Dive Brief:
- Dillard’s eked out a sales bump in Q2, reporting Thursday that total retail sales (excluding its construction business) rose 1% year over year to $1.4 billion; store comps also rose 1%.
- Retail gross margin dropped to 38.1% from 39.1% a year ago, with women’s apparel declining “significantly.”
- Inventory was up 2% compared to a year ago. Net income, which does factor in the company’s construction unit, declined 2.3% to $72.8 million.
Dive Insight:
Dillard’s Q2 results beat analyst estimates and may give department store peers some hope.
“We were happy to achieve a sales increase for the first time in a while and encouraged by strengthening sales trends in July,” CEO William Dillard said in a statement. “In an operating environment that changes daily, we focused on controlling inventory, ending up 2% compared to 6% at the end of [the] first quarter.”
That environment includes consumers wary of tariffs’ impact on prices, a situation that has hit department stores and apparel sales (their dominant merchandise) especially hard. Off-price retailers have mostly benefited, though tariffs have emerged as more of a problem for them than previously thought.
Dillard’s said in its press release Thursday that Q2 gross margin, along with the steep decline in women’s apparel, rose moderately in shoes and slightly in ladies’ accessories and lingerie; fell slightly in men’s apparel and accessories; and was relatively flat in juniors’ and children’s apparel, cosmetics and home and furniture.
The retailer’s performance in the quarter could be a harbinger for department stores more generally, or a reflection of what many analysts see as standout fundamentals in the space, including strong merchandising, a regional store footprint and founding-family control.
“The company continues to buck the trend for department stores,” Zachary Warring, equity analyst at CFRA Research, said in emailed comments.
Still, Dillard’s isn’t immune to the challenges faced by its peers. From May to June, visits to its website fell in the mid-teens year over year, physical store sales fell 1.6%, and promotions are up, according to research earlier this month from UBS analysts led by Mauricio Serna.
The company doesn’t hold a conference call with analysts and doesn’t usually provide guidance.
