Dillard’s (NYSE:DDS) shares gained more than 4% in premarket trading on Thursday after the retailer reported first-quarter earnings that exceeded analyst expectations, supported by a major legal settlement gain and stronger retail performance.
The department store operator posted adjusted earnings per share of $16.04, comfortably above Wall Street forecasts of $10.26 per share.
Revenue increased 3% year over year to $1.57 billion, topping analyst estimates of $1.54 billion and improving from $1.53 billion in the same quarter last year.
Litigation Settlement Delivers Significant Profit Boost
The quarterly results included a pre-tax gain of $104.1 million related to a favorable settlement in litigation involving payment card interchange fees.
After taxes, the settlement contributed approximately $5.10 per share to earnings.
Comparable store sales rose 3% during the quarter, while retail gross margin improved to 45.8% from 45.5% a year earlier.
Management Highlights Strong Start to 2026
“We are pleased to report a good start to 2026 with a profitable 3% sales growth supported by an increased 45.8% retail gross margin. We continue to focus on motivating our customer with newness in our merchandise assortment,” said William T. Dillard II, chief executive officer of Dillard’s.
Total retail sales reached $1.52 billion, up 3% from the prior year, with all merchandise categories recording growth.
The strongest performances came from home and furniture, ladies’ accessories and lingerie, and footwear, while men’s apparel, juniors’ and children’s apparel, and women’s apparel also posted moderate gains.
Operating Costs Increase Alongside Expansion Efforts
Operating expenses rose to $444 million, representing 28.3% of sales, compared with $421.7 million, or 27.6% of sales, in the prior-year quarter.
The increase was primarily linked to higher payroll and employee-related expenses. Ending inventory also rose 3% year over year.
During the quarter, Dillard’s opened a new 160,000-square-foot store in Beavercreek, Ohio. The company currently operates 272 stores across 30 U.S. states.