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As Macy’s, Kohl’s and JC Penney grapple with what success means for a mid-tier department store in the 21st century: fending off activist investors, hiring new owners or announcing new strategies, Southern department store chain Dillard’s quietly tunes in. .
The company grabbed 0.4% market share in the second quarter compared to other department stores, according to an M Science study, though it’s not immune to the drop in discretionary spending that several retailers have seen in stores. last weeks. In its latest quarter, revenue was barely budging year-over-year, store comparisons were flat and womenswear sales were weak. Unlike publicly traded department stores Kohl’s and Macy’s, which lowered their expectations for 2022, Dillard’s does not provide earnings guidance, though UBS analysts expect its sales, margins and profits to decline in the second half of the year. Still, other analysts see some strength in the 84-year-old regional retailer compared to its peers.
“We think Dillard’s will have a much softer landing than other players like Macy’s and Kohl’s,” GlobalData CEO Neil Saunders said in email comments, noting that Dillard’s customer base is older and wealthier and , therefore, somewhat less affected by inflation. “Still, the slowdown in more marginal customer groups and a more cautious mindset among nearly all shoppers are beginning to catch up with Dillard’s and we believe the company is now entering a period of softer growth.”
Everyone in the family
In recent years, Macy’s and Kohl’s have feuded with activist investors who pressured them into seeking to monetize their real estate, spinning off their e-commerce operations or, in Kohl’s case, reshuffling the board and even putting the business up for sale. . Meanwhile, JC Penney is now owned by two of its owners after filing for bankruptcy in 2020.
By contrast, at Dillard’s, the founder’s son runs the company, with the help of other family members employed there, and they have firm control of the company’s Class B stock and board. In fact, despite being a public company, Dillard’s is still in many ways a family business. CEO William Dillard, who worked in his father’s store as a child, has been in the C-suite since the late 1970s, when he became COO; the took the helm as CEO two decades later, according to a 2016 video profile presented by the University of Arkansas Business School.
“We are one of the few remaining retailers with the founding family still at the helm and we are very proud of that,” corporate spokeswoman Julie Johnson Guymon said by email. “Everyone is very involved in the day-to-day operations of Dillard’s and is quite visible throughout the company. The leadership and experience of the Dillard family have carried this company through eight decades of tremendous challenges and extraordinary success. Lately, it has been an extraordinary success.”
The department store has its own issues with sometimes messy or “old-fashioned” stores, but their maintenance standards are higher than many rival department stores, according to GlobalData’s Saunders. “It’s nice to shop and the customer service is very good,” he said by email. “I think because it’s a family business, they try to stay on top of traditional retail values.”
What’s in Dillard’s
Macy’s, Kohl’s and JC Penney are working hard to revamp their private label brands, an effort to take advantage of larger private-label margins and differentiate their merchandise, with mixed results.
Macy’s and Penney have gone so far as to poach former Target executives to lead those efforts, a nod to the mass marketer’s prowess in the space. But maybe they should get Dillard’s. Department stores brag 52 own brands or exclusive brand associations in women, men, children and home; your biggest private brand of clothing, footwear and accessories for women, Antonio Melani, has its own instagram page and regularly launch your own designer collaborations and capsule collections. Plus, strong brands like Pendleton, which are hard to find elsewhere, are found at Dillard’s, according to Saunders.
More than a decade ago, the retailer decided to upgrade and focus on fashion; last year, its private labels accounted for 23% of its sales, according to Guymon. The retailer works with internal and external designers and, more recently, social media influencers to develop and market these items.
“We realized that traditional department stores pretty much all looked the same,” Guymon said. “We all had very much the same brands from the same suppliers, which led to fighting over price as the only differentiating factor in the customer’s mind. This, for us, is a race to the bottom in which no one wins. We started to reach limited distribution, higher profile brands and reach a customer who is more motivated by fashion than price. This is our place in the market. We get much more excited about fashion and novelty than about price. Dillard’s client is the same way. To give us even more differentiation, we developed our own exclusive brands.”
If they continue to resonate with clients, Dillard’s private labels have the potential to help it gain market share, and its higher margins would help offset what promises to be a promotional environment next year, according to analysts at UBS.
“The great thing about Dillard’s brands is that they’ve been designed with a little thought in mind,” Saunders said. “They have a point of view and a letter that distinguishes them and directs them to particular groups of consumers. While it can sometimes be argued that Dillard’s has too much stuff, one purpose of a good department store is to be an emporium where there are lots of interesting things to look at and discover. Too many others in the space have lost that style: Dillard’s still has it and private labels play a role in this.
what lies ahead
Dillard’s was once a technology leader, adopting new digital capabilities from IBM in 1973 for data processing and digital purchase orders, and by the mid-1980s, the retailer had the third-largest online network in the country, according to William Dillard .
However, the retailer has been behind in e-commerce, which was a problem during the height of the pandemic.
“We greatly enhanced this capability during the pandemic and continue to enhance the entire eComm experience at Dillard’s,” said Guymon.
In fact, its online sales relative to brick-and-mortar sales are now growing, at a time when other department stores’ online sales are falling back as shoppers return to stores, according to research from senior analyst from M Science, Matthew Jacob. This could allow the retailer to reach younger customers, he said.
“We survived the pandemic and came out even stronger thanks to the right decisions made over eight decades of experience.”
julie johnson guymon
“I think they are benefiting probably because they are located more in the south and that has generally done quite well for them,” he said by phone. “But for me, what jumps out at you is the online performance.”
The retailer needs to reach more young shoppers, Saunders said. Guymon said yes, with the third generation of the Dillard family responsible for connecting with new and younger-focused brands and engaging with customers and tastemakers on social media.
The company’s conservative financial policy has also paid off. “We survived the pandemic and came out even stronger thanks to the right decisions made over eight decades of experience,” Guymon said.
The department store must keep that new energy in merchandising and services and that momentum coming from the pandemic, Saunders said. In the end, the best way to modernize the department store model may be to improve its own stores, assortments and services, rather than content to compare well with rivals.
“If it can pull these things off, while performance can return to more normalized levels, Dillard’s will avoid going back to being a low-energy, uninspiring retailer,” Saunders said.