S&P puts Dillard's on positive credit watch

New York City Standard & Poor's said late Monday that it has put the ratings of Dillard's on credit watch with positive implications since it has reduced its outstanding debt.

S&P said Little Rock, Ark.-based 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.

"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."