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May sees stock rating cut by S&P

Standard & Poor's, one of the big three debt ratings services, has cut its corporate credit rating for May Department Stores Co., citing its "below-average operating performance compared with that of its peers for the past two years."

The credit agency lowered its rating for the department store chain to "single-A" from "single-A-Plus," a move which could cost the chain more money the next time it borrows or sells bonds.

At the same time, S&P affirmed its "A-1" commercial paper rating on the chain, and said the outlook for the retailer remains stable.

The ratings actions affect about $4.7 billion in outstanding debt as of May 4.

S&P credit analyst Gerald Hirshberg said that while he "expects that May's results will progress over time, management's relatively aggressive financial policies are likely to temper improvement in credit ratios."

In a summary, S&P said, "May Department Stores Co. has enjoyed a long history of success in department store retailing. The company leads the industry in overall and store-level performance, and it has also enjoyed historically strong credit protection measures. However, in fiscal 2000, the company saw the end of 25 consecutive years of annual earnings growth and further declines in 2001 and the first quarter of 2002. Along with its competitors, May has suffered from lagging consumer confidence, a recession aggravated by the events of Sept. 11, significant setbacks in the stock market and a growing unemployment rate that has pared disposable personal income."

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