NEW YORK — Credit ratings in the retail sector this year are being more affected by strategy and policy decisions than by the economy, concluded a research report released by Standard & Poor’s Ratings Service on Friday.

“Negative rating trends are expected to continue in the retail sector for the balance of 2005, despite a fairly solid economic backdrop. Efforts to enhance shareholder value, mergers and acquisitions, and execution issues are driving rating activity,” said S&P credit analyst William Weitreich, who co-wrote the report, “Industry Report Card: U.S. Retail.”

The report noted that retail sales in May — excluding cars — dropped 0.2 percent. That decline followed a revised 1.4 percent gain in April.

Still, the retail sector’s credit ratio for the period of Jan. 1 to June 20 was 1.6, which represents 13 downgrades and eight upgrades.

Weitreich attributed the negative ratings trend primarily to leveraged buyout proposals at the Neiman Marcus Group, Toys ‘R’ Us and other stores, as well as mergers and strategic repositioning. The latter includes the possible sale of some of Saks Inc.’s regional department stores and the Sears-Kmart and Federated Department Stores-May Department Stores mergers.

This story first appeared in the June 27, 2005 issue of WWD. Subscribe Today.

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