U.S. retail sales for the 2008 winter holiday period and 2009 are expected to be weak while economic pressures continue to strain consumers' cash flow, according to Fitch Ratings in the latest edition of its 'Retail Register' report.
Fitch says apparel and home retailers will be the most challenged while essentials such as food and prescriptions are expected to show relative strength. Discounters and warehouse clubs should continue to outperform other retail formats.
'As expected, the 2008 'back-to-school' period showed disappointing results for department store and specialty retailers. This is a signal that the crucial winter holiday period will experience weak sales,' said Karen Ghaffari, Managing Director and head of Fitch's U.S. retail group. 'Consumers are focusing on the necessities and getting more 'bang for their buck', which has benefited discounters such as Wal-Mart and Costco Wholesale.'
Fitch expects many U.S. retail issuer ratings to remain at current levels however there is downside rating risk especially for high yield companies operating in the discretionary department store and specialty retail sectors. Fitch anticipates financial metrics to weaken for retailers with the continuing challenging sales environment. A retailer's ability to sustain operating performance in-line with peers as well as its willingness to maintain a strong balance sheet to ensure adequate liquidity will be crucial to future rating actions.
Fitch is evaluating the following key credit factors for the retail sector:
--Operating strategy and movement in market shares;
--Promotional activity, inventory levels and cost management; and
--Liquidity including use of cash and capital structure management.
'The Retail Register' includes Fitch's detailed expectations for retail sales and rating movement across its U.S. Retail coverage as well as the key credit factors for each retail segment. The report is available on the Fitch Ratings web site at www.fitchratings.com under the following headers:
Corporate Finance then Corporates then Special Reports
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Karen Ghaffari, 212-908-0708
Monica
Aggarwal, 212-908-0282
Sandro Scenga, 212-908-0278 (Media Relations)
