Fashion Wins at Dillard's: Will Category Gains Be Sustainable?

Fashion has emerged as a bright spot for Dillard's Inc. DDS, helping the department store chain deliver category-level gains despite a challenging retail backdrop. Strength in women’s apparel, dresses, and occasion wear has been particularly notable, supported by disciplined inventory management and a focus on higher-margin private labels. These gains have allowed Dillard’s to outperform parts of the broader department store space, where promotional intensity and uneven demand continue to weigh on results. 

In third-quarter fiscal 2025, Dillard’s posted a 3% increase in total retail sales and comparable-store sales, signaling steady customer engagement despite a cautious consumer backdrop. Strength in fashion-driven categories helped Dillard’s outperform many traditional department store peers, reinforcing the idea that disciplined assortment planning and brand relevance are resonating with shoppers.

A key driver behind the recent fashion momentum is Dillard’s merchandising strategy. The company has leaned into curated assortments, reduced reliance on aggressive discounting, and emphasized brands and styles that resonate with its core, higher-income customer base. This approach has helped protect margins even as traffic patterns remain inconsistent across malls. Seasonal demand tied to weddings, social events, and return-to-office trends has also supported sales in fashion-forward categories.

These gains suggest Dillard’s has struck a better balance between fashion appeal and price value, enabling it to capture discretionary spending even as consumers remain selective.

Looking ahead, the key question is whether this broad-based demand is sustainable. Consumer spending on discretionary items is becoming more selective amid inflation, elevated interest rates, and lingering uncertainty around economic growth. While rising labor costs and macro uncertainty remain risks, Dillard’s focused merchandising approach, controlled inventory growth and margin discipline position it well to navigate near-term challenges. If fashion momentum continues to extend across categories, DDS could remain one of the more resilient players in the evolving department store landscape.

The Zacks Rundown for DDS

Dillard’s shares have gained 54.6% in the past year compared with the industry’s growth of 52.6%.

DDS Stock's Price Performance

From a valuation standpoint, DDS trades at a forward 12-month price-to-earnings ratio of 22.6X, higher than the industry’s 15.30X multiple.

DDS Stock's P/E Performance

The Zacks Consensus Estimate for Dillard’s fiscal 2025 and 2026 earnings implies a year-over-year decline of 9.4% and 7.5%, respectively. Earnings estimates for fiscal 2025 and 2026 have been northbound in the past 30 days. DDS currently sports a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Some other top-ranked stocks are FIGS Inc. FIGS, The Gap, Inc. GAP and Stitch Fix SFIX.

FIGS is a direct-to-consumer healthcare apparel and lifestyle brand. It flaunts a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FIGS’ current financial-year earnings and sales suggests growth of 450% and 7%, respectively, from the year-ago actuals. FIGS delivered a trailing four-quarter average earnings surprise of 87.5%.

Gap, one of the largest specialty apparel companies, currently sports a Zacks Rank #1. GAP has a trailing four-quarter earnings surprise of 19.1%, on average.

The Zacks Consensus Estimate for Gap’s current financial-year sales implies growth of 1.8% from the year-ago reported numbers.

Stitch Fix engages in the provision of clothing and accessories in the United States, and currently carries a Zacks Rank of 2 (Buy). SFIX delivered an average earnings surprise of 37.7% in the last four quarters.

The Zacks Consensus Estimate for Stitch Fix’s current financial-year sales and EPS indicates growth of 6.4% and 9.1%, respectively, from the year-ago figure.

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This article originally published on Zacks Investment Research (zacks.com).

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