailer relied on last year’s holiday quarter for 31% of its annual operating profit, making it less dependent on the season than Macy’s (65%) or Nordstrom (44%), according to research this week from analysts led by Lauren Slade.
Department stores in general are likely to “rely on higher discounts to increase traffic and manage inventory,” according to that research. Those analysts expect holiday sales growth to slow to 3% this year, down from last year’s 4.7% and well below the 5.3% average of the past decade.
Dillard’s, which launched a series of merchandising initiatives this year, has stood out among department stores for the most part as rivals like Macy’s and Kohl’s muscle through turnarounds. Dillard’s on Thursday announced a limited-edition collaboration between influencer-stylist Lilly Sisto, known for her work with LoveShackFancy and other brands, and its Gianni Bini store label.
