Dillard's Expands Market Share Amid Modest Q2 Sales Growth
Dillard's Q2 retail sales edged up less than 1% to $1.5 billion, with comps up 1%, beating UBS expectations. Tariff refunds of $37.2 million drove most of the gross margin expansion, and net income rose 34%. Despite inventory build-up, the company gained market share, according to GlobalData.
Dive Brief:
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Dillard's second-quarter retail sales, excluding its construction business, rose less than 1% year over year to $1.5 billion, with comparable-store sales up 1%, the company announced Thursday.
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Sales in women's accessories and lingerie increased significantly; home sales rose moderately; and shoes, beauty, and men's categories saw slight gains. Conversely, sales of children's, juniors', and women's apparel declined moderately.
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The bottom line received a boost from $37.2 million in tariff refunds, which contributed 260 of the 280 basis-point gross margin improvement. Gross margin reached 40.9%, and net income, including proceeds from real estate sales, climbed 34% to $97.7 million.
Dive Insight:
While Dillard's may not have generated significantly more sales than a year ago, it managed to avoid heavy discounting, retain customer loyalty, and—according to GlobalData research—capture market share from rival department stores.
“Our 1% sales increase points to a somewhat resilient consumer,” CEO William Dillard said in a statement.
The 1% comp increase surpassed UBS analysts' expectations, who had predicted flat comps. UBS Evidence Lab's pricing analysis indicated that Dillard's discounting remained flat year over year.
However, protecting price left some merchandise unsold, as consumers have become more selective amid rising gas and grocery costs. Inventory at quarter-end was up 5% year over year.
“We see this most in high frequency categories like womenswear, where there has been a very modest downtick in the volume of things consumers have been buying,” said GlobalData Managing Director Neil Saunders. “Fortunately, this is driven by a small reduction in overall spending rather than a defection from Dillard's to other retailers.”
Some sales of children's apparel likely shifted to value retailers, Saunders noted in emailed comments. Still, margins benefited, as gross margin expanded even without accounting for tariff refunds.
The inventory build-up reflects the tightrope retailers are walking at a time when both consumers and retailers face rising costs.
“This balance between demand and supply is something Dillard's will need to watch carefully as it goes into the important back half of the year,” Saunders said.