Dillard’s Delivers Solid Q3 Retail Sales Growth as Gross Margins Improve, but Expenses Rise

Retail Sales Climb 3% with Notable Category Strength

Dillard's third-quarter report stands out for its clear retail sales momentum—total retail sales climbed 3% over the prior-year quarter, hitting $1.40 billion. This sales growth was mirrored in comparable stores, reflecting steady consumer demand and execution across the core store base. Particularly, categories such as ladies' accessories, lingerie, juniors' and children's apparel, and ladies' apparel led gains, while shoes saw moderate growth and other segments, like home, furniture, and men's apparel, showed more modest upticks.

Gross Margins Edge Up, Reflecting Improved Merchandising

Margins provided another positive: retail gross margin expanded to 45.3% from 44.5% year over year, marking a continued improvement in Dillard’s ability to control costs and maintain pricing power. This increase was most pronounced in ladies’ accessories, lingerie, and shoes. Overall consolidated gross margin reached 43.4%, up from 42.6% the previous year, underlining operational discipline despite inflationary pressures.

Net Income Increases but Operating Expenses Take a Bigger Bite

Net income for the quarter was $129.8 million ($8.31 per share), up from $124.6 million ($7.73 per share) last year. However, this growth came with a caveat—operating expenses grew to $440.4 million (30.0% of sales), rising more than sales did, mainly due to higher payroll and related expenses. For the year to date, retail sales are up just 1%, and net income is slightly down compared to last year. These mixed results show both resilience and ongoing cost headwinds.

Cash Position Strengthens; Buybacks Continue

On the balance sheet, Dillard's liquidity improved with cash and equivalents up to $1.15 billion versus $980 million a year ago. Inventory rose by 2%, indicating a cautious approach to stock levels ahead of the crucial holiday season. The company repurchased $107.8 million in shares year-to-date at an average of $359.16 per share, signaling ongoing commitment to shareholder returns. There is still $165.2 million authorized for further repurchases.

Store Base Remains Large, with Planned Closure in Texas

Dillard's continues to operate a broad national footprint of 272 stores, including 28 clearance centers across 30 states. However, it announced the closure of its Plano, Texas location, expected in January 2026, reflecting the evolving dynamics in mall traffic and local demand.

Year-to-Date Trends Highlight Margin Resilience, But Profit Pressures Linger

Year-to-date figures provide a more measured view: total retail sales are up just 1%, with retail gross margin down slightly (42.9% from 43.3%). Operating expenses edged up as a share of sales. Net income was $366.5 million compared to $379.1 million last year. The 39-week period included a modest gain from property sales. Share count has also decreased, which has partially supported per-share metrics.

What Investors Should Watch Next

Dillard’s Q3 report shows encouraging top-line growth, margin expansion, and prudent capital management, though operating cost pressures persist. As the holiday season approaches, category strength in women’s apparel and accessories could fuel further sales gains, while inventory discipline will be critical. Investors should monitor expense trends, the impact of ongoing share buybacks, and Dillard’s adaptability in a shifting retail landscape.

The company’s healthy cash position and moderate store consolidation point to a focus on sustainable operations over mere expansion. For now, Dillard’s story is one of steady execution with cautious optimism heading into the busiest shopping period of the year.

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