...Sector Outlook Negative: The non-food retail sector outlook remains negative in 2018. Consumer habits are changing, with customer demands driving omni-channel investment and an accelerated stock refresh cycle. These changes are exacerbating competition and creating growing uncertainty on returns from transformational investments. Leverage also remains persistently high and cash flow generation weak across the sector, leaving little or no headroom for most issuers at current rating levels. Highly Challenged Business Models: Three companies in this sector are currently in the `CCC' or below rating categories, one of which (New Look) was downgraded to Restricted Default (RD) and then `CC' earlier this year following the completion of a company voluntary agreement (CVA) which we viewed as a distressed debt exchange. These companies are characterised by highly challenged business models and significant execution risk in their transformation plans. They also have high leverage (particularly in...
