S&P downgrades Hornbach

S&P said it lowered its ratings on Hornbach Baumarkt AG and on its senior unsecured notes to BB from BB+. The recovery rating on the notes is unchanged at 3.

“The downgrade reflects our view that Hornbach faces stiff competition from existing and pure online players in the German and Austrian do-it-yourself (DIY) sector. This constrains Hornbach's ability to transfer higher input prices to customers amid ongoing high overhead expenses for the group's omnichannel strategy,” S&P said in a news release.

“This results in lower operating margins and in turn limits cash conversion and the group's financial flexibility in light of substantial ongoing real estate investments.”

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