Department store chain Dillard’s received a boost from tariff refunds in the second quarter, helping lift margins as the retailer posted modest sales growth.

The company’s total retail sales rose 1 per cent to $1.455 billion in the quarter ended August 1, while comparable store sales also increased 1 per cent. Net income climbed to $97.7 million from $72.8 million a year earlier.

During the quarter, Dillard’s received $37.2 million in refunds related to tariffs imposed under the International Emergency Economic Powers Act.

“Our 1 per cent sales increase points to a somewhat resilient consumer,” CEO William Dillard II said.

“Retail gross margin of 40.9 per cent, boosted by tariff rebates, helped grow cash flow and the bottom line. We ended the quarter with over $1.2 billion in cash and short-term investments after paying off $96 million in debt.”

Total net sales, including Dillard’s construction business, slipped to $1.508 billion from $1.514 billion a year earlier.

Neil Saunders, MD of GlobalData, said the results were solid given the challenging environment for department stores, although consumers remain selective with discretionary spending.

He said Dillard’s has avoided heavy discounting, helping protect margins but contributing to higher inventory levels.

“Without rapid top-line growth, Dillard’s needs to keep the economics of the business stable to protect profitability,” Saunders said.

“This is especially so since some general expenses, including labor costs, seem to be increasing modestly.”

• Further reading: Dillard’s starts year ‘in style’ as sales grow despite headwinds .