S&P alters GPS view to negative

S&P said it altered the outlook for GPS Hospitality Holding Co. LLC to negative from stable and affirmed the B- ratings on the company and its senior unsecured notes.

“Operating performance has weakened due to ongoing inflationary pressures. GPS Hospitality recently reported negative sales growth of 4.2% for the first quarter, primarily driven by declining customer traffic and rising costs that have hindered cash generation and profitability. S&P Global Ratings-adjusted EBITDA margins weakened 90 basis points in fiscal 2021, with further deterioration expected in fiscal 2022 as inflationary pressures persist amid lingering headwinds,” the agency said in a press release.

S&P said it estimates GPS Hospitality’s S&P Global Ratings-adjusted EBITDA margins will erode further in 2022 near the high-10% area from the mid-12% area in 2021.

“The negative outlook indicates that we could lower the rating within the next 12 months if prolonged operating weakness due to slowing consumer traffic or rising costs further reduce GPS Hospitality's EBITDA generation and constrain liquidity, which could cause us to view its capital structure as unsustainable,” the agency said.

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