LONDON (Alliance News) - Moody's Investors Service on Thursday affirmed Marks & Spencer PLC's credit ratings with a stable outlook, saying it expects the company's free cash flow to remain positive in 2017 and be broadly neutral in 2018.
It has affirmed M&S's Baa3 senior unsecured ratings, and the long-term Baa3 and short-term Prime 3 MTN Program ratings.
"Our decision to affirm the rating reflects our expectation that, notwithstanding the weakened operating performance, M&S's leverage will remain commensurate with the Baa3 rating in the next 12-18 months," said Senior Analyst Ernesto Bisagno.
Moody's expects M&S's sales in its Clothing & Home segment to remain negative over 2017 and 2018, but improve against the level of the first half of 2017, driven by improved stock availability, lower pricing and better ranges.
The rating agency expects ongoing weak like-for-like sales growth for the Food segment of around 1%, although factors in a strong contribution from new stores in this segment.
Moody's anticipates the company's operating costs in the UK will rise by 3.5% in 2017, in line with company guidance, but that increase will be marginally slower in 2018 due to improved efficiency and reduction of its UK selling space.
Meanwhile, M&S's liquidity profile remains satisfactory, Moody's said, and reflects the rating agency's expectation that the company will continue to generate positive free cash flow.
Shares in M&S were down 0.3% at 335.10 pence Friday.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
Copyright 2016 Alliance News Limited. All Rights Reserved.
Marks & Spencer (MKS)