S&P rates Hudson's Bay MTNs BB+

Standard & Poor's said it assigned its BB+ rating to department store retailer Hudson's Bay Co.'s C$150 million MTN program and affirmed the Toronto, Ont.-based company's other debt ratings, including the BB+ long-term corporate credit and senior unsecured debt ratings.

The outlook is negative.

"The ratings reflect the company's continued weak profitability; continued market share declines; and debt protection measures that remain slightly weak for the ratings category," said S&P credit analyst Don Povilaitis. "These factors are partially offset by continued cost containment, a strengthened capital structure given a reduction in long-term debt, and a commitment to competitive merchandising strategies at both The Bay and Zellers stores."

Hudson's Bay Co.'s third-quarter (ended Oct. 31) results were largely flat, as revenues of C$1.71 billion, operating income of C$134.8 million, and net income of C$5.5 million all improved from the same period last year, but only marginally.

Despite modestly higher third-quarter EBIT at both The Bay (up C$0.7 million) and Zellers (up C$5.2 million), same-store sales declined 2.7% for the quarter at The Bay, while Zellers saw its comparable store sales decline 1%. Return on permanent capital on a rolling basis remains weak for the ratings category at 8%.

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