S&P cuts Loblaw

Standard & Poor's said it lowered the long-term corporate credit and senior unsecured debt ratings on Loblaw Cos. Ltd. to BBB from BBB+ and the Canadian scale commercial paper rating to A-2 from A-1.

Ratings were removed from CreditWatch with negative implications, where they were placed Nov. 15 following the announcement of very weak third-quarter performance ended Oct. 6.

The outlook is negative.

According to the agency, the downgrade reflects the ongoing significant challenges including lower profitability, weak credit protection measures for the ratings, the need to continue restructuring its supply chain and an increasingly competitive operating environment.

Ratings are supported by the company's position as the largest grocer in Canada, well-established private label programs, solid operating flow generation and ample financial flexibility, the agency said.

These strengths are partially offset by significant problems with the company's supply chain, deteriorating profitability margins, weak credit protection measures for the ratings and challenging market conditions, S&P said.

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