S&P reviews Abercrombie

Standard & Poor’s said it placed all its ratings on Abercrombie & Fitch Co., including the BB- corporate credit rating, BB+ issue-level rating on its $400 million revolver and BB- issue-level rating on its $300 million term loan B, on CreditWatch with negative implications.

"The CreditWatch placement follows the company’s business update that net sales for the third quarter declined 12%, same-store sales decreased 10%, with a meaningfully lower international comp, and gross margin will erode more than previously expected given the promotional environment. Even though we are not aware of the extent of the margin decline, further sales declines could lead to significant deleveraging of fixed costs, which may be indicative that margin will be considerably lower than we had previously expected," S&P credit analyst Kristina Koltunicki said in a news release.

"This could result in a weakening of credit protection measures beyond the threshold that we determined would lead to a lower rating. Furthermore, the weak performance may lead to our reassessment of the company’s strategic initiatives to reinvigorate the business, which may not occur in the beginning of 2015."

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