24/7 Wall Street is a financial news and opinion web site that recently posted an article regarding the fate of 10 retail stocks that might not make it through 2009.

Little Rock-based Dillard’s made the hit list after its year’s worth of store closings, layoffs, expense trimming and weak operating results.

But will Dillard’s shutter its doors?  From the article:

A year ago, not many people would have thought Circuit City would be in bankruptcy now. Linens 'n Things, Mervyn's, Whitehall Jewelers and Steve & Barry's have either shut down or are closing huge numbers of locations since they moved into Chapter 11.

Dillard's is a retail operator that really is in trouble. It has 318 stores, which makes it a relatively small operation in a world dominated by outfits like Sears which has more than 3000 locations…Dillard's points to its revolving credit facility with JP Morgan as its lifeline. In the last quarter, the company lost $38 million. It made $45 million in debt services payments and has long-term debt of $807 million. In other words, no dry powder. It recently cut staff.

While the thought is on many people’s minds – I’ve had repeated public and private discussions with a variety of sources with strong opinions - a lot would have to happen for Dillard’s to collapse.  Consumer spending would have to weaken even further and liquidity or capital access would have to substantially worsen for Dillard’s to fall into this category.

I predict that we’ll see the sales decline this holiday season and beyond due to larger economic conditions, but don’t expect the cash crunch to implode Dillard’s anytime soon.

In its most recent earnings – a $56 million third quarter net loss – Dillard’s noted that it maintains a $1.2 billion revolving credit facility with JP Morgan Chase Bank as the lead agent.  

“The credit agreement expires December 12, 2012 and there are no financial covenants under this facility provided availability exceeds $100 million.  Expected availability on the credit facility following the company's peak borrowing requirement remains well in excess of $500 million,” Dillard’s said in a footnote to its financials.

Also in its third quarter report, Dillard’s described various cost-cutting measures, including those recent layoffs, store closings and expense reductions, aimed at culling $300 million out of annual expenditures.

One more item I’d point out to show that while Dillard’s may be in intensive care, it isn’t on life-support just yet.  The retailer did open 10 new stores in 2008, hardly a sign that management is ready to throw in the towel.  Two signs to watch for going forward:  new store openings, if any, in 2009 and will the cost-cutting lead to a return to profitability.

Click here to read the full post and form your own opinion.  The situation at Dillard’s is likely to get worse before it gets better.