Max Azria isn’t anticipating a big bounce in the near term.
The chairman and founder of BCBG Max Azria Group Inc., who sat on a panel at the Milken Institute Global Conference in Beverly Hills on Monday, said he sees little reason for optimism in retail over the next year and is prepared for his business to be down 10 to 20 percent.
“We have to produce with much lower costs, have to save on everything, like advertising, without doing less,” said Azria, who shared the stage with Simon Property Group Inc. chief executive officer David Simon, Goldman Sachs retail analyst Adrianne Shapira, Staples Inc. president Michael Miles and GNC Corp. ceo Joe Fortunato. “We have to be realistic; we cannot manage business by looking at everything like it will come right back.”
Azria’s take was in line with most of his fellow panelists, with the exception of Simon, who had a more positive outlook on the resilience of his mall properties.
Despite the challenges, Azria said his company is positioned to cope with the economic downturn. “People will spend less, we’ll get through the next one to two years and that’s it,” he said.
On Tuesday, Standard & Poor’s boosted its corporate credit rating on Azria’s privately held company to “B-minus” from “SD” after the firm reshuffled its debt. A rating in the “B” category indicates the company has the capacity to meet its financial commitments. “SD” indicates a selective default. The outlook on the rating is negative.
BCBG recently borrowed money to repurchase debt at less than face value. S&P views this as “tantamount to default” but the move improved the firm’s credit profile. “They were able to purchase more debt than they took on to purchase it, so they are, in essence, less leveraged,” said Jackie Oberoi, debt analyst at the rating agency.
BCBG has estimated debt of $516 million, a reduction of about $21 million from two debt buybacks, according to S&P.