Dec 6 - (The following statement was released by the rating agency)
Fitch Ratings has published its "European Food Retail Peer Study". The report analyses the main factors that influence our rating decisions for corporates in the European food retail sector, and compares specific traits of Fitch-rated companies in the industry.
Size, market share and operating margins are reliable indicators of rating levels for European food retailers. Their ratings are also supported by high barriers to entry for non-established operators due to market saturation. Brand strength, and its maintenance, is also an important rating driver and one of the main components of rating differentiation. Brand identity incorporates the logo, location, quality and up-to-date nature of the stores, as well as the perceived values of the brand itself.
The report also includes a review of financial factors. A rating differentiator for European food retailers is their leverage position - measuring a company's long-term creditworthiness and solvency - and interest coverage. European food retailers are assessed particularly in terms of their lease-adjusted net debt/EBITDAR and FFO adjusted net leverage metrics. The former is based on capitalising food retailers' lease liabilities, as these companies generally rent a significant percentage of the properties they operate from. The latter assesses food retailers' cash flow after meeting operating expenses including taxes and interest to cover underlying debt and rent payments outstanding.
The report, entitled 'European Food Retail Peer Study' covers issuers including Carrefour SA, Casino Guichard-Perrachon SA, METRO AG, Royal Ahold NV, Picard Bondco SA and Tesco PLC. It is available at www.fitchratings.com or by clicking the link below.
