Dillard’s Clearance Centers Bring Bargains And Impending Vacancies To Troubled Shopping Malls

The Dillard’s Clearance Center at the West Oaks Mall in Houston, Texas has operated for 10 years. … [+]

The opening of a Dillard’s Clearance Center is often a welcome sight to bargain-hungry shoppers. These clearance centers are housed in Dillard’s former full-line stores that anchor longtime shopping malls. However, the transition into a clearance center format is often a clear sign that the location, and the mall, is on borrowed time.

Dillard’s, one of the country’s largest department store companies, operates 285 stores in 29 states. But Dillard’s is not just one of the largest department stores, it’s also one of only a dozen such retailers that has survived until 2021.

Dillard’s currently runs 32 clearance centers, the largest amount the company has ever operated. Three years ago, there were only 14. They are typically jam-packed with heavily-discounted merchandise sold at a minimum of 65% off retail price. They frequently offer promotions that feature additional discounts on the already reduced prices.

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A placard at a Dillard’s Clearance Center clearly establishes its “all sales final” policy.

These centers consolidate merchandise onto one floor, operate under reduced hours, and are frequently closed on Mondays. All sales are final, no returns.

Part of the appeal of these clearance centers is that they are not stocked with surplus goods purchased from other distressed retailers or vendors. “The vast majority of the merchandise comes from full-line Dillard’s stores” says Julie Johnson Guymon, the company’s Director of Investor Relations. “On very, very rare occasions, we have bought merchandise from other sources, but that is minimal.”

Shoppers won’t find a Dillard’s Clearance Center at any of the country’s most popular or profitable malls. They anchor shopping centers with high vacancy rates that are past their prime. In many instances, they are the complex’s last surviving large retailer.

The lifespan of these stores is often short-lived. Dillard’s Clearance Centers rarely last for more than a handful of years. They are never seen as long-term solutions for these long-struggling, aging locations.

Dillard’s acquired Tampa’s Belk-Lindsey store at the troubled Eastlake Square Mall in 1992. In 1994, … [+]

Dillard’s regularly analyzes each store “to determine the highest and best use of each location.” That’s standard practice with most retailers. But Macy’s M -0.1%, Belk, and others tend to lean toward mass closures of their underperforming properties. Dillard’s clearance center format helps extend an individual location’s limited lifespan and allows the retailer to sell off overstock and past season merchandise on its own terms.

Starting in the mid 1980s, Dillard’s went on a large buying spree. The retailer took advantage of companies that were caught up in the industry’s merger and leveraged buyout frenzies. By 1990, Dillard’s added 120 locations to its store count. Businesses such as Stix, Baer & Fuller in St. Louis, Higbees in Cleveland, Ivey’s in Charlotte, and D.H. Holmes in New Orleans, were willing and eager to sell and helped Dillard’s quickly expand into new markets.

Dillard’s Clearance Center at Florida’s Boynton Beach Mall is housed in a former Lord & Taylor … [+]

In 1998, Dillard’s grew even larger when it purchased 103 units of Mercantile Stores, the owner of Maison Blanche in New Orleans, Joslins in Denver, Gayfers in Mobile, and many other regional names. All of these acquisitions left Dillard’s with a haphazard collection of locations in all sizes and formats.

Since the early 2000s, Dillard’s has replaced many of these acquired properties with newer stores of a more uniform design. They have helped provide the retailer a cleaner, consistent, and more contemporary image. They maintain Dillard’s longstanding commitment to stores that “create a feeling of subdued elegance.”

The Dillard’s at Colorado’s Park Meadows Mall on December 8, 2020.

Dillard’s has recently been criticized for its commitment to the traditional department store format. A number of analysts doubt that brick-and-mortar department stores, with their collection of cosmetics, clothing, and, comforters all under one roof, have a future. Critics additionally cite the retailer’s need for a more comprehensive and engaging e-commerce experience.

The brick-and-mortar format has been further complicated by COVID-19. Health and safety concerns continue to impact in-store pedestrian foot traffic, though there have been some encouraging signs of a rebound.

Dillard’s recently-released 4th quarter financial report outlined the challenges of doing business in the world of COVID. The company announced its strategy of reducing inventory and expenses and preserving liquidity. Dillard’s ended the year with $360 million in cash and inventory levels down 26%.

CEO William T. Dillard II expresses optimism regarding the country’s economic future and his company’s ability to weather these challenges. “Our team’s ability to adjust to the changing circumstances throughout [2020] made us proud. We are optimistic increased vaccinations, warmer weather and fresh fashions will motivate Americans to shop this spring.”

William T. Dillard opened his first apparel store on February 12, 1938 in Nashville, Arkansas. … [+]

Dillard’s is somewhat of a “newcomer” to the department store industry. William Dillard’s entry into the retail world dates only from 1938, with a modest apparel store in Nashville, Arkansas, population 3500. He spent ten years in Nashville before he ventured to Texarkana.

Dillard learned the department store trade after he served in executive positions at large stores in Texas before he purchased Tulsa’s Brown-Dunkin in 1960. By 1964, he controlled two of Little Rock’s largest stores.

After he established the Little Rock headquarters, Dillard built a department store empire largely through purchasing other established businesses. By 1972, Dillard operated 22 full-line department stores from New Mexico to Missouri. In 2003, that figure grew to 328.

The Dillard’s at the Pines Mall in Pine Bluff, Arkansas converts into a Clearance Center on April … [+]

Following industry standard, Dillard’s does not release sales figures for its individual stores. But the conversion of a traditional Dillard’s into a clearance center is never a good sign.

Department stores and shopping centers have shelf lives. The internet and COVID have battered the brick-and-mortar retail industry. Dillard’s Clearance Centers may bring joy and bargains to shoppers but it’s also a clear indicator that another large mall vacancy is imminent.

I’ve been cited in media publications as a department store “historian,” “lecturer,” “expert,” “guru,” “aficionado,” “junkie,” and “maven.” I am an oboist with the

 

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