Summary
While management is clearly thinking long and hard about its business, tough choices need to be made about how to best position Dillard's for the future. Dillard's clearly needs to take a leadership position in evolving the industry to a healthier, more exciting consumer environment at retail, which would be a long term positive for both the company and the sector. Dillard's has a huge opportunity if management can view the stores as both profit generator and powerful marketing tool.
Analysis
Many once dominant brands across many categories have seen their market share erode to specialized players in the retail segment. Over the last three months, same store sales have been on the decline, led primarily by juniors and children's apparel and home furnishings. Management has to realize that this "death by a thousand cuts" has begun to happen at Dillard's. Acknowledgment of this development is a critical first step.
Several key questions remain at Dillard's: How effectively and quickly can the company execute its realignment and affect internal cultural change? What form will the retail strategy take, and if successful, how big can the roll out be? What are the company's ideas to improve, differentiate, and elevate the environment for its retail partners? Will theses changes lead to a cultural shift whereby the company will focus on elevating pricing and gross margin at its "A" locations in lifestyle centers and premium malls?
Management should observe the evolution of product and brand presentation at retail. Dilliard's must be willing to pull back on some of its moderate and slightly off-price distribution, or at least focus on doing a better job of tiering across price points, particulary in "A" locations. Dillard's retail presentation has become undifferentiated and uninspiring.I believe they should adopt a premium specialty network to improve brand presentation, capture much higher product margins, and create an exciting environment for shoppers to regularly experience. Dillard's needs to improve retail presentation, get quick feedback on what is not working, and capture more vertical product margins. Management should be collaborating with its retail partners to improve presentation and differentiation. Using shop-in-shops and other differentiated programs would help improve the shopping environment. Dillard's should consider leveraging their retail partners effective merchandise techniques.
Lastly, I believe that Dillard's has a huge opportunity if management can view the stores as both profit generator and powerful marketing tool. Some of the most profitable brands deploy a significant specialty retail presence.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
