Standard & Poor's said Monday it has put the ratings of department store operator Dillard's Inc. on credit watch with positive implications since it has reduced its outstanding debt.
S&P said Dillard's has improved its credit metrics by reducing debt and that its liquidity remains good. Since the end of 2008, Dillard's has paid back $495.5 million, S&P said.
"We believe the company has enough liquidity to operate for at least the next two years, even if sales trends in the moderate department store sector remain weak," the rating agency said in a statement.
S&P said the company's operating performance had somewhat recovered so far in 2009 after declines in fiscal 2007 and 2008, when sales fell and damaged profit margins.
"We expect operating performance to continue to recover somewhat in the remainder of 2009 because Dillard's inventory is better aligned and it has lowered its cost structure," S&P said in a statement. "Dillard's should also benefit from the closing of underperforming stores, but we do not think it will be significant enough to offset the effect of the overall economy."
Dillard's is based in Little Rock, Ark.
Its shares fell 37 cents to $18.84 in after-hours trading Monday after closing at $19.21, up 37 cents from a day earlier.