Asda’s debt has been downgraded as its profits are forecast to slump more than anticipated.

Ratings agency Fitch confirmed yesterday (24 November) it has reduced its rating of the supermarket’s holding company Bellis Finco from “B+” to “B,” as it raised concerns over its future prospects, The Telegraph reported.

Fitch cautioned that profits would decline by more than previously anticipated this year, as the grocery giant invested more money into price cuts and grappled with the fallout of its IT transition.

The agency said a recent deal to sell and lease back dozens of stores worth nearly £600m would impact Asda’s finances, since it would be required to pay more in rent.

Fitch also explained its negative outlook “reflects the heightened execution risk” as well as the further investment required to regain customers following Asda’s market share falling to a record low.

The business warned that intense pricing competition could make the supermarket’s plans to improve food sales volumes and boost footfall more competitive, resulting in a further profit squeeze.

An Asda spokesman said: “Asda is a highly cash-generative business that serves millions of customers each week. 

“We remain confident in our long-term strategy and the strength of our customer proposition.”

Retail Gazette has contacted Asda for comment.

Last week, it was reported that Asda has raised roughly £600m from two sale-and-leaseback deals, as its owner TDR Capital used the grocer’s property assets to boost its finances before its debt repayment to former owner Walmart.

According to two people familiar with the matter, the retail giant agreed a £467m deal with asset manager Blue Owl and Supermarket Income REIT to sell and lease back 20 shops as well as a depot in Lutterworth, Leicestershire, the Financial Times reported.

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