One of the best-performing stocks of recent years isn’t a tech giant or a high-flying startup. Instead, it’s a family-owned department store chain that doesn’t have a large following on Wall Street.
Shares in Dillard’s Inc.
have climbed more than 1,500% since April 2020. The company’s market value is similar to that of Macy’s Inc.,
even though Dillard has less than a third of Macy’s annual revenue.
The Little Rock retailer, Ark. has approximately 280 stores, most of which are in the South, and is one of the few department store chains still run by its founding family.
The chief executive and chairman, both sons of the company’s founder, visit stores weekly and know right down to the article what sells best in each location, people who have worked with them said. They have an old-school merchant mentality that combines smart merchandising with shrewd money management, people and analysts say.
The Dillard family has instilled a sense of loyalty among staff, many of whom have been with the business for decades. Employees are encouraged to give customers personalized attention, which in turn keeps shoppers coming back, the people said.
Dillard’s management was criticized for not embracing the changes. In some ways, this consistency has benefited the company. The retailer did not pursue growth like some of its peers did by opening hundreds of stores which then had to be closed.
He also didn’t buy internet startups and resisted inducements from investors to generate cash by selling his real estate. Dillard owns the majority of its stores, which strengthens its balance sheet by keeping lease payments and debt to a minimum. More recently, it has avoided a product glut weighing down other chains.
“Dillard has stuck to his knitting,” said Joel Bines, the former managing director of retail practice AlixPartners, who now runs consulting firm Spruce Advisory. “They are a Steady Eddie with intense focus. Their customers are truly brand loyal and almost fanatical in their enthusiasm.
The retailer, with about $6.9 billion in annual sales, doesn’t hold quarterly conference calls like many large publicly traded companies. Members of the Dillard family rarely give interviews, and the company declined to make executives available for this article.
Company founder William Dillard honed his retail skills at his father’s general store before attending the University of Arkansas and later Columbia University. He opened his first store in 1938 and grew the business during the mall boom of the mid-20th century while recruiting smaller rivals. The company went public in 1969.
Mr. Dillard eventually handed over the management of the business to his five children. His son William, known as B II, became CEO in 1998. Two other sons, Alex and Mike, serve as Chairman and Executive Vice Chairman respectively. Daughters Drue Matheny and Denise Mahaffy are also members of senior management. Mr. Dillard died in 2002.
A total of 11 family members work for the company, including Mr. Dillard’s son II, known as B III, and Alex’s three daughters.
Brothers William, 77, and Alex, 73, have a reputation for being tough bargainers who have an aversion to merchandise discounts, the people said. If a competing department store sells a brand at a lower price, it will reduce orders for that brand rather than match the lower price.
The Dillard family survived a push by activist investors in 2008 to loosen their grip on the company, which they control by owning most of the Class B shares that elect two-thirds of the directors. Members of the Dillard family and employees participating in the company’s 401(k) plan own more than half of the Class A shares trading on the New York Stock Exchange.
The skyrocketing share price and two special dividends of $15 per share paid in December 2021 and January 2023 enriched rank-and-file employees and inflated the value of family holdings in the company. Share buybacks 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.
The family have at times been accused of being insular and slow to adapt to changes in retail, including the shift to e-commerce. Unlike many large retailers, Dillard’s does not disclose how much of its revenue comes from online sales.
“They’re not always so responsive 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 for and filled with products customers actually want — skills other department store chains have lost.
These tactics have earned the company a loyal customer base.
When Tracy Beavers is looking for a swimsuit, the only place she’ll buy is Dillard. “Trying on a bathing suit is no fun,” said the 52-year-old business coach, who lives in Little Rock. “Dillard’s salespeople 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 suffered from the same overbuying and undercutting habit that plagued other retailers, the people said.
It reduced its inventory during the pandemic and remained lean as other chains overbought last year and ended up with too much.
One of the ways Dillard avoided this fate was to preach the value of light inventory to his commodity buyers. Its vice president of accounting recently met with buyers across the country to discuss how excess merchandise is hurting the bottom line, company spokeswoman Julie Guymon said.
The company’s inventory was down 23.5% in the fiscal year ended Jan. 28 compared to 2019. Meanwhile, profits totaled $891.6 million in the last fiscal year, up more than 700% compared to the same period in 2019, far exceeding its rivals.
Dillard’s faces challenges that have strained other department store chains, such as slowing demand from inflation-weary shoppers.
Total retail sales in the fourth quarter were flat from the same period a year earlier, while higher markdowns weighed on profit margins. The latest financial results have put pressure on the stock, which has fallen more than 11% since Dillard’s results were announced on Feb. 21. Some of its retail counterparts reported a steeper drop in sales during the key holiday shopping period.
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Helping the bottom line is a reduction in expenses through shorter opening hours. Stores are now open from 11 a.m. to 8 p.m. compared to 10 a.m. to 9 p.m. before the pandemic.
The reduced hours allow employees to work a full day, rather than splitting the day between two shifts, which makes planning easier, Ms. Guymon said.
Some employees said they are trained to act as personal shoppers and get to know their customers by name.
It’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’ll be like, ‘Hey Michael, you’re back. What are you looking for?'”
Write to Suzanne Kapner at Suzanne.Kapner@dowjones.com
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