While more defaults and rating downgrades are expected in the retail and apparel company sector over the next several months, this year will be brighter overall, even for department stores, Moody’s said in a report Friday.
The following are highlights of the report.
- Looking beyond initial defaults and ongoing margin pressure, 2018 will be brighter
- Moody’s expects default rate in the speculative-grade retail sector to drop sharply to 5% in October from 9% today, but only after peaking at 11% in March.
- Once the coming tipping point has passed, however, numerous sub-sectors will be left stronger.
- The US retail and apparel industry chalked up 11 defaults last year, compared with seven in 2009, at the height of the recession.
- Rating downgrades shot up 87% in 2017, while upgrades declined 43%.
- Retailers will continue to come under intense pressure to meet the needs of customers, whenever and wherever they want to shop, and must strive to provide them with a frictionless experience between online and in-store shopping.
