Is Dillard’s setting the pace for mid-tier department stores?

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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.

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“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.

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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.”