S&P upgrades Dillard's

Standard & Poor's said it raised the corporate credit rating on Dillard's Inc. to BB- from B+, its unsecured debt to BB- from B+ and its subordinated debentures to B- from CCC+. The 4 recovery rating on the unsecured debt remains unchanged.

The outlook is stable.

"The upgrade reflects the significant margin gains by the company over the past year, which has strengthened its credit protection profile considerably," S&P analyst David Kuntz said in a statement.

Ratings reflect expectation that performance is likely to improve modestly over the near term despite the uneven economic recovery, the agency said.

The anticipated gains in credit protection measures during 2011 will be subdued, the agency noted.

"Dillard's weak business profile reflects the challenges of operating in a highly competitive retailing sector, its relatively small position in the moderate department store industry and productivity measures that are below average for its peer group," Kuntz said.

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