Moody’s drops Tesco to Baa2

Moody's Investors Service said it downgraded the senior unsecured long-term ratings of Tesco plc and its guaranteed subsidiaries to Baa2 from Baa1.

Concurrently, the agency affirmed the prime-2 short-term ratings of Tesco and subsidiaries.

The outlook is stable.

"We have downgraded Tesco's rating owing to the increasingly difficult conditions in the UK retail grocery market, which contributed to a 6.0% drop in the group's 2013-14 trading profit and weak first quarter of fiscal 2014-15 sales results," Sven Reinke, Moody's vice president, senior analyst and lead analyst for Tesco, said in a news release. "We expect these conditions to continue affecting the company's credit profile negatively over the next 12-18 months."

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