Dillard's Inc.'s plan to form a real estate investment trust, coupled with a drop in U.S. jobless claims, lifted stocks in department stores that cater to the middle class and less affluent shoppers.
Dillard's said on Wednesday that it would form a REIT to improve its ability to enhance cash liquidity, and its shares were up 17.3 percent at midday Thursday. Dillard's, whose stores are concentrated in the U.S. Southeast, owns 88 percent of the space occupied by its 309 stores.
The Dillard's plan also helped the stock of rival J.C. Penney. Penney shares were up 4.1 percent.
When activist investor William Ackman's Pershing Square Capital took a 16.5 percent stake in Penney in October, the shares rose on the assumption he would try to get the company to create a REIT to take advantage of its real estate. Penney owns 37.5 percent of the 1,108 department stores it runs.
Ackman tried unsuccessfully to get discount retailer Target Corp. to create a REIT in 2008.
The Dillard's plan likely reignited speculation that Penney would consider a REIT, Morningstar analyst Paul Swinand said.
He said department stores that cater to lower-middle-class shoppers also got a boost from news that jobless claims fell sharply last week.
"Sears and Penney ... they still have a recovery that could happen and that has not been priced into their stocks," Swinand said. Sears Holdings shares were up 5.6 percent.
Shares in those chains slipped in recent weeks after December chain-store sales data showed the recovery in consumer spending over the holidays was not as robust as had been hoped.
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