Moody’s: E Mart view negative

Moody's Investors Service said it revised E Mart Inc.'s outlook to negative from stable.

Moody's also said it affirmed the company’s Baa2 issuer rating.

The outlook revision reflects the likelihood that E Mart's financial profile will remain weak for its Baa2 rating over the next 12 to 18 months due to a challenging operating environment that will continue to pressure its profitability and cash flow, Moody’s explained.

The negative outlook also considers a view that the competitive position of the hypermarket format in the broader retail industry in Korea faces increasing pressure from fast-growing e-commerce businesses, the agency said.

E Mart's reported operating income is expected to decline moderately in 2016 and remain low in 2017, Moody’s said, and its operating margin is expected to decrease to about 3.4% to 3.5% in 2016 and 2017 from 3.7% in 2015.

The outlook could return to stable if E Mart improves its financial profile through higher earnings, reduced investments or the implementation of substantial de-leveraging initiatives, the agency said.

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