One of the best-performing stocks in recent years is neither a tech giant nor a high-flying startup. Instead, it’s a family-run department store chain that doesn’t have a large following on Wall Street.
Dillard’s Inc. DDS 1.48% shares are up more than 1,500% since April 2020. The company’s market value is similar to Macy’s Inc., although Dillard’s has less than a third of Macy’s annual sales.
Retailer The Little Rock, Ark. has about 280 stores, most of them in the South, and is one of the few department store chains still managed by its founding family.
The chief executive and president – both sons of the company’s founder – visit stores weekly and know exactly what’s selling best at each location, said people who have worked with them. They have an old-school shopkeeper mentality that combines smart merchandising with shrewd financial management, according to the people and analysts.
The Dillard family has instilled a sense of loyalty in employees, many of whom have been with the company for decades. Staff are encouraged to give customers personal attention, which in turn keeps shoppers coming back, the people said.
Dillard’s management has been criticized for not embracing changes. In a way, this steadfastness has benefited the company. The retailer hasn’t followed growth like some of its peers, opening hundreds of stores that later had to close.
It also didn’t buy internet startups and resisted investor pressure to make money by selling its properties. Dillard’s owns the majority of its stores, which strengthens its balance sheet by keeping rent payments and debt to a minimum. More recently, a product glut has been avoided that has weighed on other chains.
“Dillard has stuck to his guns,” said Joel Bines, former executive director of AlixPartners’ retail practice, who now runs consulting firm Spruce Advisory. “You are a Steady Eddie with intense focus. Their customers are really loyal to the brand and almost fanatical in their enthusiasm.”
William Dillard II, right, who became Chief Executive in 1998, with Oklahoma Gov. Kevin Stitt, center, and Dillard’s Vice President William Dillard III.
Photo: Sue Ogrocki/Associated Press
The retailer, which has about $6.9 billion in annual sales, doesn’t host quarterly conference calls like many large publicly traded companies. Members of the Dillard family rarely give interviews, and the company declined to provide executives for this article.
Company founder William Dillard honed his retail skills in his father’s general store before attending the University of Arkansas and later Columbia University. He opened his first store in 1938 and expanded the business during the mall boom of the mid-20th century while simultaneously buying out smaller competitors. The company went public in 1969.
Mr. Dillard eventually passed management of the company to his five children. His son William, known as B II, became CEO in 1998. Two other sons, Alex and Mike, serve as President and Executive Vice President, respectively. Daughters Drue Matheny and Denise Mahaffy are also officers. Mr. Dillard died in 2002.
A total of 11 family members work for the company including Mr Dillard II’s son known as B III and Alex’s three daughters.
Brothers William, 77, and Alex, 73, have a reputation for being tough bargainers and an aversion to discounts on goods, people said. If a competing department store is selling a brand at a lower price, they will cut back on that brand’s orders instead of making up for the lower price.
The Dillard family survived a 2008 push by activist investors to loosen the company they control by owning most of the Class B stock, which elects two-thirds of the directors. Dillard family members and employees who participate in the company’s 401(k) plan own more than half of the Class A stock traded on the New York Stock Exchange.
The skyrocketing share price plus two special dividends of $15 per share paid in December 2021 and January 2023 have enriched ordinary employees and enhanced the value of the family’s holdings in the company. Stock buybacks have helped make the remaining shares more valuable. There are about 17 million Class A shares outstanding, up from more than 100 million two decades ago.
Dillard’s has about 280 stores, most of them in the south.
Photo: Sarah A. Miller/Tyler Morning Telegraph/Associated Press
The family have been accused at times of being isolated and slow to adapt to changes in retail, including the shift to e-commerce. Unlike many large retailers, Dillard’s doesn’t disclose how much of its revenue comes from online sales.
“They’re not always so alert to new ideas,” said Neil Saunders, chief executive of research firm GlobalData. “What they lack in innovation, they make up for in traditional retail skills.” He said Dillard’s stores are neat and easy to shop, and are filled with goods that customers really want — skills that other department store chains have lost.
These tactics have garnered the company a loyal following.
When Tracy Beavers is looking for a bathing suit, she only goes shopping at Dillard. “Trying on a bathing suit isn’t fun,” said the 52-year-old business coach, who lives in Little Rock. “Dillard’s sales people give me an honest opinion. They won’t tell me I look cute in something if I don’t.”
Before the Covid-19 pandemic, Dillard’s suffered from the same habit of overselling and discounting that plagued other retailers, people said.
It has thinned out its inventory during the pandemic, staying slim as other chains got overbought last year and ended up with too much stuff.
Dillard’s is one of the few department store chains still run by the founding family.
Photo: Stephen Zenner/SOPA Images/Zuma Press
One way Dillard’s avoided this fate was by preaching to its merchandise buyers the value of light inventory. The vice president of accounting recently met with shoppers across the country to explain how excess merchandise is hurting the bottom line, company spokeswoman Julie Guymon said.
The company’s inventories are down 23.5% for the fiscal year ended Jan. 28 compared to 2019. Meanwhile, its earnings for its most recent fiscal year totaled $891.6 million, up more than 700% over the same period in 2019 — far ahead of the competition.
Dillard’s is facing challenges that have put other department store chains under pressure, such as: B. the falling demand of inflation-weary buyers.
Total retail sales were flat in the fourth quarter from the year-ago period, while higher discounts weighed on margins. Recent financial results have weighed on the stock, which has fallen more than 11% since Dillard announced earnings on Feb. 21. Some of its retail peers reported sharper sales declines during the important holiday shopping season.
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The bottom line is that reducing costs through shorter shop opening hours helps. Shops are now open from 11am to 8pm, down from 10am to 9pm before the pandemic.
The reduced working hours allow staff to work a full day instead of splitting the day into two shifts, which helps with planning, Ms Guymon said.
Some employees said they were trained to behave like personal shoppers and to know their customers by name.
That’s a big draw for Michael Nuells, a 32-year-old actor who lives in Las Vegas. “When people know who you are, it’s like coming home,” he said. “They’re going to be like, ‘Hey Michael, you’re back. What are you searching for?'”
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Write to Suzanne Kapner at [email protected]
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