Debenhams took another hit over the weekend as influential ratings agency Moody’s downgraded the struggling retailer on two separate measures.
Just two months after it was last downgraded due to weaker than expected profits, Moody’s has lowered Debenhams’ corporate family rating from B2 to Caa1.
A separate rating which measures the likelihood that Debenhams will default on one or more of its debt obligations was also downgraded from B2-PD to Caa1-PD.
It attributed the downgrades to the “aggressive” pricing strategies of Debenhams’ rivals and highly challenging market, which it anticipates will lead to lower than expected profits in the run up to the Christmas season.
“Downgrading Debenhams to Caa1 reflects the challenges it faces to improve its credit quality during 2019 in order to achieve a timely and cost effective refinancing of its current debt facilities,” Moody’s vice president David Beadle said.
“In the meantime however, we expect the company to at least stabilise profitability, materially improve net cash generation, and for its liquidity to remain adequate.”
This follows news late last month that the embattled department store would close the shutters on 50 under-performing stores out of its 165 store portfolio over the next three to five years, a move that could potentially result in the loss of up to 4000 jobs.
Despite this being announced alongside the worst financial results in Debenham’s 240-year history, its share prices jumped as much as 15 per cent as traders hailed the concrete plan of action for staying afloat.
For the year to September 1, Debenhams posted a statutory loss of £491.5 million, down from a profit of £59 million profit a year earlier.
Underlying profit before tax also plummeted 65.1 per cent year-on-year to £33.2 million, before cash exceptional charges relating in part to the Debenhams Redesigned strategy.