Research Update: Next PLC Rating Lowered To 'BBB-' On COVID-19-Related Business Disruption; Placed On CreditWatch Negative

We expect the COVID-19 pandemic will result in a material drop in U.K.-based apparel retailer Next PLC's sales, owing to the closure of its stores and online operations. Although Next is planning to implement a series of measures to mitigate the impact and preserve cash, a steep decline in sales, earnings, and cash generation will considerably weaken the group's credit metrics. We are therefore downgrading Next's long-term and short-term issuer credit ratings to 'BBB-/A-3' from 'BBB/A-2', and placing all ratings on CreditWatch with negative implications. The CreditWatch indicates still-significant downside risks given the uncertainty as to when COVID-19 will peak and whether the pandemic will persist beyond second-quarter 2020, leading to a prolonged weakening of Next's credit ratios. S&P Global

...- We expect the COVID-19 pandemic will result in a material drop in U.K.-based apparel retailer Next PLC's sales, owing to the closure of its stores and online operations. - Although Next is planning to implement a series of measures to mitigate the impact and preserve cash, a steep decline in sales, earnings, and cash generation will considerably weaken the group's credit metrics. - We are therefore downgrading Next's long-term and short-term issuer credit ratings to '###-/A-3' from '###/A-2', and placing all ratings on CreditWatch with negative implications. - The CreditWatch indicates still-significant downside risks given the uncertainty as to when COVID-19 will peak and whether the pandemic will persist beyond second-quarter 2020, leading to a prolonged weakening of Next's credit ratios....

Research Update