Dillard’s gains market share

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Sales barely rose, tariff refunds padded the bottom line and customers were choosy, but the retailer held its own in Q2, analysts said.

Dillard’s Q2 retail sales (excluding its construction business) rose less than 1% year on year to $1.5 billion, with comps up 1%, the company said Thursday.

Women’s accessories and lingerie sales rose significantly; home rose moderately; and shoes, beauty and men’s rose slightly. Sales of children’s, juniors and women’s apparel fell moderately.

The bottom line got a boost from $37.2 million in tariff refunds , which furnished 260 of the 280 basis-point gross margin increase. Gross margin reached 40.9%, and net income, including proceeds from real estate sales, rose 34% to $97.7 million.

Dillard’s may not have made many more sales compared to a year ago, but it avoided discounts, kept its customers close and, according to GlobalData research, took 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 beat expectations from UBS analysts, who had expected flat comps. The UBS Evidence Lab’s pricing analysis found Dillard’s discounting flat year on year.

Protecting price did leave some clothes on racks, though, as customers have grown more choosy in an environment defined by 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,” GlobalData Managing Director Neil Saunders said. “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 probably did go to value retailers, however, Saunders said in emailed comments. Still, margins benefited, as gross margin expanded even without accounting for tariff refunds.

The inventory pile-up reflects the tightrope retailers are walking at a time when consumers and retailers both 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.

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