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Investors Shopping at Dillard's Department Stores

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The stock ends up more than 11%, easily the top NYSE performer, after announcing a Real Estate Investment Trust division.

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Dillard's (DDS) homepage advises us to "shift into neutral," but after today's stellar stock showing I suspect several equity analysts will soon be upgrading the department store outfit to Buy. (Or cutting it to Hold on account of valuation concerns -- take your pick.) Its stock ended up more than 11%, easily the top NYSE performer in an advance that put fellow Arkansas retail outfit, a little known number named Walmart (WMT), in the shade.

The gain comes after announcing in an 8-K SEC filing late yesterday it intends to establish a Real Estate Investment Trust division so as to be better able to tap debt markets. The formation of such a wholly owned subsidiary may ultimately, the company believes, "enhance its liquidity," and if today's share price action is any indication it appears investors are inclined to agree.

Dillard's clearly believes if you can't beat 'em, join 'em, or at least aim for a halo effect; publicly traded REITs handily outperformed the overall market last year in racking up gains of 28% on a continuing improvement in commercial real estate fundamentals allied to tight supply.

Yes, department stores are increasingly seen as dinosaurs heading inexorably toward extinction, but Dillard's did just beat Street sales estimates while competitors were suffering through a decidedly mediocre December. This chain's relatively cost-conscious offerings are consistent with a firm founded during the Great Depression, and have helped Dillard's weather the Great Recession better than many. The company, whose 310 outlets are located mainly in the Southeast, has turned itself around impressively from those dark days at the turn of the millennium when it posted five successive quarterly losses.

Its intention is to lease back some properties from the REIT and Deutsche Bank analyst Bill Dreher, a Buy-rated bull on the name, is hailing the move as "a very positive development for the shares given [Dillard's] significant -- and undervalued -- real estate ownership."

Killjoys can point to nosebleed multiples at an outfit whose history has betrayed some seriously spotty results, with the stock already up about 135% in only 12 months even before today. Rising rates and stretched valuations may also soon start to loom large for the REIT sector. Today, however, Dillard's is entitled to enjoy its spell in the sun.

For more, see Why REITs Are Drawing Attention, Target Buys Canadian Department Store Zellers for $1.8 Billion, and Mid-Day Musings: Dillard's, Macy's, Target…

It ain't often Sarah Palin and President Obama are on the same page but Discovery Communications (DISCA) has obviously benefited from having them both on the same network. Shares in the Silver Spring company are currently striking gold, finishing solidly higher on an otherwise down day in equities after scoring an analyst upgrade.

The cable and satellite TV operator, whose properties also include TLC, Animal Planet, and the Military Channel, was raised to Above Average from Average by an analyst at Caris & Company. If that sounds like faint praise, consider that researcher David Miller also took his 12-month price target up to $48 from $43 on the company which can count Kate Plus 8 among its cult offerings. (How her ex-husband must wish he remained gainfully employed at the network.)

Discovery, in a joint venture agreement with Hasbro (HAS), has additionally just launched a channel called The Hub, one of whose retro shows is Family Ties. Alex P. Keaton, ever the arch capitalist, would certainly approve of the station's recent linkup with America's most powerful person, one with proud ties to Chicago. Obama? No, Oprah.

Miller at Caris wrote in a note that the broadcaster had some "notable ratings gains in 2010." He also materially raised fiscal full year 2011 revenue and per share earnings estimates to $4.09 billion and $2.30 from $4.06 billion and $2.14, respectively.

All that said, are there still some concerns ahead of the February 11 earnings release? With apologies to both Obama and Palin, "Let me be clear -- you betcha." With fully 40% of revenues being derived from advertising, Discovery is especially vulnerable should such spending stall in the upcoming spring selling season.

Additional insight can be found in Media Companies' Stellar Earnings Mean Little to Stocks and Hollywood CEOs: Oprah.

No one's asking "where's the beef?" at burger behemoth Wendy's/Arby's Group (WEN) today. Shares in the Atlanta-based fast food outfit plumped up almost 7% on a disclosure that it will sell the underperforming Arby's roast beef sandwich chain.

Constantly finding itself unable to adequately compete thanks to being sandwiched between industry giants Yum Brands (YUM) and of course McDonald's (MCD), while lacking the global heft of both, Arby's was long a drag on the performance of its corporate parent. With an average check of $7.50, some $2.50 above the industry average, it was especially ill-equipped to capture customers conditioned to value offerings in an economic downturn.

Notwithstanding today's euphoria, a sale of this 3,700 restaurant outfit shouldn't be seen as a panacea and may still take some doing, with Roth Capital researcher Tony Brenner even going so far as to say "it may be that Arby's winds up being sold to its franchisees, in a deal that may have to be partly financed by the company." Hardly a recipe for overnight success.

Abandon all attempts at New Year's dieting by tucking into The Origins of Cult-Favorite Fast Food Restaurants: In-N-Out Burger, What It Takes to Work Here: McDonald's, and Burger King Gets Cooked.

New York last night lost out to La-La Land as America's rudest city. Had the poll been taken this morning however, there's a chance some choice epithets emanating from the heart of midtown Manhattan would have put the Big Apple back on top. Times Square-based media titan Thomson Reuters (TRI) is currently cursing its luck after being lowered to Hold from Buy at Citigroup today, taking shares down a little more than 1%.

In April of 2008 Thompson acquired Reuters, a British-based news agency whose origins can be traced to the dawn of the telegraph age in 1851. Coming merely five months before the market meltdown, in retrospect it wasn't such a fine time for a financial information and analytics outfit to splash the cash. Still the combined entity has since rebounded nicely, and its third-quarter easily exceeded consensus earnings estimates (yes, that would be estimates of analysts polled by none other than Thomson Reuters, itself a major industry provider of such projections.) Excluding extraordinary items, EPS came in at $0.49 as revenue rose to $3.26 billion, well above Street consensus calling for $0.44 and $3.2 billion, respectively.

In mid-December the company said it will launch a new general-news service, seen as competition for eternal arch rival Associated Press. Thomson Reuters reports full-year and fourth-quarter 2010 earnings on Thursday, February 10.

Though many have high hopes for its new Eikon desktop platform, it operates in a notoriously cyclical space and has the likes of New York's billionaire mayor to contend with. Many more days like this, and the company, which along with the University of Michigan produces a consumer sentiment survey, may soon itself be a little low on confidence.

Please see Can CNN Be a Better AP? and Merrill Lynch Says Bye Bye Bloomberg.


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No positions in stocks mentioned.
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