Fitch Ratings Affirms Saks Inc.'s IDR at 'B'; Upgrades Sr. Notes to 'B+/RR3'.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed its Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) of Saks Incorporated Saks Incorporated (NYSE: SKS) is a Fortune 500 operator of department stores in the United States. While currently headquartered in Birmingham, Alabama, the company is in the process of moving to New York City. Saks Incorporated was formerly known as Proffitt's, Inc. (Saks) at 'B' and its rating of the company's secured bank credit facility at 'BB/RR1'. In addition, Fitch has upgraded the company's senior unsecured notes to 'B+/RR3' from 'B/RR4'. The Rating Outlook has been revised to Stable from Negative. Saks had $517 million of senior unsecured notes and no bank debt outstanding as of May 5, 2007. The affirmations reflect the company's improving operating trends, recent debt reduction, and internationally recognized luxury franchise balanced against the competitive operating environment and the cyclical nature of luxury retailing. The upgrade of the senior unsecured notes reflects the improvement in the expected recovery on the notes as a result of the repayment of $96 million of the notes in a tender offer. The revision of the Outlook to Stable from Negative reflects the expectation that sales trends will remain solid and that profitability will continue to recover from currently depressed levels. Saks reported comparable store sales growth of 4.9% in 2006 and a strong 14.4% in first quarter 2007. Behind this improvement is an effort to broaden the merchandise mix by expanding the lower priced 'Saks Fifth Avenue' label, more effectively catering assortments by market, and substantially increasing inventory levels. Profitability remains sub par, with the operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: at 0.3% in the twelve months ended May 5, 2007, but is improving as a result of merchandising improvements and cost reductions. The company has been streamlining its organizational structure, and has centralized its headquarters in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . Along with its corporate restructuring, Saks has reduced debt levels to bring them in line with a lower level of revenues and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become . In April 2007, Saks successfully completed a tender offer for half of its $190 million of 8.25% notes due 2008, which was financed with cash on hand. Fitch expects the leverage measured by adjusted debt/EBITDAR will improve from its current level of 6 times (x), driven by a combination of strengthening profitability and further debt repayment. The ratings of the $500 million secured bank facility and senior unsecured notes reflect their recovery prospects. Fitch's recovery analysis assumes a liquidation value Liquidation value Net amount that could be realized by selling the assets of a firm after paying the debt. in a distressed scenario of $994 million. Applying this value across the capital structure results in outstanding recovery prospects (over 90%) for the bank facility, which is secured by inventories and certain receivables. The recovery prospects for the senior unsecured notes are good (50%-70%). Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion