Growth Gives Dillard's a Credit Ratings Boost

by Mark Friedman  on Monday, May. 6, 2013 12:00 am  

Credit rating services dished out praise to Dillard’s for its continued financial success.  

The continued strong earnings performance of Dillard’s Inc. resulted in recent credit ratings increases from Standard & Poor’s Rating Service and Moody’s Investors Services.

Standard & Poor’s of New York increased the Little Rock retailer’s corporate credit rating from BB to BB+, which is just below investment grade. It also gave Dillard’s a stable outlook.

Moody’s, also of New York, increased Dillard’s corporate family rating from Ba3 to Ba2, and its rating outlook was changed to positive, up from stable, according to an April Moody’s news release.

“I couldn’t agree with that more because the company did a magnificent restructuring,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm in New York. “They are much, much stronger in the competitive environment in that they closed bad stores. They brought costs down. They changed their merchandise mix. They did so many tremendously positive things.”

The improved credit ratings will help Dillard’s financially, he said.

“Let’s say they float a bond offering; they’ll pay less” because of the better rating, Davidowitz said.

Julie Bull, a spokeswoman for Dillard’s, couldn’t be reached for comment.

Dillard’s ratings could be higher, but Moody’s is concerned about the retailer’s past performance.

Between 2000 and 2009, “Dillard’s experienced a prolonged decline in comparable store sales and sporadic earnings,” Moody’s said in its news release last month.

Better Performance

Both Moody’s and Standard & Poor’s gave Dillard’s praise for its recent performance. For the fiscal year that ended Feb. 2, sales grew by 5 percent to $6.6 billion compared with the previous fiscal year. (However, the most recent fiscal year contained 53 weeks compared with 52 weeks for the previous fiscal year. Excluding the extra week, sales rose only 3 percent for the fiscal year that ended Feb. 2.)

Dillard’s sales per SF jumped from $116 in fiscal 2010 to $129 in 2012.



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