Kohl's Earnings Surprise Crash and Burn

[storewanderer]

With all that being said about Dillard's.............................I hardly think this is a retailer to be admired.

They may not be a retailer to be admired in the sense that they do not go after cutting edge design or technology, or innovation, but they have managed their house properly from a financial standpoint. They have kept their company from being ruined like so many other publicly traded companies through activist investors, weird debt arrangements, being pressured to "compete with Amazon," etc. And that is why they are still in business. Also their products are of a reasonable to better quality and they operate their stores to a high standard starting with build quality.

They know what they are doing, they have a strategy that works thanks to how they are set up financially.

[storewanderer]

Dillard’s sucess is that most of their stores are in smaller cities, where they are often the only full-line department store in town. Those places are not known for the desire for the newest fashion designs.

I haven't really noticed this situation of them being the only full line department store in a given city. Even in smaller markets they still usually competed with at least a JC Penney (and a Sears not all that long ago- but I don't think Sears closing would help the softlines heavy Dillards since Sears has been struggling on softlines since the 1980's). This may have changed more recently with all the JCP closures.

Dillard's probably has been helped to an extent by Macys closing some smaller market stores, though I can't really cite any specific examples of where this happened. But those were lousy Macys anyway, they shouldn't have been Macys in the first place with the quality of store/product offer.

[ClownLoach]

Dillard's sales continue to slide and their profit margins have taken a beating since COVID when they (and others) were able to sell more full price merchandise. I recently visited two of their stores in Ohio. Neither had any customers and one of them seemed to have literally no staffing in the home store or the cosmetic/jewelry section that was just off the mall. Macy's, in contrast had some customers and you could find staff. Owning mall real estate may save you rent, but it's a declining investment in most places. Dillard continues to do buy backs in order to raise the dividend.

Stating Dillard's sales "continue to slide" is a flat out lie. They are outperforming the industry (that isn't saying much).
Dillard's sales in 2012 were $6.59 billion
Dillard's sales in 2019 were $6.2 billion
Dillard's sales in 2023 were $6.75 billion

This is a declining industry. It is losing sales. Companies in this industry are not doing very well...
Macy's sales in 2012 $27.7 billion
Macy's sales in 2019 $24.6 billion
Macy's sales in 2023 $23 billion

Dillard's is also doing these stock buy backs so they can continue to control their company and not lose it to hostile/activist investors. They actually seem to want to keep their dividend machine going over the long term. They aren't looking for the quick buck like so many other companies are... you do not like Dillard's and that is fine, you have a lot of valid reasons for that assessment some of which I agree with, but they are a very financially solid company and for how they run their business the results they post are very impressive. If various other department store operators had managed their business the way Dillard's does, we would still have a lot more department store chains in the US today.

Dillard's relative success, which is hindered by failures of their industry peers dying off in the same malls due to their mismanagement, further validates what I'm saying. There is demand for this format. The problem is due to too many mergers the players are very weak and they are underperforming as a result. The majority of the department store problem in my opinion is still self inflicted.

They have the same thing in common with Macy's in only one key area: both know that if they sell they sign the death warrant for their companies, which would be immediately gutted for their real estate assets and left for dead, Red Lobster style. (Hey, that's a great new catchphrase)

[buckguy]

Dillard's sales continue to slide and their profit margins have taken a beating since COVID when they (and others) were able to sell more full price merchandise. I recently visited two of their stores in Ohio. Neither had any customers and one of them seemed to have literally no staffing in the home store or the cosmetic/jewelry section that was just off the mall. Macy's, in contrast had some customers and you could find staff. Owning mall real estate may save you rent, but it's a declining investment in most places. Dillard continues to do buy backs in order to raise the dividend.

Stating Dillard's sales "continue to slide" is a flat out lie. They are outperforming the industry (that isn't saying much).
Dillard's sales in 2012 were $6.59 billion
Dillard's sales in 2019 were $6.2 billion
Dillard's sales in 2023 were $6.75 billion

This is a declining industry. It is losing sales. Companies in this industry are not doing very well...
Macy's sales in 2012 $27.7 billion
Macy's sales in 2019 $24.6 billion
Macy's sales in 2023 $23 billion

Dillard's is also doing these stock buy backs so they can continue to control their company and not lose it to hostile/activist investors. They actually seem to want to keep their dividend machine going over the long term. They aren't looking for the quick buck like so many other companies are... you do not like Dillard's and that is fine, you have a lot of valid reasons for that assessment some of which I agree with, but they are a very financially solid company and for how they run their business the results they post are very impressive. If various other department store operators had managed their business the way Dillard's does, we would still have a lot more department store chains in the US today.

Given the COVID era inflation, Dullard's sales have dropped. Their profits had a COVID bubble but have been in long-term decline (notice that you didn't cite those numbers, but you must have seen them). You also didn't dispute the buy-back which they've been doing for years. At some point, the family will decide there are easier ways to make money and will sell what's left to private equity, like Belk. Macy's has had multiple rounds of closures and isn't exactly comparable.

At best, they have an odd niche consisting of older customers in a sometimes random collection of mostly sunbelt locations. The only surviving chain remotely like that like that is Boscov in the mid-Atlantic, which has scattered stores in a mix of large and small markets. They seem to have recovered from bankruptcy as a going concern---remodeling stores, adding the occasional new one and operating on a more old-school model than Dillard while drawing actual customers including some relatively young people.

[veteran+]

Dillard's sales continue to slide and their profit margins have taken a beating since COVID when they (and others) were able to sell more full price merchandise. I recently visited two of their stores in Ohio. Neither had any customers and one of them seemed to have literally no staffing in the home store or the cosmetic/jewelry section that was just off the mall. Macy's, in contrast had some customers and you could find staff. Owning mall real estate may save you rent, but it's a declining investment in most places. Dillard continues to do buy backs in order to raise the dividend.

Stating Dillard's sales "continue to slide" is a flat out lie. They are outperforming the industry (that isn't saying much).
Dillard's sales in 2012 were $6.59 billion
Dillard's sales in 2019 were $6.2 billion
Dillard's sales in 2023 were $6.75 billion

This is a declining industry. It is losing sales. Companies in this industry are not doing very well...
Macy's sales in 2012 $27.7 billion
Macy's sales in 2019 $24.6 billion
Macy's sales in 2023 $23 billion

Dillard's is also doing these stock buy backs so they can continue to control their company and not lose it to hostile/activist investors. They actually seem to want to keep their dividend machine going over the long term. They aren't looking for the quick buck like so many other companies are... you do not like Dillard's and that is fine, you have a lot of valid reasons for that assessment some of which I agree with, but they are a very financially solid company and for how they run their business the results they post are very impressive. If various other department store operators had managed their business the way Dillard's does, we would still have a lot more department store chains in the US today.

Given the COVID era inflation, Dullard's sales have dropped. Their profits had a COVID bubble but have been in long-term decline (notice that you didn't cite those numbers, but you must have seen them). You also didn't dispute the buy-back which they've been doing for years. At some point, the family will decide there are easier ways to make money and will sell what's left to private equity, like Belk. Macy's has had multiple rounds of closures and isn't exactly comparable.

At best, they have an odd niche consisting of older customers in a sometimes random collection of mostly sunbelt locations. The only surviving chain remotely like that like that is Boscov in the mid-Atlantic, which has scattered stores in a mix of large and small markets. They seem to have recovered from bankruptcy as a going concern---remodeling stores, adding the occasional new one and operating on a more old-school model than Dillard while drawing actual customers including some relatively young people.

I'm with you on this.

I think their customer profile is not sustainable (aged and not too many years left going forward). Dillard's is not set up for the future customer. Can they tweek in time to cater to younger customers?

[ClownLoach]

Stating Dillard's sales "continue to slide" is a flat out lie. They are outperforming the industry (that isn't saying much).
Dillard's sales in 2012 were $6.59 billion
Dillard's sales in 2019 were $6.2 billion
Dillard's sales in 2023 were $6.75 billion

This is a declining industry. It is losing sales. Companies in this industry are not doing very well...
Macy's sales in 2012 $27.7 billion
Macy's sales in 2019 $24.6 billion
Macy's sales in 2023 $23 billion

Dillard's is also doing these stock buy backs so they can continue to control their company and not lose it to hostile/activist investors. They actually seem to want to keep their dividend machine going over the long term. They aren't looking for the quick buck like so many other companies are... you do not like Dillard's and that is fine, you have a lot of valid reasons for that assessment some of which I agree with, but they are a very financially solid company and for how they run their business the results they post are very impressive. If various other department store operators had managed their business the way Dillard's does, we would still have a lot more department store chains in the US today.

Given the COVID era inflation, Dullard's sales have dropped. Their profits had a COVID bubble but have been in long-term decline (notice that you didn't cite those numbers, but you must have seen them). You also didn't dispute the buy-back which they've been doing for years. At some point, the family will decide there are easier ways to make money and will sell what's left to private equity, like Belk. Macy's has had multiple rounds of closures and isn't exactly comparable.

At best, they have an odd niche consisting of older customers in a sometimes random collection of mostly sunbelt locations. The only surviving chain remotely like that like that is Boscov in the mid-Atlantic, which has scattered stores in a mix of large and small markets. They seem to have recovered from bankruptcy as a going concern---remodeling stores, adding the occasional new one and operating on a more old-school model than Dillard while drawing actual customers including some relatively young people.

I'm with you on this.

I think their customer profile is not sustainable (aged and not too many years left going forward). Dillard's is not set up for the future customer. Can they tweek in time to cater to younger customers?

If the cyclical model holds, and nothing indicates to me it won't, then these DTC brands that are currently spending a fortune on their own store operations will eventually want to give up those expenses to improve margins and volume. And that will mean selling to department stores. As the brands change and update they will thereby bring younger customers.

Note the recent struggles of Nike, where they acknowledged removing product from department store chains was a mistake.

Eventually the brands become hungrier and realize it costs too much to keep building stores, so they look for someone else who has done it already.

Another factor with Dillard's is where they're located: fast growing sun belts with young population. They offer easy, easy, easy credit which those people need. So they're already attracting younger shoppers with the credit.

[storewanderer]

Duplicate

[storewanderer]

I'm with you on this.

I think their customer profile is not sustainable (aged and not too many years left going forward). Dillard's is not set up for the future customer. Can they tweek in time to cater to younger customers?

If the cyclical model holds, and nothing indicates to me it won't, then these DTC brands that are currently spending a fortune on their own store operations will eventually want to give up those expenses to improve margins and volume. And that will mean selling to department stores. As the brands change and update they will thereby bring younger customers.

Note the recent struggles of Nike, where they acknowledged removing product from department store chains was a mistake.

Eventually the brands become hungrier and realize it costs too much to keep building stores, so they look for someone else who has done it already.

Another factor with Dillard's is where they're located: fast growing sun belts with young population. They offer easy, easy, easy credit which those people need. So they're already attracting younger shoppers with the credit.

The thing is as these current aging customers stop shopping, another new group of aging customers is right behind them. That new group of aging customers seems to be showing up to shop at Dillard's. Dillard's is positioned strongly in these markets that a lot of retirees keep moving into. AZ, FL, TX, NV, etc. They are also reaching lower income customers through those "clearance stores" and establishing with those customers that they offer nice products (and those customers will remember that when they need something nice and are willing to pay full price in a full service location).

Also I see a cross section of age groups shopping in Dillard's. They get plenty of 30-something age customers who are looking for "nicer" products. Women's shoes is their strongest department and this attracts all ages. Men's clothing has the right mix of "golf" clothing as I call it and attracts a cross section of customer ages again 30+ age group. You go there once you're fed up with poor quality products elsewhere.

I am not sure what the benefit would be for Dillard's to sell out to private equity. Why would that make buckguy happy? It seems to me if more businesses had stayed debt free, asset heavy, like Dillard's has, retail would be in a much better place today with additional competition and more stable operators. So what if the family is getting a bunch of dividends from the ongoing operation? I see no issue with that. Sure they could try to instead invest the money back into the company and try to reinvent the business and do things like that but at the end of the day they are still here, they are still debt free, they are still profitable, while many competitors who have gone the "reinvent" route, the "private equity" route, are out of business. The consumer would be much better off if more retailers managed their finances the way Dillard's does.

[storewanderer]

Given the COVID era inflation, Dullard's sales have dropped. Their profits had a COVID bubble but have been in long-term decline (notice that you didn't cite those numbers, but you must have seen them). You also didn't dispute the buy-back which they've been doing for years. At some point, the family will decide there are easier ways to make money and will sell what's left to private equity, like Belk. Macy's has had multiple rounds of closures and isn't exactly comparable.

At best, they have an odd niche consisting of older customers in a sometimes random collection of mostly sunbelt locations. The only surviving chain remotely like that like that is Boscov in the mid-Atlantic, which has scattered stores in a mix of large and small markets. They seem to have recovered from bankruptcy as a going concern---remodeling stores, adding the occasional new one and operating on a more old-school model than Dillard while drawing actual customers including some relatively young people.

Just the fact that Dillard's consistently posts any sort of profits is better than what we see going on with the rest of the industry over the past 10 year time period...

Dillard's average store is doing $25 million a year in sales so someone is buying something there... the average Macys is doing $32 million a year in sales so obviously they are selling more... and they need to sell more to service all of their debt and pay rent. Both chains are still far more productive than Kohls who averages about $14 million per year per store.

I'm not sure what you are looking for here. Dillard's has outperformed the industry (thanks to having no debt and owning most of its stores) in the past decade. They are not the best retailer at running a cutting edge store with cutting edge technology and the trendiest products, but they have managed their finances well and operate their stores to a high standard.

If Macy's knew what it was doing they wouldn't be having multiple rounds of closures... Macy's is in a constant state of chaos, restructuring, expense cuts, and throwing whatever at the wall hoping something sticks. Now there are activist investors going after the chain trying to get control of it. Who knows what will happen to Macy's. Never a dull moment there but who knows what form the company will be in five years from now.

[ClownLoach]

Given the COVID era inflation, Dullard's sales have dropped. Their profits had a COVID bubble but have been in long-term decline (notice that you didn't cite those numbers, but you must have seen them). You also didn't dispute the buy-back which they've been doing for years. At some point, the family will decide there are easier ways to make money and will sell what's left to private equity, like Belk. Macy's has had multiple rounds of closures and isn't exactly comparable.

At best, they have an odd niche consisting of older customers in a sometimes random collection of mostly sunbelt locations. The only surviving chain remotely like that like that is Boscov in the mid-Atlantic, which has scattered stores in a mix of large and small markets. They seem to have recovered from bankruptcy as a going concern---remodeling stores, adding the occasional new one and operating on a more old-school model than Dillard while drawing actual customers including some relatively young people.

Just the fact that Dillard's consistently posts any sort of profits is better than what we see going on with the rest of the industry over the past 10 year time period...

Dillard's average store is doing $25 million a year in sales so someone is buying something there... the average Macys is doing $32 million a year in sales so obviously they are selling more... and they need to sell more to service all of their debt and pay rent. Both chains are still far more productive than Kohls who averages about $14 million per year per store.

I'm not sure what you are looking for here. Dillard's has outperformed the industry (thanks to having no debt and owning most of its stores) in the past decade. They are not the best retailer at running a cutting edge store with cutting edge technology and the trendiest products, but they have managed their finances well and operate their stores to a high standard.

If Macy's knew what it was doing they wouldn't be having multiple rounds of closures... Macy's is in a constant state of chaos, restructuring, expense cuts, and throwing whatever at the wall hoping something sticks. Now there are activist investors going after the chain trying to get control of it. Who knows what will happen to Macy's. Never a dull moment there but who knows what form the company will be in five years from now.

I suspect there are extremes at Macy's, while the range at Dillard's is narrower.

I would have to imagine Macy's has stores doing as little as $7 to 8 Million, and extremes way up there. Maybe a few triple digit like Herald Square. So the $7M ish low volume stores drag down the company and can't be "cost cut" any further once inevitable cost increases push them into negative territory again.

Meanwhile I could easily see each Dillard's doing about the same $25M.

The consistency makes the company easier to operate and thus more profitable. Also the Dillard's stores appear to be more uniform.