S&P downgrades Parkson Retail

Standard & Poor’s said it lowered the long-term corporate credit rating on Parkson Retail Group Ltd. to B from BB-.

The agency also said it lowered the long-term Greater China regional scale rating on Parkson to cnB+ from cnBB+.

The outlook is negative.

The downgrades are due to an expectation that Parkson’s leverage will stay high and profitability to weaken over the next 12 months due to a weak operating performance amid a challenging retail environment, S&P said.

Parkson’s cash flows have deteriorated more than expected over the past year, the agency said, and does not anticipate any material improvement over the next 12 months.

The company’s leverage also could further increase due to intensifying competition and rising labor costs, S&P said.

The company’s cash flows could also deteriorate over the next 12 months due to weak same-store sales growth potential, further reducing its interest coverage, the agency said.

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