May Co. placed on credit watch by S&P
June 2, 2003-- Home Textiles Today,
Concerned about sliding profits, a soft economy and weak consumer spending, Standard & Poor's rating agency is contemplating a downgrade of May Department Stores Co. and said it has placed the retailer on CreditWatch with "negative implications."
"The company has suffered from intense competition, lagging consumer confidence, a poor economy, a rising unemployment rate that has pared disposable personal income and the continuing impact world events are having on consumers' appetite for spending," said S&P credit analyst Gerald Hirschberg.
Hirschberg said profits fell in 2002 for a third straight year and were down again during the first quarter. At the same time, same-store sales fell by 8.8 percent, and, hampered by falling sales, operating profits declined by 23 percent. "The outlook for May and for other moderately priced department stores remains problematic for the balance of 2003, as many of the same macroeconomic factors that hurt 2002 are unchanged," the analyst said.
Hirschberg added, "Although May has made a good effort to conserve cash by reducing share repurchases to minimal levels, the company has had difficulty in paring inventory levels due to the poor retail environment."
May's corporate credit and long-term debt are currently rated "A", and its short-term commercial paper is rated "A-1". Any rating action would involve about $3.9 billion in May debt.