Morrisons has credit rating downgraded amid debt concerns

Morrisons has had its credit rating cut after recording weaker sales and profits.

Credit rating agency Moody’s downgraded the UK’s fifth largest supermarket chain as it cautioned that its ability to repay its roughly £7.5 billion of debts had moved to “negative” from stable.

It reduced the firm’s existing overall credit rating one rung from B1 to B2, indicating greater risk for investors and bondholders.

The downgrade comes after a turbulent period for Morrisons following its £7 billion takeover by US private equity firm Clayton Dubilier & Rice in 2021.

Last month, the retail group also revealed a fall in annual earnings amid pressure from depressed consumer confidence and rising costs.

Sales have also come under pressure in recent months, resulting in rival Aldi overtaking it as the UK’s fourth-largest supermarket chain.

Moody’s analysts said its concerns over Morrisons were linked to its private equity ownership and a “high leverage” and “aggressive financial strategy”.

The agency added that the downgrade was “triggered by the company’s operating underperformance in fiscal 2022″.

Nevertheless, the reports also flagged that Morrisons’ sales had risen over the festive period and its market share stabilised, according to data from researchers at Kantar.

“Both trends suggest greater stability of the company’s sales going into fiscal 2023, leading to a recovery of profits through operating leverage, pass-through of higher input costs, and achievement of synergies and efficiencies,” the report said.

Morrisons declined to comment on the report.