House of Fraser and New Look hit by credit downgrade

Moody’s slashed House of Fraser’s ‘corporate family credit’ rating and the rating of £165m of floating rate notes, issued by the department store group and due in 2020, from B3 to Caa1.

B ratings are considered to be “speculative” and carry a high credit risk, while Caa ratings are judged to be of “poor standing” and are subject to a very high credit risk.

Moody’s lead analyst for House of Fraser David Beadle said: “Our downgrade of House of Fraser reflects its weak results in the first three quarters of its fiscal year, which was due to both challenging market conditions and company-specific factors, notably in respect of disruption after the launch of a new web platform and underperformance in house brands.”

He added that without a general improvement in the consumer environment, which is unlikely in the current climate, “a recovery in House of Fraser’s profitability is dependent on either an improvement in the company’s product offer or in cost savings initiatives, which involve execution risks”.

House of Fraser is under new leadership, having operated without a chief executive for six months. Chief executive Alex Williamson arrived from the Goodwood estate in July.

New Look

Moody’s also downgraded New Look’s corporate family rating and the rating of senior secured notes issued by the struggling fashion retailer and due in 2022.

“Our decision to downgrade New Look’s ratings reflects our expectations that, after a particularly weak second quarter, results in the second half of the company’s fiscal year will also fall well short of last year”, Beadle said.

“Following changes to the senior management team, New Look is seeking to refocus on its historic value-based broad appeal. However, this strategy will take time, and the path towards a meaningful recovery in profitability is uncertain.”

New Look is in the midst of changing its strategy from that of former boss Anders Kristiansen, who abruptly exited the retailer in September.

The retailer’s move to a more value-focused offer will be executed by former boss Alistair McGeorge, who returned to the retailer following Kristiansen’s departure.