Dillard's Inc. sees implied rating drop

By Staff -- Home Textiles Today, 1/12/2004 12:00:00 AM

NEW YORK —

Citing concerns about the financial performance of Dillard's Inc., and "concerns about the value of the company's franchise over the longer term," Moody's Investors Service has downgraded the company's senior implied rating to B1 from Ba3.

Moody's said the rating cut reflects its "expectation that Dillard's will not be able to quickly turn around its disappointing operating performance, and that the company will continue to face strong challenges ... "

Moody's said Dillard's primarily targets "moderate to better customers who are being aggressively sought by competitors with significantly stronger growth trends, such as Kohl's and Target, and by those with more heavily promotional strategies, such as other traditional department stores. Dillard's key competitive strategy is to excel with compelling private-label product which produces higher margins for the retailer and drives customer loyalty."

But Moody's said it now questions that strategy "and is concerned that Dillard's will find it challenging to deliver this message to consumers given the drop-off in store traffic and the promotional pricing strategies used by competing department stores."