Coronavirus: Moody’s downgrades M&S’s credit score

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M&S Marks & Spencer Moody's
The outlook has been revised to ratings under review from negative
// Credit ratings agency Moody’s downgrades M&S’s credit
// The coronavirus pandemic is expected to dent the retailer’s outlook

Moody’s has downgraded Marks & Spencer’s credit rating as the coronavirus outbreak is expected to affect the retailer’s outlook in the weeks ahead.

The influential credit ratings agency downgraded and placed on review for further downgrade M&S’s senior unsecured long-term ratings to Ba1, down from Baa3.

The retailer’s long term MTN Program rating was also downgraded from (P)Ba1 from (P)Baa3.


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Mood’s placed on review for downgrade M&S’s corporate family rating of Ba1 and a probability of default rating of Ba1-PD

The outlook has been revised to ratings under review from negative.

Moody’s said the rapid spread of the coronavirus and the deterioration of the global economic outlook has created a “severe and extensive credit shock across many sectors”.

The agency now expects demand within M&S’s Simply Food business to trade well, though its heavy leaning towards chilled and fresh selections means customers may prefer other grocers where more cupboard food selections would be available.

Moody’s expected M&S’s clothing and home business to endure a significant fall in sales in the weeks ahead and that its profitability will be dented further by discounting of surplus stock later in the year.

It expects the retailer’s profitability to fall “significantly” in its next fiscal year, to the end of March 2021.

Moreover, Moody’s said M&S’s focus on minimising the impact of coronavirus on its operations in the short term may delay its initiatives planned to reposition the business for growth.

Moody’s expected the company’s profit before tax in fiscal 2022 to be at best no more than in fiscal year 2020, which the company now expects to be at or below the bottom end of the £440 million to £460 million range it previously guided.

In its review process, Moody’s will be focusing on the extent and length of store closures in the coming weeks, the impact of liquidity measures taken by M&S on its balance sheet, and any implications the coronavirus crisis may have for the company’s credit profile over the medium term, including on demand and its supply chain.

Earlier this year, Moody’s downgraded M&S’s credit rating from stable to negative following a strenuous year for the retailer.

The change to negative comes after M&S’s trading report, which recorded a 2.7 per cent decline across clothing and home like-for-like sales over the 13 weeks to December 28.

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