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Tesco credit rating under threat: S&P

A store sign is seen outside a Tesco supermarket in London April 15, 2014. REUTERS/Luke MacGregor
A store sign is seen outside a Tesco supermarket in London April 15, 2014. REUTERS/Luke MacGregor

LONDON (Reuters) - Tesco , Britain's biggest retailer, was dealt a fresh blow on Tuesday after another ratings agency warned of a possible cut to its credit rating in the wake of its recent poor performance.

Earlier this month Tesco Chief Executive Philip Clarke vowed to win back shoppers with millions of pounds of price cuts after the grocer posted a second straight year of falling profits.

Standard & Poors said it had revised its outlook for Tesco's debt to negative from stable.

"The outlook revision reflects a greater decline in Tesco's like-for-like sales in the UK than we anticipated, and lower profitability across its retail operations," it said.

Though S&P affirmed it "BBB+/A-2" long and short-term corporate credit ratings on Tesco, it believes the firm will find it hard to reverse the negative market and operating trends that are adversely affecting its sales and profitability.

It said a continued decline in Tesco's market share, sales and profit could result in a one-notch downgrade.

The stance by S&P follows one by rival Moody's on Friday to place its BAA1 rating for Tesco on review for downgrade.

In common with Britain's three other leading grocers - Wal-Mart's Asda, Sainsbury's and Morrisons - Tesco has been hit on two fronts, by the discount chains Aldi and Lidl and by Waitrose and Marks & Spencer at the premium end of the market.

Monthly industry data, published April 8, showed Tesco's UK market share had shrunk to 28.6 percent, its lowest level in nearly a decade.

(Reporting by James Davey; editing by Kate Holton)

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