Moody’s downgrades M&S credit score to negative

Moody’s has downgraded Marks and Spencer’s outlook from stable to negative after it reported a 0.7% decline in revenues in its third quarter of the current financial year to £3bn.

In referencing the decision Moody’s said that the “continued decline” in Marks and Spencer’s clothing and home like-for-like sales, which dropped by 3.7% to £1.1bn, and indications that full year margins for both its clothing and food departments will likely be at the “weaker end” of previous guidance.

Moody’s said the results highlight the challenges the company faces to “curb the trend” of deteriorating underlying profitability.

David Beadle, senior credit officer and lead analyst for M&S at Moody’s, said: “The negative outlook reflects the risk that the company’s profitability may continue to decline, notwithstanding the strategic efforts to reposition the business for sustainable growth.

“The latest results highlight the challenges in clothing and home even though it is positive to note signs of progress in Food, cost control, and the decision last year to reduce dividends.”

At the time Marks and Spencer attributed the fall in revenues to competitor discounting in December as well as lower furniture displays at the start of the quarter.

The news also comes after the retailer was removed from the FTSE 100 for the first time since the index launched 35 years ago, after its market value fell below the threshold for inclusion, last September. Most recently the stock market value of challenger online fashion firm, Boohoo, has overtaken that of M&S.