Chief executive officer and chairman of the board, Dillard's
Born: June 16, 1945.
Education: University of Arkansas, BSBA, 1966; Harvard University, MBA, 1968.
Family: Son of William T. Dillard (deceased founder of Dillard's) and Alexa (homemaker; maiden name unknown); married Mandy (maiden name unknown).
Career: Dillard's, 1968–1973 (position unknown); executive vice president, 1973–1977; president and chief operating officer, 1977–1998; chief executive officer, 1998–; chairman of the board, 2002–.
Address: Dillard's Department Stores, 1600 Cantrell Road, Little Rock, Arkansas 72201; http://www.dillards.com.
■ William Dillard II began his career in 1967 at Dillard's, the company his father, William T., had founded in 1938 in Little Rock, Arkansas. Dillard's is known as an upscale department store chain and by 2004 ranked number three in the United States, with Dillard family members owning 99 percent of the voting stock and electing two-thirds of the company's directors.
William Dillard II was named executive vice president in 1973, rising to the position of chief executive officer by 1998. He made his mark on the company almost immediately through the introduction of computers in the 1970s. Dillard took the company through its largest acquisition with the $3 billion purchase of Mercantile Stores Company in 1998. Despite criticism from industry analysts that they risked becoming a discount chain, Dillard's also initiated its own brand of clothing in 2002 to help reduce debt while increasing sales. Dillard was criticized for not being aggressive enough in slashing prices when inventory did not sell and possessing a weaker management style than his father. He and his younger brothers adamantly refused to sell the company despite falling sales and stock prices and open criticism from nonfamily stockholders.
Dillard grew up as the oldest son of a retailing pioneer. At the time of his birth, Dillard's had been operating for seven years. Dillard's father ran the company with an iron fist and groomed all five of his sons to take over management roles as they came of age. After receiving degrees in business from the University of Arkansas and Harvard, Dillard immediately began working for the family business, where he received all of his retail training under the watchful eye of his father.
Many critics of Dillard's noted the family's penchant for keeping the status quo and not allowing anyone else into the family's inner circle of running the business. In 1991 Forbes referred to the family as insulated and private.
Even though the company went public two years after Dillard began working there, its structure remained a dual-class stock, where the family owned the majority of voting stock yet retained a small percentage of the company. In 2000 the Dillard family owned 10 percent of the company but held 99 percent of the voting stock. They also kept control of the board by placing family members on it. The elder Dillard held the chairman's position until 1998, when he turned over the reins to his eldest son.
As the retailing market changed in the 1990s, Dillard remained loyal to his father's example of holding on to inventory and waiting too long to mark down out-of-season items. When the company began losing profits steadily each quarter by the end of the decade, however, Dillard began to introduce new strategies in an effort to reduce debt and bring Dillard's back to the retail giant once dubbed in 1991 a company with "profit margins that would knock your eyes out" (as quoted in Forbes , September 18, 2000).
Dillard made his mark in the company by introducing data processing as early as 1973, when he became the executive vice president. Dillard's was at the forefront of computerizing purchase orders. Dillard was also praised for being a computer whiz long before other companies began using computers.
In 1998 Dillard made a surprising move for the company, which had typically bought stores on the cheap. He made a bid for Mercantile Stores in 1998 for $3.1 billion in cash. Dillard won the bid, but analysts claimed the company paid too much, which caused Dillard's to accumulate a high level of debt. Dillard ended in-store promotions and stopped an easygoing return policy at Mercantile Stores. Both of those customer-friendly policies had been the hallmark of Mercantile. By 2002 Arkansas Business noted that the acquisition was disappointing and resulted in damaging the company's stock price. Dillard blamed the poor performance on losing time to consolidating Mercantile Stores into Dillard's.
Dillard began in 2002 to make up for the Mercantile purchase by selectively buying one store at a time in malls where businesses had exited or closed. In some locations, this gave Dillard's two anchor stores within one mall, each one specializing in different departments. Dillard called this "a doubleheader." Dillard's led the industry with these doubleheader stores, with two anchor stores in 50 different malls by May 2002.
The ownership of real estate by Dillard's continued to be the company's strong point as it struggled to keep pace with the changes in the retail industry. Analysts noted that investors seemed more interested in the land holdings than in sales when profits plunged in 2002 and 2003. Experts noted not only that Dillard has continued to make wise decisions on real estate but also that the location of the properties has been a positive for the company. By 2001 Dillard's owned 75 percent of its stores, making it a company with a strong book value, unlike other chains that lease most of their stores.
With discount retailers taking business away from the malloriented stores such as Dillard's by the end of the 1990s, Dillard began making decisions that seemed aggressive compared with the strategies previously employed by the company. Developing a private brand of merchandise led to a rise in sales by 2002. When the brand was first introduced, many thought it would hurt Dillard's by making the stores more of a discount chain; others felt the move would improve sales. One industry insider said that Dillard's started its private-label program before many other chains, which helped them get a boost on the competition. Dillard was praised for offering customers a choice between the core brands and their own brand, which was discounted. Other analysts said that consumers are obsessed with known brand-name labels and criticized Dillard's for attempting to give consumers something they did not want to buy.
Dillard told shareholders in 2002 that the company sought the perfect balance between the known labels and private ones. By 2003 the strategy had paid off, with the private label steadily increasing its profits to 18.2 percent of total store sales. However, the old problem left over from the elder Dillard continued to plague the company. Large amounts of inventory and huge markdowns hit the gross profit margins hard. Insiders said the markdowns were so drastic because Dillard waited too long to make the decision to discount the overabundant inventory at the end of the season. Dillard's became desperate to move the merchandise and slashed prices too low. Despite increasing sales of the private label, this other strategy left the company in a sales slide by mid-2003.
Along with its private label, Dillard also instituted a policy to help move merchandise faster at the end of the season. The movement of items out of the store helped stabilize the profit margins. Dillard increased the private-label merchandise and negotiated up-front vendor allowances. Forbes noted in 2000 that Dillard's had made strides with these decisions. Dillard closed unprofitable stores while reducing staff. Arkansas Business said in 2002 that these new strategies had finally taken hold to improve the net income despite dropped net sales. Dillard said in a press release, "We consider our accomplishments in the fourth quarter [fiscal year 2002] to be solid affirmation that we are on the right track with our strategies" (March 11, 2002).
Dillard's career cannot be separated from the successes and failures of the company. Critics often lambasted the man and the company for the lack of communication with the media, industry analysts, and shareholders. Forbes noted in an article in 2000 that Dillard refused to be interviewed for the story. He made it a policy never to comment on criticisms and speculations regarding the company.
One of the shareholders did speak to Forbes for the article, complaining about management's lack of response to written requests for information. Thomas Jackson, a managing director of Prudential Investment Corporation, was the second-largest shareholder in 2000, owning 9.2 percent of Dillard's stock. Jackson told Forbes that even though he was disgusted with what he perceived as arrogance, he held on to his stock, hoping Dillard would make the decision to sell the company.
When the founder of Dillard's died in 2002, many insiders speculated that his son would make the decision either to sell or to make significant changes in the policies governing the company. The speculation occurred because the elder Dillard was seen as the spiritual guide of the company despite his son's appointment as CEO in 1998. An editorial in Arkansas Business in 2002 said that even Wall Street was betting the heirs would sell the company. Dillard, although reticent to speak to the media, had sent word through friends that the family remained committed to Dillard's and entertained no ideas of selling.
Dillard said he kept shareholders informed on the company's status at the annual meetings and held conference calls with investors and any other interested parties, the media included, on a regular basis. He issued a statement after the Forbes piece came out, noting that what some refer to as "snubbing" he called "fair disclosure." By 2003, however, investors were concerned that Dillard had not participated in the last four conference calls held, despite the investors' request that Dillard be present. Robert Buchanan, an analyst for A. G. Edwards, told the America's Intelligence Wire on September 9, 2003, "In the interest of the shareholders he [Dillard] should sell the company." Analysts blamed Dillard's lack of forthrightness as one of the reasons that forecasting the earnings of the company was nearly impossible. This secretiveness kept Wall Street wary.
Analysts praised Dillard and his hands-on style of management during his early years as president. Nothing reached the floor for sale until Dillard had made a decision about it. In 1983 Dillard was praised for creating market dominance for the company through his computer system, which led to higher efficiency. However, criticisms regarding management's conservative approach to change began to surface despite the innovation in tracking merchandise through computerized files.
What had once worked for Dillard's in the 1980s no longer helped, because the nature of retail stores changed in the 1990s. Dillard made some adjustments, but he remained steadfast to his father's original strategies even with dire predictions from industry analysts as of 2004.
As Dillard began to change strategies toward private-label brands and real-estate acquisition, profits fluctuated for the decade from 1994 to 2004. When the elder Dillard died in 2002, speculation that Dillard and his brothers would sell the company created ups and downs in stock valuations. While the changes Dillard instituted did help profit margins, some of the same criticisms of management's style remained.
Forbes magazine charged in 2000 that Dillard hung on stubbornly to the belief that the family could handle the downturn in sales. The magazine said Dillard lacked his father's business sense. In 2003 analysts said that sales fell because the company had waited too long to lower prices on summer stock. By 2004 Moody's Investors Services expressed anxiety over the value of Dillard's performance and its ability to recover.
See also entry on Dillard Department Stores, Inc. in International Directory of Company Histories .
"Dillard's Dogged by Charges of Dull Management Style: Founder's Son Told to Sell the Company," America's Intelligence Wire, September 9, 2003.
Friedman, Mark, "Dillard's Brand Strategy Has Supporters, Critics," Arkansas Business , November 25, 2002, p. 1.
Halkias, Maria, "Chief of Dillard's Says Company Not for Sale," Dallas Morning News , May 21, 2002.
Kroll, Luisa, "Bargain Bin," Forbes , September 18, 2000, p. 52.
Whitsett, Jack, "Dillard's Strategy Begins to Show," Arkansas Business , March 11, 2002, p. 10.
—Patricia C. Behnke