Tradition is trying to catch up with the times at Dillard's. Sandwiched between retail giant Macy's and discount chains such as Kohl's, Dillard's is rethinking its strategy and trimming its store count. The department store chain operates about 270 locations (down from 330 in 2005) in some 30 US states, covering the Sunbelt and the central US. Its stores cater to middle- and upper-middle-income women, selling name-brand and private-label merchandise with a focus on apparel and home furnishings. Women's apparel and accessories account for nearly 40% of its sales. Founded in 1938 by William Dillard, family members, through the W. D. Company, control the company.
Dillard's exclusive brand lines include Antonio Melani, Gianni Bini, GB, Roundtree & York, and Daniel Cremieux. By product line, the company generated 22% of its sales from ladies' apparel in fiscal 2016 (ended January), and another 16% from ladies' accessories and lingerie. Another 17% of sales came from men's apparel and accessories, while the rest of sales came from shoes (16%), cosmetics (14%), juniors' and children's apparel (8%), and home and furniture products (4%).
Beyond department stores, Dillard's owns CDI Contractors, a Little Rock, Arkansas-based construction firm that was started to build and remodel its stores. It also owns Acumen Brands, the operator of a dozen online retailers, including scrubschopper.com (medical uniforms) and countryoutfitter.com (western wear), which assists in its e-commerce operations.
Texas and Florida are the Arkansas-based department store chain's two largest markets, accounting for about a third of total stores. In 2016, the company operated 297 Dillard's stores and 24 clearing centers -- representing more than 50 million sq. ft. of space -- in 29 states.
Sales and Marketing
Dillard's markets its products in shopping malls and open-air centers. The retailer spent $50 million on advertising in FY2016, down from $56 million in FY2015 and $65 million in FY2014.
Dillard's sales and profits have remained mostly flat over the past few years as its rising comparable store sales have been offset by its shrinking net store count.
The retailer's sales were flat again in FY2016 (falling a minuscule $25,584), but there were intra-segment shifts in sales. Retail declined 2%, with ladies' and men's apparel and accessories, and children's apparel and cosmetics, falling. On the other hand, sales in the small construction segment leaped 58% due to an increase in construction projects.
Net income continued on its dwindling trend seen since 2011, coming in 19% lower at $269 million. An increase in payroll costs pushed up Selling, General and Administrative expenses. Cash from operations fell $161 million amid lower profitability.
To try and reverse falling sales, the department store chain has moved "up market", positioning itself above Macy's and Belk and below high-end chains such as Nordstrom and Bloomingdale's. To attract more customers, Dillard's is focusing on adding more fashion, much like J. C. Penney has done in recent years. The firm's new direction is inspired on the success of specialty stores with their edited displays or merchandise in boutique-like settings rather than an endless sea of apparel racks. New stores are smaller (averaging 170,000 sq. ft.) and located in open-air lifestyle centers rather than enclosed malls. Dillard's, which has been averse to marking down merchandise but has been forced to discount by its lower-end competitors, hopes its move up market will stop the markdowns.
As part of the company’s strategy to invest back into the business through store upgrades, Dillard's opened newly constructed locations in Liberty Center in Cincinnati, Ohio; Fremaux Town Center in Slidell, Louisiana; and Fashion Place Mall in Murray, Utah.
Dillard's also continues to shrink its net store count as it shutters underperforming locations in attempt to cut operating expenses and generate property gains. During 2014, for example, it closed its Southgate Mall location in Sarasota, Florida for a gain of $6.3 million, and sold a store in Longmont, Colorado for $14.5 million in proceeds.