S&P cuts five department stores

Standard & Poor's said it downgraded the ratings of Dillard's Inc. to B- from B+, Macy's Inc. to BB from BBB-, Neiman Marcus Group Inc. to B from B+, Nordstrom Inc. to BBB+ from A- and J.C. Penney Co. Inc. to BB from BBB-. The outlook is stable.

The agency also affirmed Sears Holdings Corp. at BB-. The outlook is negative.

All ratings were removed from CreditWatch with negative implications, where they were placed on Feb. 5.

"The rating actions reflect Standard & Poor's deepening concern about the impact of the U.S. recession on the increasingly troubled department store sector, which felt the full brunt of the declining U.S. economy and weakening consumer confidence in 2008," S&P analyst Diane Shand said in a statement.

The recession is likely to last through at least the third quarter of 2009 given weakening employment, the still-poor housing market and continuing turmoil in financial markets, according to the agency.

"We believe lower consumer spending and declining mall traffic will affect the sales and profits of the department store operators this year," Shand added, "and that recovery will be slow and dependent on an improvement in the macroenvironment."

The affirmation on Sears is based on expectation that credit measures should remain adequate for the rating, even with expected sales pressure from a difficult retailing environment, the agency said.

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