Decathlon S.A.

Overview Key strengths Key risks One of the largest athletic footwear, apparel, and sports equipment retailers globally, with significant market share worldwide and leading position in key markets (France, Italy, and Spain). Some performance volatility stemming from dependence on discretionary consumer spending. Compelling value proposition based on a wide assortment of private brands and favorable price position in the current macroeconomic environment. Lower profitability than other retailers or branded consumer product companies. Vertically integrated business model, supporting pricing and merchandising flexibility. Working capital volatility weighs on free operating cash flow (FOCF) generation. On Dec. 31, 2022, Decathlon?s S&P Global Ratings-adjusted leverage was 1.2x, up from 0.5x in 2021. The increase was driven by negative discretionary cash flows (DCF) after leases

...A strong balance sheet and limited financial debt continue to support the rating, despite increased leverage in 2022. On Dec. 31, 2022, Decathlon's S&P Global Ratings-adjusted leverage was 1.2x, up from 0.5x in 2021. The increase was driven by negative discretionary cash flows (DCF) after leases of about 550 million, as the company suffered from a 900 million working capital outflow, and the restatement of its lease liability. In 2022, the company started applying International Financial Reporting Standards (IFRS) and reported a total lease liability of about 2.8 billion, significantly above S&P Global Ratings' previous estimate of 1.6 billion. Despite the increase, adjusted leverage remains relatively low considering the modest financial risk profile, and we expect it to progressively decline by 0.1x per year over 2023-2025. Excluding leases, Decathlon continues benefitting from a net cash position, given the limited amount of financial debt. Decathlon' s new CEO is considering a strategic...

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