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Ratings blow for House of Fraser and New Look

Department store House of Fraser has been labelled a ‘very high credit risk’ by ratings agency Moody’s following weak trading in the first three quarters.

David Beadle, a vice president for Moody’s and lead analyst for House of Fraser, pointed to challenging market conditions, disruption following the launch of a new web platform and underperforming house brands.

Several brands sold on House of Fraser’s website complained about a drop in sales following a £25m upgrade to its ecommerce platform in April this year.

“Absent an unexpected general uptick in consumer demand, 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,” he said.

Moody’s also slashed its rating for New Look, warning the retailer’s finance could prove “unsustainable” following falling profits.

The retailer’s adjusted EBITA plummeted by 72.2% year on year to £24.2m in the 26 weeks to 23 September 2017. It also reported an underlying operating loss of £10.4m, compared to a £59.3m profit in the same period the year before.

“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”, said Beadle.

”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.” 

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