Dillard's rises as analyst upgrades to 'Buy'

AP News
|
Posted: Nov 20, 2009 1:33 PM

Shares of department store retailer Dillard's Inc. rose on Friday after an analyst upgraded the stock to "Buy" and said efforts to cut costs and improve merchandise are paying off.

The stock added $1.23, or 8.6 percent, at $15.51 in afternoon trading.

The company remains focused on cutting costs by closing underperforming stores and trimming selling, general and administrative expenses, Deutsche Bank analyst Bill Dreher Jr. wrote in a note to investors.

Dillard's is also positioning itself somewhere between Macy's and Bloomingdale's, two other department store retailers, said Dreher, noting that improved merchandise is resonating with customers.

The company has made an "extraordinary effort" in expanding higher-margin, private label, and exclusive brands, Dreher said.

Earlier this week, Dillard's reported a third-quarter profit, reversing a year-ago loss, as fewer expenses and a tax benefit boosted its bottom line. Advertising, selling, administrative and general expenses were trimmed by $88.6 million amid cost-cutting and store closings.

Dreher previously rated the stock "Hold." Dreher's new price target is $28, up from $13.50 previously, implying shares have room to nearly double from Thursday's close of $14.28.