(The following statement was released by the rating agency)
Sept 13 - Standard & Poor’s Ratings Services said today that it does not expect any significant changes to the U.S. supermarket industry’s credit quality in the near term despite tough times because of slow U.S. economic growth, rising food prices, and persistently high unemployment. In a new report titled, “Top 10 Investor Questions On The U.S. Supermarket Industry,” published earlier today on RatingsDirect, we examine some of the issues facing the industry.
“For example,” said Standard & Poor’s credit analyst Charles Pinson-Rose, “we believe these economic conditions will make it more difficult for traditional grocery stores to operate.” It’s likely that they will absorb some of the higher costs, leading to gross margin contraction, something that has already been evident in recent operating results. Moreover, nontraditional food retailers, such as warehouse clubs, discounters, and dollar stores, are increasing their food offerings and expanding their store bases. Weak economic conditions, coupled with generally rising gas prices, could intensify the shift from traditional to nontraditional food retailers in the near term
“Given that we are forecasting flat or slightly negative profits for many industry participants, we don’t expect credit ratios and credit quality to change,” added Mr. Pinson-Rose. (Caryn Trokie, New York Ratings Unit)