Department store Dillard's on Thursday demonstrated its strength in a troubled segment with its second quarter report. Total retail sales (excluding its construction business) rose 72% year over year to $1.5 billion, with women's apparel and shoes outperforming other categories; compared to 2019, retail sales rose 12%.
The Southern retailer didn't release store comps relative to pandemic-dominated 2020; comparable store retail sales compared to 2019 rose 14%. The company swung into the black, reaching net income of $185.7 million after an $8.6 million net loss in the period last year.
Margins in the quarter expanded thanks to "stronger consumer demand and better inventory management leading to decreased markdowns," per a company press release. Retail gross margin reached 41.7% of Q2 sales, compared to 31.1% last year; retail gross margin expanded by 1,299 basis points from 2019.
Dillard's joins other retailers in keeping a tight control of inventory and avoiding discounts — and in benefiting from a robust level of consumer confidence after a 2020 that was defined by the pandemic. As of July 31, inventory was down about 13% year over year.
"The strong consumer demand we saw in the first quarter continued throughout the second quarter," CEO William Dillard said in a statement. "This momentum, combined with our continuing focus on inventory and expense control, produced a sequential record performance. We ended the quarter with $670 million in cash even after repurchasing $112 million of stock."
It helps that the lockdowns of last year are over, though there's some evidence that shoppers are growing wary of the delta variant of the coronavirus, which has hit hardest in many of the areas where Dillard's operates. Traffic at Dillard's stores rose nearly 30% from the first quarter to the second, according to data from Placer.ai.
Ahead of the company's report Thursday morning, Wedbush analysts noted that the government's support of consumers this year, most recently in the form of child tax credits, appears to have boosted its sales of children's and junior apparel. In fact, Dillard's success may be less a reflection of its own fundamental strengths and more of tailwinds related to the waning of the pandemic, the Wedbush team led by Jen Redding said in a Thursday client note. Still, Wedbush also sees the retailer as a standout in its sector.
"We reaffirm our expectations for Dillard's to lead department stores sector strength over the second quarter and into the back half," Redding said.