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Tesco downgraded to junk status by credit ratings agency

Credit ratings agency Moody’s has downgraded its rating on Tesco, forecasting the grocer will continue to be rocked by a competitive market.

According to Retail Week, late on Thursday, Moody’s downgraded its ratings to Ba1 from Baa3 after the retailer unveiled its Christmas trading results, which showed that UK like-for-likes fell 0.3% in the six weeks to January 3.

Sven Reinke, Moody’s vice-president and senior analyst, said: “We have downgraded Tesco’s ratings because of our expectation that the structural changes in the UK grocery retail market will continue to challenge the company’s operating performance even with the benefits of the significant restructuring actions announced by the company earlier today.

“Moreover, we think that the company’s efforts to stabilise the UK operations and to protect the balance sheet, while helpful, will take time to implement and the company’s financial profile is likely to remain leveraged beyond what we consider to be commensurate with an investment grade profile.”

 

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