Tear Sheet: Heritage Grocers Group LLC's Credit Metrics Will Remain In Line With The Rating As It Integrates El Rancho

In recent quarters, the company has faced margin compression due, in part, to the lower historical margin of El Rancho, as well as management's increased promotional activity. A reduction in Supplemental Nutrition Assistance Program (SNAP) benefits has also negatively affected HGG's customers. We expect the company's customers will adjust their purchasing patterns throughout 2024 due to this reduction. Therefore, we lowered our revenue projection for 2024 and now forecast that HGG's S&P Global Ratings-adjusted EBITDA margins will be in the low 8% area, which is down from 9% in 2023. However, we expect the company's leverage will remain stable at about 5.6x because the improvement in its revenue will offset the decline in its margin. HGG has a strong position

...Foreign currency issuer credit rating B/Stable/-- Local currency issuer credit rating B/Stable/-- Business risk Weak Country risk Very Low Industry risk Intermediate Competitive position Weak Financial risk Highly Leveraged Cash flow/leverage Highly Leveraged Anchor b Diversification/portfolio effect Neutral (no impact) Capital structure Neutral (no impact) Financial policy FS-6 (no impact) Liquidity Adequate (no impact) Management and governance Moderately Negative (no impact) Comparable rating analysis Neutral (no impact) Stand-alone credit profile b...

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