Dillard’s Chooses Market Share Over Profits Amid Rising Tariffs

Dillard’s headquarters in Little Rock, where executives are “rolling with the punches” of an uncertain tariff environment. (Madeline Circle)

As other department stores are warning of tariff-related price increases, Dillard’s Inc. plans to “sacrifice profits to maintain market share,” Bill Dillard III, a senior vice president of the Little Rock department store chain, recently told a group of Arkansans.

“From our standpoint, we’ve made a conscious decision. We want to try to cover our costs, but we … are not going to work as hard at covering our margins,” Dillard told the Political Animals Club meeting at the Arkansas Museum of Fine Arts in Little Rock on June 10. “And by that, I mean we will sacrifice profits to maintain market share to not shock the customer.”

Bill Dillard’s comments during the program, called “The Ever Changing World of Tariffs and Their Potential Arkansas Consumer Impact,” provided some insight into the inner workings of the department store chain, with its 272 stores across 30 states. It’s a company that rarely makes public comments about its business.

Other retailers have said they are raising prices in response to the Trump administration’s tariffs. The administration announced the move in April, placing tariffs of at least 10% on countries that export goods to the United States.

“In fact, 76% of respondents said their businesses had increased the price of goods they sell to mitigate the cost of the new and expected tariffs,” said a June 13 news release from Signifyd, which offers retailer fraud protection services. Talker Research polled 500 U.S. e-commerce companies for Signifyd, based in San Jose, California.

Last month, Macy’s of New York said in an earnings call that it would raise prices on some items as a result of the tariffs.

Dillard said that he thought most business owners are doing their “best to hold steady” on prices, but companies have to make a profit. “And as things change with regard to your cost inputs, whether they be price of labor, price of goods, price of transportation, … you have to calculate that and figure it out,” he said.

But if Dillard’s has to raise prices, “we want to move with the market, if you will, not be ahead of it,” Dillard said.

He said one of the retailer’s vendors was aggressive about raising prices after COVID-19. The result was that the vendor’s sales declined.

Most businesses will try to adjust their prices as needed and as the market allows them to do, “but you don’t want to be the pioneer in that respect, or you’re going to get your head taken off,” Dillard said.

Since announcing the tariffs, the Trump administration has made several changes to their size and the products exempted. President Donald Trump said earlier this month that U.S. tariffs on China’s goods would be 55% while China’s tariffs on the United States’ exports would be 10%.

As a result of the tariffs, prices are expected to rise for the average consumer and department stores might see a decline in sales, William London, an international business attorney and partner at Kimura London & White LLP of Irvine, California, told Arkansas Business.

“I think, from a department store perspective, the future is uncertain,” London said.

Caught Flat-Footed

In Trump’s first term, Dillard’s “saw the writing on the wall” and started divesting its sourcing out of China, Dillard said.

Dillard’s has been able to source most of its manufacturing for its men’s category to other countries rather than rely on Chinese manufacturers, he said.

But for other categories, it hasn’t been that easy. Christmas decorations, as an example, have “been a real challenge,” Dillard said.

“We worked like crazy for the last four or five years, and we managed to get 15[%],” he said. “It used to be 100. We got it down to 85. But 85% is still China based, and there’s just not an ecosystem, i.e., supply chain, elsewhere.”

China hasn’t been the lowest-cost operator for decades, Dillard said.

The average manufacturing wage in China can be about $7 an hour, but in other countries, it can be as low as $1.30 an hour. “But the total package, [the Chinese] know-how, their skill set, etc., have been the best value still, and the best total package,” he said.

On April 2, Trump announced what he called Liberation Day, with a plan to place reciprocal tariffs on nearly all countries that export goods to the United States. (Since then, there have been court challenges to the tariffs, but they remain in place as the cases make their way through appellate courts.)

When the reciprocal tariffs were announced, it “caught us flat-footed,” Dillard said. “We didn’t see that coming.”

The announcement “got our attention,” Dillard said. “It wasn’t quite what I pictured Liberation Day feeling like.”

The news came late in the day on a Wednesday. “By the next morning, we were having meetings with legal sourcing, which are the guys that work with our overseas factories or domestic, … our merchants, with people that are responsible for buying the goods, our designers, … so a broad cross-section of folks,” Dillard said.

“And we were in full problem-solving mode and trying to discern what the impact was, how you quantify it, how you start to move forward,” he said. “But it was a big deal.”

He said Dillard’s leaders have met practically every day about the tariffs.

“Our sourcing guy just got back from Turkey, Egypt, Jordan and Pakistan, many of which we already do some business in, but we’re looking again,” Dillard said.

The markets also reacted to the Liberation Day announcement. Dillard’s stock price fell from $364.04 at the close of April 2 to $320.66 at the close of the next day. The stock price closed at $294.77 on April 8. Since then, the price has shot up 36.5% to $402.41 at the close of June 13.

For Dillard’s quarter that ended May 3, its retail sales were down 2% compared with the same period in 2024, to $1.47 billion. Its net income also was down 9% to $163.8 million for the first quarter compared with the first quarter in 2024.

“We turned in a relatively good first quarter in light of the prevailing economic uncertainty,” Dillard CEO William Dillard II said in a company news release last month. “We kept expenses under control and reported a healthy gross margin.”

A graduate of Northwestern University Kellogg School of Management, Bill Dillard lived in China in the mid-1990s

Dillard’s has kept the same manufacturing partners for decades, and they are also being impacted by tariffs.

“We’re problem-solving together,” Dillard said. “It’s not easy to figure out what to do, but it’s still in the spirit of partnership.”

In the meantime, China’s exports to the U.S. have fallen as a result of the tariffs. In May, China’s exports to the U.S. dropped nearly 35% compared with May 2024, sparking fears that retailers won’t have enough inventory in the coming months.

Dillard’s, however, expects to have enough goods to sell during the holiday shopping season. “We were rolling with the punches, and we’re making the best of it,” Dillard said.