By Saabira Chaudhuri
Fitch Ratings has cut its rating on Tesco PLC (TSCO.LN) by one
notch, pushing Britain's biggest retailer into junk territory.
Fitch said its downgrade to double-B-plus from triple-B-minus
"reflects a weakening outlook for the group's near term
profitability in its core U.K. operations relative to our prior
expectations as the company implements its wide-ranging turnaround
plan."
The move means all three big ratings firms now rate Tesco at
junk, after Standard & Poor's downgraded the retailer in
January.
Moody's Investors Service on Thursday said Tesco's trading
profit was in line with its estimates and that its rating and
outlook on the retailer was unchanged. Moody's has rated Tesco at
junk since January, when it cut the company's rating to Ba1 from
Baa3.
Fitch also said it expects Tesco's free cash flow generation
next year to be hit by the timing of restructuring charges and
working capital effects associated with changes to supplier
relationships, which has spiked Tesco's leverage and risk
profile.
The ratings firm maintained its negative outlook on Tesco,
saying this reflects "the continued pressures Tesco's core U.K.
business faces in restoring profitability, despite the initiatives
carried out by management."
Tesco earlier this week reported the steepest ever full-year
loss for a British retailer amid a raft of charges, capping the
most tumultuous year in the grocer's 96-year history. The retailer
posted a pretax loss of GBP6.38 billion ($9.52 billion) for the
year ended Feb. 28. It logged charges of GBP7 billion, including a
property impairment of GBP4.7 billion. Tesco reported net debt of
GBP8.5 billion for the year.