...Competition Leads to Further Downgrade: The downgrade in October to `BBB-` reflects Tesco PLC's continued loss of competitiveness in its core UK operations, with profitability further impacted by the accounting adjustments associated with the group's recognition of commercial income. Fitch Ratings expects further pressures on volumes and pricing, coupled with the operational leverage inherent in the business to lead to a fall in margins in the UK. We believe Tesco's financial profile is now more aligned with the 'BBB-' rating level, despite the announced capital preservation measures,. The ratings, however, remain supported by the market-leading size of the business, the group's still dominant UK market share and presence in all key food retailing channels, as well as international diversification. Challenging Operating Environment: The UK food retail market remains subject to increasing competitive pressures as the industry reacts to growing discount offers and changing consumer shopping...
