Dillard's reports Q2 profit beat, sales narrowly miss estimates

Dillard's Inc. (NYSE: DDS ) stock fell Thursday despite a sizable second-quarter earnings beat, as tariff refunds provided a significant lift to profit and margins while sales came in just shy of expectations.

Dillard's reported earnings of $6.25 per share, well above the analyst estimate of $4.27.

Net income rose to $97.7 million from $72.8 million a year earlier, while earnings increased from $4.66 per share.

Net sales totaled $1.508 billion, narrowly missing the $1.522 billion analyst estimate and slipping from $1.514 billion a year earlier.

Total retail sales, excluding the company's construction business, rose 1% to $1.455 billion.

Comparable-store sales also increased 1%.

Tariff Refunds Give Earnings A Boost Second-quarter results included $37.2 million in refunds related to International Emergency Economic Powers Act tariffs.

The refunds contributed $28.4 million after taxes, or $1.82 per share, to earnings.

By comparison, the year-ago quarter included a $4.8 million pretax gain, or $3.7 million after taxes, primarily from the sale of three properties.

Retail gross margin jumped to 40.9% from 38.1% a year earlier.

The tariff refunds added 260 basis points to the margin.

Dillard's said it does not expect further significant refunds. "Our 1% sales increase points to a somewhat resilient consumer," CEO William T.

Dillard II said.

He added that the stronger retail gross margin, aided by tariff rebates, helped boost cash flow and earnings.

Even without the refunds, retail gross margin improved moderately in ladies' apparel and slightly in cosmetics and home and furniture.

Margins were flat in juniors' and children's apparel and declined slightly in men's apparel and accessories and shoes.

Ladies' accessories and lingerie posted a moderate margin decline.

Operating expenses rose to $443.6 million, or 29.4% of sales, from $434.2 million, or 28.7% of sales, a year earlier.

Dillard's cited higher payroll and payroll-related costs as the primary driver.

Consolidated gross margin increased to 39.7% from 36.6% a year earlier.

Accessories Drive Sales Growth Ladies' accessories and lingerie posted significant sales growth during the quarter, while home and furniture sales increased moderately.

Shoes, men's apparel and accessories, and cosmetics recorded slight sales gains.

Sales declined moderately in juniors' and children's apparel and ladies' apparel.

Inventory at the end of the quarter was 5% higher than a year earlier.

Cash Flow Improves As Dillard's Pays Down Debt For the first 26 weeks of fiscal 2026, net cash provided by operating activities rose to $326.8 million from $319.4 million a year earlier.

Capital expenditures totaled $39.5 million.

Dillard's ended the quarter with $763.1 million in cash and cash equivalents and $497.7 million in short-term investments, for a combined $1.26 billion.

The company also made $96 million in principal payments on long-term debt during the first half.

For fiscal 2026, Dillard's expects depreciation and amortization of about $175 million and capital expenditures of about $120 million.

DDS Price Action: Dillard's shares were down 5.64% at $600.15 at the time of publication on Thursday, according to Pro data.

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