CONTRACT
 
 
     This contract is made and entered into on this 8th day of
March, 1997, by and between Dillard Department Stores, Inc., a
Delaware corporation with its principal place of business in Little
Rock, Pulaski County, Arkansas (hereinafter called "DDS") and
William Dillard, an individual residing in Little Rock, Pulaski
County, Arkansas (hereinafter called "Dillard").  
 
                      W I T N E S S E T H:
 
     WHEREAS, DDS is a Delaware corporation with its corporate
headquarters in Little Rock, Pulaski County, Arkansas, and Dillard
serves as Chairman of the Board of Directors and Chief Executive
Officer of DDS;
 
     WHEREAS, Dillard serves in the above capacity by election of
the Board of Directors of DDS;
 
     WHEREAS, the Board of Directors of DDS desires to ensure that
DDS will continue to receive the advice and counsel of Dillard on
a consulting basis after the time he should choose to retire from
full-time employment by DDS;
 
     WHEREAS, the Board of Directors of DDS further desires to
retain for as long a period of time as possible the public image of
DDS as created and personified by Dillard;
 
     WHEREAS, Dillard and DDS entered into a contract dated October
17, 1990 (the "1990 Contract"), which outlined the terms pursuant
to which Dillard would provide consulting services to DDS following
Dillard's retirement; and
 
     WHEREAS, Dillard and DDS now desire to enter into this
contract to replace the 1990 Contract.
 
     NOW, THEREFORE, Dillard and DDS now enter into this contract
upon the terms and conditions hereinafter set forth:
     
     I.   Dillard, having attained the age of 65 on September 2,
1979, may elect to retire from full-time employment by DDS at the
end of any calendar month by giving ninety (90) days written notice
to the Board of Directors or the Executive Committee of DDS.
 
     II.  At all times after the effective date of the retirement
of Dillard in accordance with the provisions set forth in
Paragraph I, Dillard agrees to make himself available on a
reasonable basis to provide consulting services to the Board of
Directors and officers of DDS and further agrees not to compete
with DDS.
 
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     III. Upon his retirement as set forth in Paragraph I, Dillard
shall be paid for the remainder of his lifetime, as a consulting
fee, an annual amount equal to one and one-half percent (1-1/2%) of
the average of the five highest amounts of total annual
compensation paid to Dillard by DDS for his employment during such
fiscal years multiplied by his total years of employment with DDS. 
Dillard's employment shall be deemed to have begun January 1, 1938. 
The annual fee is to be paid in twelve (12) equal monthly
installments beginning as of the first day of the month following
the date of retirement.  On the third anniversary of the retirement
of Dillard and every three (3) years thereafter, the annual fee
will be adjusted for the increase in the Consumer Price Index for
all cities published by the Bureau of Labor Statistics of the
United States Department of Labor using the index number for the
month of Dillard's retirement as the base number.  Each adjustment
shall be calculated by multiplying the fee determined in the first
sentence of this Paragraph III by a fraction the numerator of which
shall be the Index number for the month preceding the month in
which the adjustment is to be made and the denominator of which
shall be the base number.
 
     IV.  If, in the opinion of a competent and disinterested
physician, Dillard shall become disabled, physically or mentally,
so as to be unable to continue his full-time duties as directed by
the Board of Directors, or to perform consulting services after
retirement as provided in Paragraph II, Dillard shall be paid for
the remainder of his lifetime an amount equal to the consulting fee
that would have been paid under the provisions of Paragraph III.
 
     V.   Upon the death of Dillard, whether while serving in a
full-time capacity or while being compensated following retirement
pursuant to Paragraph III or disability pursuant to Paragraph IV,
DDS shall make the payments referred to in Paragraph III to
Dillard's wife, Alexa Dillard, for the remainder of her lifetime
beginning on the first day of the month following the month of
Dillard's demise.
 
     VI.  So long as Dillard shall perform the consulting services
referred to in Paragraph II, he shall be entitled to participate in
all fringe benefits as may be authorized and adopted from time to
time by DDS.
 
     VII. This agreement is drawn to be effective in and shall be
constructed in accordance with the laws of the state of Arkansas. 
This agreement shall inure to the benefit of, and shall be binding
upon, the respective parties, their heirs, successors, and assigns;
provided, however, Dillard shall not have the right to transfer or
assign his benefits hereunder.
 
<PAGE>
 
     IN WITNESS WHEREOF, DDS and Dillard have executed this
agreement on the day and year first above written.
 
                              DILLARD DEPARTMENT STORES, INC.
 
     
                         By:  /s/ James I. Freeman
                              Its Senior Vice President  
                                  
 
ATTEST:
 
/s/ James E. Darr, Jr.
 
 
                              /s/ William Dillard
                                   William Dillard