A strong holiday showing could lead Saks Inc. to a better credit rating.
Moody’s Investors Service upgraded the luxe retailer’s probability of default rating to “B2” from “B3” and put the rest of Saks’ credit ratings on review for possible upgrade late Thursday afternoon. The debt watchdog said its review would focus on fourth-quarter performance as well as the company’s liquidity, debt maturities and operating strategies, including plans for further store closures.
“Saks’ earnings have notably improved due to higher consumer spending; a rebound in the luxury goods markets, and the company closing underperforming stores, which had previously been a small drag on earnings,” said Maggie Taylor, senior credit officer at Moody’s.
The ratings agency noted Saks’ earnings before interest and taxes tallied $80 million for the 12 months ended Oct. 31.
Saks’ corporate family credit rating currently rests at “B2,” which according to Moody’s rating scale indicates the company’s debt is still “subject to high credit risk.”
Prior to the upgrade, investors traded shares of Saks up 1.7 percent to $11.59 despite a modest downdraft in the market overall. The S&P Retail Index slipped 0.32 points to 508.47 as the Dow Jones Industrial Average declined 2.42 points to 11,370.06.
Among the retail decliners were Urban Outfitters Inc., down 1.8 percent to $37.63; Aéropostale Inc., 1.1 percent to $24.27, and The Men’s Wearhouse Inc., 1 percent to $23.42.
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