Morrisons has been dealt with another blow after credit rating agency, Fitch, cut the supermarket chain’s credit rating over its £6.6 billion worth of debt and shrinking profits.
According to Fitch, the former Big 4 grocer has driven up prices faster than its rivals resulting in market share being lost.
As a result, skyrocketing costs will also lead to a £200 million drain on Morrisons’ profits over the next three years, the company predicts.
Fitch downgraded the supermarket giant’s debt rating from a BB level to a B, indicating a “material” risk of default.
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It said: “Morrisons lost more market share than its large peers due to larger price increases.”
Fitch added that it also expects Morrisons to apply future excess cashflows and to proceed from potential material asset disposals in a bid to repay debt and build leverage headroom under the its ‘B+’ rating.
Fitch also expects Morrisons’s wholesale revenue to grow on average around 4% per year in FY23-FY25.
It said: “Within our forecast we have retained product sales to McColls in this segment, and expect growth to come mainly from McColls’ store conversions to Morrisons Daily. Existing conversions have delivered like-for-like sales growth and profit from a change in product mix.
“The McColls acquisition provides a direct convenience channel with around 1,000 stores with incremental £20 million EBITDA, pre-energy cost inflation.”
This comes as Morrisons announced plans to proceed with more McColls conversions and has announced the closure of 132 unprofitable stores.