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Dillard's: Sales Soften with Consumption Moving from Goods to Experiences

Thomas Paulson
Aug 12, 2022
Dillard's: Sales Soften with Consumption Moving from Goods to Experiences

Key Dillard's Metrics

Dillard's comparable store sales were flat, led by cosmetics, accessories, and men’s apparel. Ladies’ apparel was the weakest category. The release quotes CEO William Dillard: "Business softened in the quarter as we lapped the strongest second quarter in our history." Placer.ai shows a meaningful deterioration in the traffic trend throughout the period.

  • Trailing-twelve-month (TTM) sales per square foot was up $1 QoQ to $142.
  • TTM EBITDA and free cash flow (FCF) were $1.4B and $0.9B, respectively, representing a very healthy 67% conversion rate. FCF was solid as inventory was only up marginally YoY and inventory turnover was roughly even, putting the company in a good position to preserve merchandise margin at its current high level. Over the next twelve months, it will be an achievement to hold both near 2021’s levels and most likely expect some giveback, but still at very healthy levels.
  • Profitability moved lower from last year’s record levels due to fixed-cost and payroll expense deleverage. Higher wages were also called out in the release and SG&A per store is up 10% YoY. As Dillard’s store base doesn’t materially change, that rate of increase reflects a lot of payroll expense deleverage and suggests that the downturn in the sales trend was faster than what management could or was willing to do in terms of cutting labor hours.

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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