(The following statement was released by the rating agency)
Dec 10 - Uncertainty surrounding the business models of Europe's biggest food retailers and a weak economic environment are the key drivers of a negative outlook for the sector, Fitch Ratings says.
Major food retailers will focus on adapting their business models in 2013 to cope with changing consumption patterns, while they also face low like-for-like sales growth and pressure on operating margins. Failure to remain competitive through this period of change could lead to negative rating actions in 2013. This is particularly true for the very biggest companies in the sector: Carrefour, Tesco and Metro.
We expect retailers to increase the space devoted to fresh products, while reducing their focus on non-food products, where they face stiff competition from specialist retailers. We also expect retailers to stop expanding their portfolio of large stores and concentrate instead on smaller and convenience store formats as an ageing population and high petrol prices lead to changes in consumer behaviour.
An acceleration of retailers' multi-channel strategy will also lead to more online services and more innovative ways to combine their online and bricks-and-mortar operations. This includes the roll-out of 'drive-thru' supermarkets, where customers can order online and pick up their shopping at a time that suits them.
As they go about reforming their business models, we expect food retailers to pay particular attention to restoring their credit profiles through improving internal cash flow generation. This is also likely to include a tendency to pay dividends in scrip and to exit foreign markets where they don't have a clear leadership position.
For more information on the outlook for the sector, please see the full European Food Retail outlook report, published today on www.fitchratings.com.
(Caryn Trokie, New York Ratings Unit) Keywords:
(Caryn.Trokie@thomsonreuters.com; 646-223-6318; Reuters Messaging: rm://email@example.com)
Copyright Thomson Reuters 2012. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.