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Tesco boss Philip Clarke faces renewed pressure over credit rating warning

Tesco boss Philip Clarke faced renewed pressure after rating agency Standard & Poor’s warned of a potential cut to its credit rating.

Standard & Poor’s (S&P) yesterday changed its outlook on the Tesco’s debt from stable to negative. The move indicates that the grocer is more likely to have its rating cut than raised, according to The Guardian.

“The outlook revision reflects a greater decline in Tesco’s like-for-like sales in the UK than we anticipated, and lower profitability across its retail operations,” said S&P analyst Raam Ratnam.

“In our opinion, the declining profitability and difficult trading conditions could undermine Tesco’s competitive position and weaken its credit metrics to lower levels than we consider adequate for the current ratings. In our view, market conditions will remain highly competitive, particularly in the UK, which accounts for around 70% of Tesco’s retail sales and profits.”

Despite the warning, the agency held its BBB+ rating for Tesco. However, it follows fellow ratings specialist Moody’s warning on Friday that it was considering reducing Tesco’s rating for a second time.

Earlier this month, Tesco revealed group trading profit plunged 6% to £3.3bn last year and Clarke warned that the trading environment is changing rapidly.

Underlying pre-tax profit slumped 7.7% to £3.05bn and UK like-for-likes dipped 1.3% in the year to February 22.

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