Analyst Michael Exstein mentioned that Dillard's multiple had contracted over the past few months, diminishing the speculative premium in the share price. He estimates that the company’s FCFs “sufficiently” supports $350-$375 million per year towards share repurchases.

Taking Dillard's current share price, the estimate would enable to company to repurchase around 3.5 million shares per annum, which represents 9 percent of the share base. “We expect the company to earn at around $8 per share going forward, barring further dropoff in the company's business,” Exstein added.

In view of the expected increase in share buybacks, there appears to be limited downside in Dillard's share price. Although the buybacks would only partially offset the lack of sales growth and potential pressure on EBIT margin, Exstein commented.

In the report Credit Suisse noted, “Our upgrade is purely valuation-driven, and does not reflect any change in our view on the challenges facing the mall anchor industry as a whole.”

Dillard's shares are trading at an 18 percent discount to its department store peers, versus its 12 percent discount over the past five years. Exstein believes this is “justified” in view of the company's “family-controlled voting structure and limited communication with investors.”

Although Dillard has executed “one of the most impressive turnarounds in retail,” it is unlikely to be able to generate incremental sales growth or margin expansion in the near-term. “While downside appears limited by potential incremental share buyback activity, we think DDS is unlikely to be immune to the cyclical challenges facing the overall mall anchor industry,” Exstein wrote.