Moody’s lowers M&S’s credit rating from stable to negative

  • The change follows M&S’s recent trading report, which recorded a decline across clothing & home like-for-like sales

By guest author Sahar Nazir from Retail Gazette

Caption courtesy by Retail Gazette

Moody’s has downgraded Marks & Spencer’s credit rating from stable to negative following a strenuous year for the retailer.

The influential credit ratings agency confirmed M&S’s Baa3 senior unsecured ratings and its long-term (P)Baa3 senior unsecured MTN Program rating.

The change to negative comes after M&S’s recent trading report, which recorded a 2.7 % decline across clothing and home like-for-like sales over the 13 weeks to December 28, 2019

Marks & Spencer reported a “disappointing” Christmas trading period despite its food division making a “standout” performance.

The continued decline in like-for-like clothing and home sales reflect the challenges the company is facing to curb the trend of deteriorating underlying profitability, which has fallen each year since peaking in fiscal 2016.

“The negative outlook reflects the risk that the company’s profitability may continue to decline, notwithstanding the strategic efforts to reposition the business for sustainable growth,” Moody’s lead analyst David Beadle said.

“The latest results highlight the challenges in clothing and home even though it is positive to note signs of progress in food, cost control, and the decision last year to reduce dividends.”

The official press release to the results per December 28, 2019:



‘Improved trading performance reflecting progress of transformation strategy’


  • Trading reflects ongoing progress of transformation strategy
  • UK like-for-like revenue slightly up, driven by improved quarter in both main businesses
  • Food business maintains momentum of H1 with positive like-for-like revenue and further improvement in volumes, with standout performance in the 2-week Christmas period as customers responded to sharper value and more relevant innovation
  • Clothing & Home improved run rate from H1 reflecting strong initial customer reception of Autumn ranges with signs of continuing recovery in core Womenswear, offset by underperformance in Menswear and Gifting
  • Decisive actions to drive trade in-season including improved availability, a reduction in options and improving value helped reduce the value of stock into sale by 12%
  • Full year guidance unchanged, although gross margins expected to be around lower end of guidance, largely offset by cost reduction programme

Steve Rowe, Chief Executive, said: “We delivered an improved performance in Q3 across both main businesses. The Food business continued to outperform the market and Clothing and Home had a strong start to the quarter, albeit this was followed by a challenging trading environment in the lead up to Christmas. As we drive a faster pace of change, disappointing one-off issues – notably waste and supply chain in the Food business, the shape of buy in Menswear and performance in our Gifting categories – held us back from delivering a stronger result. However, the changes we made earlier in the year in Clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future.”

Additional points

Clothing & Home UK online revenue was up 1.5%, which was lower than expected.  Revenue was adversely impacted by competitor discounting in December and lower furniture dispatches at the start of the quarter.  We generated an improved run rate in traffic and orders, started to implement improvements to search and personalisation in the period and launched an instalment payment option.

International revenue continued to reflect investment in price and franchise partner driven stock efficiencies.  However, this investment translated into solid volume growth with retail sales of partners up, excluding the effects of disruption in Hong Kong.

We will report full year results on 20 May 2020.