Macy's Buyout? Private ownership bid

[veteran+]

Wow, that is one nasty set up for compensation, regardless if it works for a "few people".

[storewanderer]

Wow, that is one nasty set up for compensation, regardless if it works for a "few people".

It is terrible for part time employees. It actually works better for full time employees than part time employees. The model is strange. Dillards isn't overly heavy on store level management either. There are a lot more full time employees out on the floor under this wage model... even the department managers (I think they call them a "Business Manager") are paid on a pay scale established based on how much product their department sells.

[ClownLoach]

Dillards does not have the cache of Macy's, not even close. This, despite Macy's being kind of messed up.

Doesn't debt factor into this? I thought Dillard was debt free? That would explain the discrepancy.

Dillard's does not seem to draw a lot of traffic, but they have a considerable amount of customers who shop with their credit cards. They are also a full commission model which reduces labor costs as the sales people help set displays, stock the racks and shelves, and clean the store. This is why their stores typically are perfectly clean and recovered, even though they might look a bit dated.

California retailers operating on full commission run into problems, which was one of the reasons for the infamous conversion to hourly at Circuit City who had more stores in California than any other state. The commissioned employees were responsible for substantial work that was effectively unpaid (stocking shelves, cleaning the store, setting planograms and displays). Concept was that they had to do this work to be able to sell merchandise and earn their commissions. The only work that wasn't done by commissioned employees was the actual unloading of trucks, warehouse stocking, and loading into cars. Everything else used to be fine until California labor board began investigating Circuit City with this kind of operation and questioned if they were really making employees effectively work off the clock; as you know when one company falls under the microscope everyone else reacts swiftly. This might also be why Dillards stopped expanding into California, as the state investigating Circuit City's commissioned employees work in retail happened a few years after they opened in Antelope Valley Mall. I haven't shopped that location but I'll bet they run a different staffing model in California as a result. Most full commission models today are only in smaller formats with minimal side work, like cell phone stores, or car dealers. Pretty much everything else became hourly with some commission incentives which ultimately is a more expensive model

Back to the topic at hand, Dillard's is such a regional player that they would likely experience little to no success expanding without costly advertising campaigns. A Dillard's opening in Seattle for example would be no more successful than a Boscov's or Belk or really any other regional player; very few customers would know who they are and the cost of acquisition per customer would be substantial.

Dillard's runs on a model that I consider worse than commission. The employee's wage is based on how much they sell. They have a sales goal by day, week, etc. and wage is directly tied to it over time. They may get paid $15/hr today under the assumption they'll average $300 an hour in sales. If they go a few months and only average $250 an hour in sales then they get a pay cut... if they get average sales up again then they'll get their $15 back... It isn't that simple but that is broadly how it works and there are factors for seasonality, clearance sales, etc. but it is a very tough model especially given the low customer counts in the stores. But there are quite a few employees in the Reno Dillards who have worked there since it opened in 2005, also a couple guys in women's shoes (best performing department in the store) who I am pretty sure used to be commissioned appliance salespeople at Sears, so it seems to work for some of these employees.

Dillard's stopped expanding into California because Macy's West was run in a very aggressive manner taking all of the real estate so they couldn't get good sites at the better malls. Macy's let them get nosebleed sites in places like Stockton and El Centro and expected they'd just shut down. Well, they are indeed still open at those sites... Not sure how El Centro does but the Stockton Store actually does very well. Reno Store has had a few ups and downs; I was worried it was going to close around 2016-2017; it has done better the past couple years.

This is still basically a modified commission program that probably is the legal workaround for the unpaid work problems I mentioned California was investigating. Whether the store is in California or not doesn't really matter, if a judgment is filed in California then many lawyers in other states jump in and file class actions that are large enough to go to federal courts. Therefore they'll change practices nationwide over California matters unless the laws elsewhere are not protective of whatever criteria is in question. I think the question of merchandising and inventory maintenance, ordering, cycle counts etc. being off the clock work effectively for full commission people is a legitimate concern and that's why it was being questioned as violation of federal employment laws.

In this model, at the end of the day they're doing extra calculations but still paying on commission where if you don't sell you don't get paid for your work. They just make adjustments over an average period instead of paying in real time. Surely they are also going to discipline or fire anyone who isn't meeting aggressive sales goals too, as they are not going to want to be "propping up" their wages if they're not making enough money off that salesperson. So they could also keep the questionable practices of using these salespersons as labor for the store "as long as it's on the sales floor itself". They can still be made to merchandise the store, they just can't be the ones unloading deliveries or working the back room. What they wouldn't be able to do under this model is get overtime exemption for salespersons, yes that was another part of commissions in the past.

As far as what Dillard's said publicly about expansion, this was hanging over California as well a few years after they opened that handful of stores. California was going after anything they felt was deserving of litigation. Commissioned sales, and restaurant waitstaff were both looked at. As you probably know, California changed to no longer allow restaurant waitstaff to be compensated at the federal tipped employees rate (which is somewhere around $3/hour) and said they have to receive full minimum wage.

[veteran+]

Doesn't debt factor into this? I thought Dillard was debt free? That would explain the discrepancy.

Dillard's does not seem to draw a lot of traffic, but they have a considerable amount of customers who shop with their credit cards. They are also a full commission model which reduces labor costs as the sales people help set displays, stock the racks and shelves, and clean the store. This is why their stores typically are perfectly clean and recovered, even though they might look a bit dated.

California retailers operating on full commission run into problems, which was one of the reasons for the infamous conversion to hourly at Circuit City who had more stores in California than any other state. The commissioned employees were responsible for substantial work that was effectively unpaid (stocking shelves, cleaning the store, setting planograms and displays). Concept was that they had to do this work to be able to sell merchandise and earn their commissions. The only work that wasn't done by commissioned employees was the actual unloading of trucks, warehouse stocking, and loading into cars. Everything else used to be fine until California labor board began investigating Circuit City with this kind of operation and questioned if they were really making employees effectively work off the clock; as you know when one company falls under the microscope everyone else reacts swiftly. This might also be why Dillards stopped expanding into California, as the state investigating Circuit City's commissioned employees work in retail happened a few years after they opened in Antelope Valley Mall. I haven't shopped that location but I'll bet they run a different staffing model in California as a result. Most full commission models today are only in smaller formats with minimal side work, like cell phone stores, or car dealers. Pretty much everything else became hourly with some commission incentives which ultimately is a more expensive model

Back to the topic at hand, Dillard's is such a regional player that they would likely experience little to no success expanding without costly advertising campaigns. A Dillard's opening in Seattle for example would be no more successful than a Boscov's or Belk or really any other regional player; very few customers would know who they are and the cost of acquisition per customer would be substantial.

Dillard's runs on a model that I consider worse than commission. The employee's wage is based on how much they sell. They have a sales goal by day, week, etc. and wage is directly tied to it over time. They may get paid $15/hr today under the assumption they'll average $300 an hour in sales. If they go a few months and only average $250 an hour in sales then they get a pay cut... if they get average sales up again then they'll get their $15 back... It isn't that simple but that is broadly how it works and there are factors for seasonality, clearance sales, etc. but it is a very tough model especially given the low customer counts in the stores. But there are quite a few employees in the Reno Dillards who have worked there since it opened in 2005, also a couple guys in women's shoes (best performing department in the store) who I am pretty sure used to be commissioned appliance salespeople at Sears, so it seems to work for some of these employees.

Dillard's stopped expanding into California because Macy's West was run in a very aggressive manner taking all of the real estate so they couldn't get good sites at the better malls. Macy's let them get nosebleed sites in places like Stockton and El Centro and expected they'd just shut down. Well, they are indeed still open at those sites... Not sure how El Centro does but the Stockton Store actually does very well. Reno Store has had a few ups and downs; I was worried it was going to close around 2016-2017; it has done better the past couple years.

This is still basically a modified commission program that probably is the legal workaround for the unpaid work problems I mentioned California was investigating. Whether the store is in California or not doesn't really matter, if a judgment is filed in California then many lawyers in other states jump in and file class actions that are large enough to go to federal courts. Therefore they'll change practices nationwide over California matters unless the laws elsewhere are not protective of whatever criteria is in question. I think the question of merchandising and inventory maintenance, ordering, cycle counts etc. being off the clock work effectively for full commission people is a legitimate concern and that's why it was being questioned as violation of federal employment laws.

In this model, at the end of the day they're doing extra calculations but still paying on commission where if you don't sell you don't get paid for your work. They just make adjustments over an average period instead of paying in real time. Surely they are also going to discipline or fire anyone who isn't meeting aggressive sales goals too, as they are not going to want to be "propping up" their wages if they're not making enough money off that salesperson. So they could also keep the questionable practices of using these salespersons as labor for the store "as long as it's on the sales floor itself". They can still be made to merchandise the store, they just can't be the ones unloading deliveries or working the back room. What they wouldn't be able to do under this model is get overtime exemption for salespersons, yes that was another part of commissions in the past.

As far as what Dillard's said publicly about expansion, this was hanging over California as well a few years after they opened that handful of stores. California was going after anything they felt was deserving of litigation. Commissioned sales, and restaurant waitstaff were both looked at. As you probably know, California changed to no longer allow restaurant waitstaff to be compensated at the federal tipped employees rate (which is somewhere around $3/hour) and said they have to receive full minimum wage.

They should be hauled in court and eviscerated!

[storewanderer]

As far as what Dillard's said publicly about expansion, this was hanging over California as well a few years after they opened that handful of stores. California was going after anything they felt was deserving of litigation. Commissioned sales, and restaurant waitstaff were both looked at. As you probably know, California changed to no longer allow restaurant waitstaff to be compensated at the federal tipped employees rate (which is somewhere around $3/hour) and said they have to receive full minimum wage.

Nevada also requires tipped workers to pay at the standard minimum wage.

In the case of Dillards, the wage they start at in Reno is significantly above minimum wage. Like 16 years ago they would start someone with zero experience (18 year old) who seemed mature at $11/hr-$12/hr for part time depending on department but they never had many positions available and more professional appearance/clothing was needed which had an added cost to the employee vs. working at some other retail store and throwing on a polo or apron and calling it good. Then if the part time employee met certain sales goals (very difficult to do with the older employees around) within 90 days they would get a raise of some dollars (not cents). At that time most retailers around town paid about $8/hr for an entry level employee. Minimum wage was maybe $7.55/hr for part time but not sure it was that high yet.

The bigger issue of course was the full time/older employees would sort of fight the part time employees for sales. It made it difficult for the part time employees who were shy/timid to go engage customers as the more aggressive older employees would go engage the customers first. Also the older employees want the sales so they are spending time going after sales, not spending time training the young/less experienced employees. Unless business was really slow (which there are a lot of times like that; weekday evenings etc.).

The bigger issue was a number of the customers actually only wanted to deal with the older employees who they had dealt with before...

Dillards has a very different operating style than other retailers. This service philosophy drives more full price sales but as time goes on fewer and fewer customers will pay full price so the model feels like a dinosaur to me. But it works for a retailer with little to no debt who owns most of their buildings.

At Macys the employees are just cashiers. They don't leave behind the register, don't engage on the floor, it is really just not a great experience if you are looking for engagement. You can seek out a "stylist" at some Macys locations by appointment for the level of help that the average standard Dillards floor employee provides all day.

[ClownLoach]

Great article about Macy's botched conversion of Field's.

https://chicago.suntimes.com/2024/2/1/2 ... chitecture

[buckguy]

Dillard's runs on a model that I consider worse than commission. The employee's wage is based on how much they sell. They have a sales goal by day, week, etc. and wage is directly tied to it over time. They may get paid $15/hr today under the assumption they'll average $300 an hour in sales. If they go a few months and only average $250 an hour in sales then they get a pay cut... if they get average sales up again then they'll get their $15 back... It isn't that simple but that is broadly how it works and there are factors for seasonality, clearance sales, etc. but it is a very tough model especially given the low customer counts in the stores. But there are quite a few employees in the Reno Dillards who have worked there since it opened in 2005, also a couple guys in women's shoes (best performing department in the store) who I am pretty sure used to be commissioned appliance salespeople at Sears, so it seems to work for some of these employees.

Dillard's stopped expanding into California because Macy's West was run in a very aggressive manner taking all of the real estate so they couldn't get good sites at the better malls. Macy's let them get nosebleed sites in places like Stockton and El Centro and expected they'd just shut down. Well, they are indeed still open at those sites... Not sure how El Centro does but the Stockton Store actually does very well. Reno Store has had a few ups and downs; I was worried it was going to close around 2016-2017; it has done better the past couple years.

This is still basically a modified commission program that probably is the legal workaround for the unpaid work problems I mentioned California was investigating. Whether the store is in California or not doesn't really matter, if a judgment is filed in California then many lawyers in other states jump in and file class actions that are large enough to go to federal courts. Therefore they'll change practices nationwide over California matters unless the laws elsewhere are not protective of whatever criteria is in question. I think the question of merchandising and inventory maintenance, ordering, cycle counts etc. being off the clock work effectively for full commission people is a legitimate concern and that's why it was being questioned as violation of federal employment laws.

In this model, at the end of the day they're doing extra calculations but still paying on commission where if you don't sell you don't get paid for your work. They just make adjustments over an average period instead of paying in real time. Surely they are also going to discipline or fire anyone who isn't meeting aggressive sales goals too, as they are not going to want to be "propping up" their wages if they're not making enough money off that salesperson. So they could also keep the questionable practices of using these salespersons as labor for the store "as long as it's on the sales floor itself". They can still be made to merchandise the store, they just can't be the ones unloading deliveries or working the back room. What they wouldn't be able to do under this model is get overtime exemption for salespersons, yes that was another part of commissions in the past.

As far as what Dillard's said publicly about expansion, this was hanging over California as well a few years after they opened that handful of stores. California was going after anything they felt was deserving of litigation. Commissioned sales, and restaurant waitstaff were both looked at. As you probably know, California changed to no longer allow restaurant waitstaff to be compensated at the federal tipped employees rate (which is somewhere around $3/hour) and said they have to receive full minimum wage.

They should be hauled in court and eviscerated!

I was in Dullard's recently and there was zero "service" which has been my experience in the past at other of their stores. Granted, I was there for curiosity sake and because it was the shortest way from the parking lot, but it's alway odd when that kind of store doesn't seem to have anybody on the floor.

Despite mostly buying upper-middle stores, I'd agree that even the more flagship-ish Dillard stores really don't offer anything very exclusive. Stores in that bracket were meant to be aspirational places to shop and they usually had exclusive lines, although certain brands would only go into the most upscale department stores. Still, they would carry brands and lines of merchandise you wouldn't find at one of The May Company stores, Gimbels or some other lower-middle chain. They usually had better service and beter reputations as employers than those stores, as well. Dillard seemed to eviscerate all of that, along with selling a lot of private label stuff. Macy did a better job of integrating private label when they switched from their bargain basement "Supre-Macy" line to well-defined house brands. Among the cheaper stores, only Mercantile was truly successful, perhaps because they had been controlled for many years by a textile company.

I checked their financials and Dillar's isn't doing so well, not even keeping up with the rate of inflation https://investor.dillards.com/press-rel ... e-Results/: . The full year should be out soon.

[veteran+]

This is still basically a modified commission program that probably is the legal workaround for the unpaid work problems I mentioned California was investigating. Whether the store is in California or not doesn't really matter, if a judgment is filed in California then many lawyers in other states jump in and file class actions that are large enough to go to federal courts. Therefore they'll change practices nationwide over California matters unless the laws elsewhere are not protective of whatever criteria is in question. I think the question of merchandising and inventory maintenance, ordering, cycle counts etc. being off the clock work effectively for full commission people is a legitimate concern and that's why it was being questioned as violation of federal employment laws.

In this model, at the end of the day they're doing extra calculations but still paying on commission where if you don't sell you don't get paid for your work. They just make adjustments over an average period instead of paying in real time. Surely they are also going to discipline or fire anyone who isn't meeting aggressive sales goals too, as they are not going to want to be "propping up" their wages if they're not making enough money off that salesperson. So they could also keep the questionable practices of using these salespersons as labor for the store "as long as it's on the sales floor itself". They can still be made to merchandise the store, they just can't be the ones unloading deliveries or working the back room. What they wouldn't be able to do under this model is get overtime exemption for salespersons, yes that was another part of commissions in the past.

As far as what Dillard's said publicly about expansion, this was hanging over California as well a few years after they opened that handful of stores. California was going after anything they felt was deserving of litigation. Commissioned sales, and restaurant waitstaff were both looked at. As you probably know, California changed to no longer allow restaurant waitstaff to be compensated at the federal tipped employees rate (which is somewhere around $3/hour) and said they have to receive full minimum wage.

They should be hauled in court and eviscerated!

I was in Dullard's recently and there was zero "service" which has been my experience in the past at other of their stores. Granted, I was there for curiosity sake and because it was the shortest way from the parking lot, but it's alway odd when that kind of store doesn't seem to have anybody on the floor.

Despite mostly buying upper-middle stores, I'd agree that even the more flagship-ish Dillard stores really don't offer anything very exclusive. Stores in that bracket were meant to be aspirational places to shop and they usually had exclusive lines, although certain brands would only go into the most upscale department stores. Still, they would carry brands and lines of merchandise you wouldn't find at one of The May Company stores, Gimbels or some other lower-middle chain. They usually had better service and beter reputations as employers than those stores, as well. Dillard seemed to eviscerate all of that, along with selling a lot of private label stuff. Macy did a better job of integrating private label when they switched from their bargain basement "Supre-Macy" line to well-defined house brands. Among the cheaper stores, only Mercantile was truly successful, perhaps because they had been controlled for many years by a textile company.

I checked their financials and Dillar's isn't doing so well, not even keeping up with the rate of inflation https://investor.dillards.com/press-rel ... e-Results/: . The full year should be out soon.

My experience with Dillard's mirrors yours.

Nothing about them compels me to visit them (same thing with Kohls).

[arizonaguy]

They should be hauled in court and eviscerated!

I was in Dullard's recently and there was zero "service" which has been my experience in the past at other of their stores. Granted, I was there for curiosity sake and because it was the shortest way from the parking lot, but it's alway odd when that kind of store doesn't seem to have anybody on the floor.

Despite mostly buying upper-middle stores, I'd agree that even the more flagship-ish Dillard stores really don't offer anything very exclusive. Stores in that bracket were meant to be aspirational places to shop and they usually had exclusive lines, although certain brands would only go into the most upscale department stores. Still, they would carry brands and lines of merchandise you wouldn't find at one of The May Company stores, Gimbels or some other lower-middle chain. They usually had better service and beter reputations as employers than those stores, as well. Dillard seemed to eviscerate all of that, along with selling a lot of private label stuff. Macy did a better job of integrating private label when they switched from their bargain basement "Supre-Macy" line to well-defined house brands. Among the cheaper stores, only Mercantile was truly successful, perhaps because they had been controlled for many years by a textile company.

I checked their financials and Dillar's isn't doing so well, not even keeping up with the rate of inflation https://investor.dillards.com/press-rel ... e-Results/: . The full year should be out soon.

My experience with Dillard's mirrors yours.

Nothing about them compels me to visit them (same thing with Kohls).

When I think of Dillard's I think of a dark, dreary store with clothing that is overpriced and not in style. It's a place I don't picture many people under the age of 60 shopping at.

I live near several and probably haven't purchased anything at a Dillard's in 8 or 9 years.

[storewanderer]

I checked their financials and Dillar's isn't doing so well, not even keeping up with the rate of inflation https://investor.dillards.com/press-rel ... e-Results/: . The full year should be out soon.

I haven't bought much at Dillards in the past year, but the store in my area continues to be in great shape.

Of course they aren't keeping up with the rate of inflation. This entire sector keeps shrinking. How did they do compared to Macys and Kohls in 2023? Pretty sure they did better or similar...

Also with their lack of debt and ownership of the vast majority of their store base, they can weather a lot more "not even keeping up with the rate of inflation" quarters than Macys or Kohls can. The stock price is way bloated. The market is begging them to sell to private equity. I am hoping they don't bite.