Despite expecting Next to ”successfully navigate” through coronavirus, credit rating agency Moody’s has placed the retailer on review for downgrade due to uncertainty over how long stores will remain closed and how quickly consumer demand will recover.
Moody’s has placed Next’s long-term issuer rating and backed senior unsecured rating on review to downgrade to Baa3 from Baa2.
It has changed the company’s outlook to under review from stable.
All of Next’s stores and its online operation are currently closed due to the coronavirus crisis.
Moody’s said: ”Although Moody’s expects the company to successfully navigate through the weeks and months ahead, there can be no certainty at this stage as to how long store closures persist or how quickly demand recovers.
“Moody’s believes that Next may be able to return to credit metrics commensurate with its current ratings during the course of 2021. However, in addition to downside risks in respect of the timing, shape and certainty of a return to pre-crisis levels of demand, the rating agency notes that Next may choose to return to historic levels of shareholder distributions from a more leveraged position, which would constrain its ability to return to pre-crisis credit metrics.
”More positively, Moody’s recognises Next’s track record of stable profits and strong cash generation; the company’s balanced financial policies which have seen it maintain stable credit metrics over many years while distributing surplus cash to shareholders; the detailed planning and scenario analysis the company has undertaken in respect of the coronavirus crisis; the steps already announced by the company to maintain an acceptable liquidity profile in the months ahead, which in Moody’s view is also supported by Next meeting the qualifying criteria to access the joint HM Treasury and Bank of England Covid Corporate Financing Facility.”