Dillard’s Inc. ended a disappointing fiscal 2019 about the same time the coronavirus started upending lives and the economy.
And as the pandemic spread across the country, nonessential shopping nearly stopped, damaging the Little Rock department store chain and its peers.
Sales at Dillard’s stores open at least a year are expected to be down 31.7% in its first quarter, and 13.9% in its second quarter, according to a March 23 research report on department stores from J.P. Morgan of New York.
In the second half of the year, Dillard’s is expected to “improve to low to mid-single-digit comps,” the report said.
Meanwhile, on March 27, Dillard’s temporarily shut about 200 of its 285 locations. “While we are cooperating fully and promptly with any government directives in our markets, our first choice is to remain open where we can for the long-term benefit of our associates,” Dillard’s spokeswoman Julie Johnson Guymon said in a statement to Arkansas Business. “We believe we can safely serve the customers who choose to visit us by strictly following CDC guidelines.”
Dillard’s had announced on March 17 a plan to reduce store hours, a move that brought criticism after other retailers announced they were temporarily closing to slow the spread of the virus.
Dillard’s hasn’t “probably made the best decisions,” said Jen Redding, an analyst for Wedbush Securities Inc., a financial services and investment firm in Los Angeles. “Their stores have been open in markets where they can stay open. And I don’t think that’s really the responsible decision to make.”
While most of its stores remain dark, Dillard’s website “remains open for all customers, supported by our Internet Fulfillment Center in Maumelle as well as our store locations across the country,” Guymon said.
Dillard’s launched its ship-from-store capability for online sales in August. “This enhancement is serving us well in the current situation,” Guymon said.
Dillard’s doesn’t release its online sales numbers. But Redding doesn’t see Dillard’s making up the sales missed from its brick-and-mortar locations. “I don’t think Dillard falls in that category of having a strong e-commerce channel.”
Department stores, though, are expected to rely on online sales while their stores are closed, analyst Jacqueline Hiner of the Los Angeles market research firm IBISWorld said in an email. “The most successful operators in this period will likely be the ones that operate and advertise e-commerce platforms to sustain a revenue stream,” she said.
Still other analysts doubt that many consumers are doing much shopping online while they are home quarantined. “I’m not hearing it anecdotally from the industry,” said David Marcotte, senior vice president of insights for Kantar Retail of Norwalk, Connecticut.
Even though Dillard’s stumbled for its fiscal year that ended Feb. 1, Marcotte said he thought of the chain as being one of the healthy retailers. “Not necessarily growing, obviously, but still in better shape than, say, Macy’s,” he said.
Dillard’s reported net income of $111 million on revenue of $6.3 billion for its fiscal year that ended Feb. 1. In the previous fiscal year, Dillard’s had $170 million in net income on revenue of $6.5 billion. And same-store sales fell 1% in the most recent fiscal year, compared to an increase 2% the previous year.
Malls that closed because of COVID-19 aren’t expected to reopen for weeks. Marcotte said it’s difficult to say what will happen to Dillard’s sales when customers return. “That’s going to be huge foot traffic,” he said. “My expectation is that when everything reopens, it’s going to be the mother of all clearance sales.”
Inventory that arrived after the Christmas clearance sales is “all sitting there” and will soon be out of season, Marcottee said. He’s watching to see how consumers spend the money the federal government is sending from the coronavirus rescue package passed last week.
He also will keep an eye on what happens in the fall, the key back-to-school season for retailers. Department stores could be hurt again if the coronavirus revives or still instills fear, he said.
“If that occurs, some schools will be closed, and the back to school [shopping season] will be blown up,” Marcotte said.
Meanwhile, Dillard’s said it’s continuing with its plans to open its Waco, Texas, expansion during this fiscal year. Dillard’s also recently opened a 85,000-SF expansion at the Columbia Mall in Columbia, Missouri. That mall, however, temporarily closed on March 24, to slow the coronavirus.