Fitch Ratings downgraded Tiffany & Co.’s long-term debt rating, but maintained a “stable” outlook for the jewelry retailer.
The downgrade was issued due to Tiffany’s profit outlook. But Fitch said the “rating continues to reflect Tiffany’s strong position in the global premium-jewelry segment, its iconic brand image and generally strong cash flow and credit metrics.”
Fitch lowered the company’s long-term issuer default ranking to a “BBB+” from an “A-” rating.
“The downgrade reflects Fitch’s changing expectations for Tiffany’s medium-term earnings before interest, taxes, depreciation, and amortization trends given signs of a luxury spending slowdown in the U.S. and other key markets as well as the impact of the strong U.S. dollar on tourist spend in the U.S.,” analysts for the ratings firm said, adding that Fitch pegs Tiffany’s sales due to foreign tourism at 25 percent of its total.
Fitch is also expecting Tiffany to deliver negative same-store sales, which will drive a 1 to 3 percent decline in the retailer’s 2016 EBITDA. Fitch expects Tiffany’s debt leverage to be “flattish.”
For the recent holiday selling season, Fitch said it “believes sales, especially in Tiffany’s lower price-point categories including silver jewelry, were negatively impacted by reduced international tourism related to the strong U.S. dollar as well as a general stagnation in U.S. luxury spending.”