Slow-Moving Dillard's Must Pick Up the Pace to Stay in the Race

Implications: Dillard's has grown, though not necessarily thrived, over the years, largely through acquisitions. The acquired companies and stores were a mixed bag of good and mediocre players; Dillard's became a real melting pot and the diverse roots are still evident in the stores today. The stores are sometimes dark and convoluted with unusual merchandise adjacancies (but heck, the old Marshall Field's merchandised books next to Waterford crystal); management is inbred and appears strategically unsophisticated. Stores are frequently very large with correspondingly low sales per square--you're much more likely to walk into a Dillard's store with sales productivity of $150 per square foot or lower than find one that generates $200 a square foot or higher.  The double whammy of big stores and low productivity isn't helped by the absence of stores in large, dense markets, such as New York, Chicago, or LA.

Analysis:

There is a big plus--Dillard's offers its customers lots of great merchandise and fabulous end-of-season clearance events. Are these enough to carry the company through a very challenging retail cycle?

A trip through a larger Dillard's store the first week of April brought home the strengths and weaknesses of the operation and also confirmed that management is serious about introducing some energy, excitement, and urgency into the stores. Will the company become fleet footed and agile? Probably not, but it will put up a fight.

Dillard's has a great shoe department with sales penetration of about 13% to total, twice that of most department stores and approaching Nordstrom's, the mother lode of all shoe departments. It really sparkled and glowed during my recent visit; display tables of Wellies, for example,  really set the tone.

Unfortunately, the rest of Dillard's center-core businesses don't equal the appeal of shoes. While handbag space is huge and reasonably appealing with large inventories from the usual suspects plus unique product from Jack George's, cosmetics, fashion jewelry, watches, neckwear, and belts just don't excite as they often do at Nordstrom.
 
Men's was appealing with Daniel Cremieux and Polo front and center. In ready-to-wear, a new designer dress department was being introduced. Dana Buchman was being cleared out in sportswear and will be replaced for Fall by Donna Karan. Massive quantities of Ellen Tracy, Austin Reed, BCBG, Alex Marie, Eileen Fisher, Nurture, among others,  filled the floor.  Juniors has been cleaned up, featuring big statements of Kensie Girl, Takara, and prom dresses.

The store was colorful and attractive new-concept full sheet signing called out newness, "Spring Chic", and "The Style of Your Life". Clearly there are changes coming.  Making the stores more appealing and offering stronger genuine customer service cannot hurt. HOWEVER, as recent sales results from a number of top-notch department store and specialty players clearly announce, this is not a good time to stray away from the target customer, especially by trading up too aggressively.