S&P downgrades Fossil, facilities to BB

S&P said it lowered its corporate credit rating on Fossil Group Inc. to BB from BB+.

The outlook is negative.

At the same time, the agency downgraded the issue-level rating on the company's $1.05 billion revolving credit facility and $231.25 million term loan to BB from BB+. The recovery rating on these facilities is unchanged at 3, indicating an expectation for meaningful (50%-70%, at the high end of the range) recovery in the event of a payment default.

"Our rating action reflects the downward revision of our forecast for Fossil, and our expectation that credit measures will continue to deteriorate as a result of declining profits," S&P analyst Mariola Borysiak said in a news release.

"We now believe the company's sales will continue to decline throughout 2017 as a result of a weak retail environment, declining demand for traditional watches, and poor performance in the company's jewelry and leather segments.

“In addition, we forecast meaningful margin erosion due to increasing competition in the wearable technology segment that will force the company to rely on promotions to drive sales.

“Further, we believe the ongoing shift in product mix toward lower-margin wearable devices, and the investments necessary to strengthen brand awareness and enhance omnichannel capabilities, will also weigh on the company's margins for at least the next two years," Borysiak added in the release.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.