Dillard’s First Quarter 2023 Sales And Earnings

Dillard’s reported a decrease of 4% in retail sales and comparable sales also decreased by 4%. Net income was $201.5 Million compared to last year’s $251.1 Million. Earnings per diluted shares were $11.85 compared to last year’s $13.68.

Last year had an unusually strong bounce while this year the company felt a slowdown of customer buying in “the back half of the quarter”. With the Federal Reserve trying to stem inflation by raising interest rates, this is no surprise. Consumer slowdown of spending was felt by the whole industry.

The company did achieve a gross margin of 45.6% and repurchased $113.8 million of stock, or 357,000 shares, in the quarter and still had $955 million in cash and short-term investments remaining.

The company indicated that cosmetics was the strongest performing category followed by shoes and ladies’ apparel. On the other hand, ladies’ accessories. lingerie and juniors and children’s apparel were the weakest categories.

At the end of the quarter the company operated 247 Dillard stores and 27 clearance centers spanning 29 states, mostly in the Southern part of the United States. It is significant to note that the company operates clearance centers, keeping the main stores looking fresh with new merchandise. It makes a big difference to a store’s look if the clearance of merchandise is concentrated in clearance centers.

Once again Dillard’s is the first company to report quarterly earnings among major retailers. Their computer system is up-to-date and humming. Most other retailers will also have encountered a slowdown of consumer spending. This is likely to continue for the next quarter or two. I expect stronger sales in the significant fourth quarter when customers are buying gifts for holiday giving.

As sales slowed down in the quarter, management carefully monitored gross margin which ended at 45.6% a remarkable achievement.

POSTSCRIPT: The result is very good and we are pleased that inventory only rose 3%. Management’s merchandise information system is fast and flags weaknesses quickly. The macroeconomic environment will make 2023 a difficult year, but I see continued leadership by Dillard’s.