Even though holiday revenues are expected to rise, Standard & Poor’s said the sales gains might not be enough to avert slowing business trends and weaker profits for the rest of this year and in early 2012.
Already, credit downgrades outpaced upgrades by a rate of 1.3 to 1 over the first nine months of this year, marking a dramatic flip from a year earlier.
“This trend indicates the extent to which the retail sector is softening following the recovery in 2010,” said S&P debt analyst Gerald Hirschberg in an analysis Monday.
“After the deep recession, many retail companies have tapped the debt markets, raising new capital to address debt maturities or tight covenants, or to finance [leveraged buyouts] or merger and acquisition activity, thereby weakening their overall credit profile,” Hirschberg said.
The credit markets have generally been open to retailers, which so far this year have taken on $53 billion in new debt rated by the credit watchdog.
“For most department stores, we believe same-store sales comparisons will become less favorable over the next few quarters and that performance growth is likely to slow, especially given the weak economy in the U.S. and Eurozone issues,” Hirschberg said.
S&P expects combined November and December sales of general merchandise, apparel, furniture and other goods will rise 2.5 percent to $249 billion — just shy of 2007 sales of $251 billion. The rating agency expects sales will continue to grow in the low-single digit percentage range early next year.
“Margins will at best remain the same, and could be squeezed if retailers can’t pass on higher costs or lower leverage through sales,” Hirschberg said in the report.
Hirschberg said S&P’s retail ratings could withstand some “moderate variances to our baseline outlook,” but that an unexpected twist could lead to a credit downgrade, especially if a company is carrying a lot of debt.
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)
Breaking News: @hedislimane joins @celine as its new artistic, creative and image director. One of fashion’s preeminent image-makers and trendsetters, Slimane is to join the LVMH brand on Feb. 1 and unveil his first fashion proposition for men and women next September during Paris Fashion Week. It marks a major homecoming for Slimane, who cemented his reputation – and influenced men’s tailoring for more than a decade – as the designer of Dior Homme between 2000 and 2007. He went on to reinvent and ignite the house of Yves Saint Laurent, which he rechristened Saint Laurent, between 2012 and 2016 – all the while maintaining a close relationship with the Arnault family, which controls LVMH and Dior. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
“Personally I believe the Eighties have been the richest and more vivacious period for international fashion,” Giorgio Armani said when asked what his favorite decade of fashion is. It was a moment of disruption and experimentation and only thinking back to the first years of that decade is always an emotion for me, for what they have meant to me and my work.” The influence is clear in @giorgioarmani spring 2018 collection, pictured here, which was full of bright colors and unexpected prints. Read more about which decades designers loved most on WWD.com #wwdfashion #wwddecades (📷: @aitorrosasphoto)
For Lady Gaga’s only Italian show on her “Joanne World Tour,” the singer wore a range of @versace_official outfits. The standout piece: this custom-made bodysuit inspired by the brand’s spring 2018 collection. #wwdfashion (RG: @ladygaga)
@_camillaruth_ is expanding on the wellness-craze concept with @westbourne – a new NYC restaurant that’s both a healthy-minded café as well as a business that gives back to the community. Marcus works with the Robin Hood foundation to give back to The Door, a non-profit providing youth development services, and also hires employees through The Door. Read our full interview with Marcus on giving back through food on WWD.com. #wwdeye (📷: @lexieblacklock)