Dillard’s Inc. appears to be winning the endorsement of both shoppers and investors as it tries to reposition itself as more of a luxe player.
Better sales and lower expenses helped lift first-quarter profits 57.2 percent, the firm reported Friday, and Wall Street responded by pushing the company’s shares up $7.41, or 15.3 percent, to $56, after they hit a 52-week high of $56.76 in midday trading.
The 294-door Little Rock, Ark.-based chain is following in the first-quarter footsteps of Macy’s Inc., which pushed profits up fivefold with the help of some belt tightening.
But Macy’s is not the model that Dillard’s is aspiring to — think more of service-obsessed Nordstrom Inc., which also started the year off with better earnings as luxury spending rose.
“It’s a change of mind-set regarding who we should be,” said Julie Bull, director of investor relations. “There is an underserved consumer out there who wants exceptional service, and she’s seeking a retailer who will provide that on a long-term basis. It’s very much moving from what we think of as transactional retailing to relational retailing — as we raise the level of product in the store, we also are raising the level of the shopping experience and the level of attention to detail.”
Customers are now referred to as “clients” and sales associates are being encouraged to develop relationships with them. Kiehl’s cosmetics and Vince Camuto shoes have been added, and the Michael Kors assortment has been expanded.
So far, shoppers appear to approve of Dillard’s efforts. The firm’s net income rose to $76.7 million, or $1.31 a diluted share, from $48.8 million, or 68 cents, a year earlier. Revenues for the three months ended April 30 increased 1.1 percent to $1.5 billion from $1.48 billion on a 2 percent increase in comparable-store sales.
The retailer cut advertising, selling, administrative and general expenses by $4.3 million to $389.3 million and retail gross margins expanded by 130 basis points.
“I was very surprised by how strong the numbers were,” said Jason Asaeda, a retail equity analyst at Standard & Poor’s, who upgraded the stock to “buy” from “hold.”
The regional department stores have long been seen as withering under pressure of better-capitalized national competitors with superior marketing and financial might.
But Asaeda said he’s reevaluating that thinking.
“The companies that are left, they really have an opportunity to shine if they just think about what they represent,” he said.
Dillard’s has been trimming its store count, and Asaeda said that has made the chain and the overall customer experience a lot easier to manage.
“I’m not sure exactly what their final target is, but my impression is that they’re implementing changes slowly and they’re seeing how customers react,” he said.
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“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
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