NEW YORK — Saks Inc. and Nordstrom Inc. both received good news on the debt securities front from Moody’s Investors Services Thursday.
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Reflecting what the ratings agency believes is “a stabilization of market share relative to other department stores and sustainable margin improvement,” Moody’s upgraded several of Saks’ debt issues, including its senior implied rating to “Ba3” from “B1”; its senior unsecured public debt ratings, guaranteed by operating subsidiaries, to “Ba3” from “B1”; and its senior unsecured long-term issuer rating to “B1” from “B2.”
Moody’s added that its outlook on the approximately $1.2 billion of Saks’ debt securities covered by the ratings remains stable, “reflecting the expectation that Saks will maintain improvements to operating performance and continue to finance its business strategies through internally generated funds.”
Looking ahead, Moody’s said the firm’s ratings “could respond positively [if] Saks can successfully grow [its] top line without negatively impacting operating margins and can continue to reduce leverage. The ratings may go down if the company begins to increase leverage to fund growth strategies or shareholder transactions; or if it is unable to maintain operating improvements or top line relative to other department stores.”
Meanwhile, citing a number of improved operating indicators, Moody’s confirmed its ratings of Nordstrom and changed the outlook to stable from negative. Among the confirmations were the retailer’s senior unsecured notes, debentures and issuer rating at “Baa1”; its senior unsecured shelf rating at “(P)Baa1” and its subordinated shelf rating at “(P)Baa2.”
“The outlook change is based on the improvement in comparable-store sales, operating profitability, supply-chain management and credit metrics,” Moody’s said. “Nordstrom’s ratings are confirmed, reflecting the company’s solid franchise, its upscale client base, differentiating customer service and private label quality, improving credit metrics and more efficient supply chain management.”
In New York Stock Exchange trading Thursday, Saks shares closed up 11 cents, or 0.7 percent, at $16.36, while those of Nordstrom rallied 54 cents, or 1.5 percent, to end the session at $37.69.