High Inflation: Credit Implications for European Non-Food Retailers
DBRS Morningstar studied the credit implications of the current economic environment on European merchandising companies, drawing a parallel with the global financial crisis of 2008–09 to shed some light on future scenarios.Key highlights include:
-- We anticipate decreasing EBITDA margins and sales volumes over the next 12 to 18 months, leading to weakening credit metrics especially for non-investment-grade issuers.
-- These trends result from a mix of negative factors, such as record-high European inflation, consequent loss of consumers' purchasing power, and supply-chain disruptions.
“If inflation stays at the high single-digit level also beyond 2022, this would result in a medium-term effect on companies’ profitability, weakening the credit profile across the whole rating spectrum”, according to Edoardo Danieli, Assistant Vice President of European Corporate Credits.
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