S&P ups Dillard's outlook to stable

Standard & Poor's said it revised its outlook on Dillard's Inc. to stable from negative and affirmed the company's BB corporate credit and senior unsecured long-term ratings.

The outlook revision reflects Dillard's release of fourth-quarter and full-year results for 2005, which indicated that credit measures continued to improve, and S&P's expectation that the company's operations have stabilized.

The ratings reflect the company's relatively good market position within the moderate segment of department store retailing and ratios that have recovered from the low point of 2003, the agency said. Dillard's used proceeds from the November 2004 $1.1 billion sale of its private-label credit card business to substantially reduce its debt. Although the agency's primary concern over Dillard's has not been guided by leverage, but rather by the company's sales, earnings and cash flow, the significant reduction in debt has enabled Dillard's to make good progress in improving its coverage of interest expense and in reducing its leverage, the agency said.

EBITDA coverage of interest increased to 5.5x for the year from 4.3x for fiscal 2004, and total debt to EBITDA remained 2.7x.

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