Mobilux 2 S.A.S.

The stable outlook reflects our view that Mobilux 2 will exhibit modest earnings growth. We anticipate that this will enable the company to achieve adjusted debt to EBITDA of about 4.6x-4.8x and FFO to debt of 12%-18%, while we expect the company to improve its EBITDAR coverage ratio to 1.5x from 1.4x in 2018 and maintain positive reported FOCF in the coming years. We could lower the ratings in the next 12 months if Mobilux 2's FOCF were to approach neutral, its EBITDAR cover failed to improve, or if its adjusted debt to EBITDA were to increase to 5x and its FFO to debt declined to 12%. That could happen if the group's store portfolio underperforms, if the current reorganization

...Earnings growth is constrained by the competitive, volatile, and mature French furniture market.The increasing market pressure related to new online pure players entering an already-crowded market has continued to weigh significantly on earnings growth in 2018. The competitive environment has become more promotion-oriented: for instance, Black Friday is now very popular in France. After fiscal year 2018 (FY, ending June 2018) flat earnings growth, with sales of 1.6 billion (up 1.3% year-on-year, but down 0.2% on a like-for-like basis) and reported EBITDA of 76.3 million (down 1.6% year-on-year), we expect a modest pick-up in sales of about 2.3% in 2019 with a like-for-like of about 1.5% to 2.0%. This is thanks to a revamp of the merchandizing strategy and renewed advertising campaigns, translating to 5 million-6 million reported EBITDA growth in 2019. BUT posted a very solid performance in the first quarter of 2019, with 3.9% like-for-like growth amid a negative market overall (-4.4% on...

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