CHICAGO--()--Fitch Ratings today published its second edition of the 'High Yield Retail Checkout' a comprehensive analysis of large companies in the leveraged finance retail sector.
The report profiles 25 of the largest high-yield retail and apparel companies. Each company report includes Fitch's assessment of the business and financial profile, and provides detailed capital structure, debt organizational chart, and covenant analyses.
Concerns around market share losses have become more prominent among high-yield issuers. This was a key In Fitch's multinotch rating downgrades on Best Buy, Co., Inc. (Best Buy), J.C. Penney Company, Inc. (J.C. Penney), Sears Holdings Corporation (Sears), RadioShack Corporation (RadioShack) and SUPERVALU Inc. (SUPERVALU) over the past 24 months. Fitch may take additional negative rating actions in 2013 as indicated by the Negative Outlooks on several retailers.
High leverage at companies such as Rite Aid Corporation (Rite Aid) and Sears, and more recently, The Gymboree Corporation (Gymboree) and J.C. Penney, is primarily attributable to significant EBITDA contraction as a result of execution missteps and/or share losses. Best Buy, RadioShack, and Toys 'R' Us, Inc (Toys) have also experienced EBITDA erosion and have business models that bring into question their ability to turn EBITDA around.
For companies such Claire's Stores, Inc. (Claire's) and The Yankee Candle Company, Inc. (Yankee), their high leverage is largely a reflection of the sheer heaviness of their debt load from historical and recent leveraging transactions, while their flattish performance has constrained their ability to deleverage meaningfully. Most of these retailers are expected to remain on a negative trajectory in 2013.
Retailers that are expected to delever over the next 12 to 24 months on the back of top line improvement and FCF generation include Bon-Ton Stores, Inc. (Bon-Ton); GNC Holdings, Inc. (GNC); Hanesbrands Inc. (Hanesbrands); Levi Strauss & Co. (Levi); Michaels Stores, Inc. (Michaels); NBTY, Inc. (NBTY); Neiman Marcus, Inc. (Neiman Marcus); PVH Corporation (PVH).
The following companies are profiled in the report:
Bon-Ton Stores, Inc. (The)
Best Buy Co., Inc.
Burlington Coat Factory Warehouse Corporation
Claire's Stores, Inc.
GNC Holdings Inc.
Gymboree Corporation (The)
J.C. Penney Company, Inc.
J.Crew Group Inc.
Jones Group, Inc. (The)
Levi Strauss & Co.
Limited Brands, Inc.
Michaels Stores, Inc.
Neiman Marcus, Inc.
Rite Aid Corporation
Sally Beauty Holdings, Inc.
Sears Holdings Corporation
Toys 'R' Us, Inc.
Yankee Candle Company, Inc. (The)
The full report 'High Yield Retail Checkout' is available at www.fitchratings.com. Fitch's 2013 outlook report for the U.S. retail sectors is also available.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: High-Yield Retail Checkout