Metro AG (MEO) had its long-term credit rating cut to the lowest investment-grade level by Standard & Poor’s Ratings Services after Germany’s biggest retailer reduced its 2012 profit forecast last week.
The rating on Dusseldorf, Germany-based Metro was cut to BBB- from BBB, Standard & Poor’s said in a statement today. S&P also lowered the short-term rating one level to A-3.
“The downgrade reflects a continuing trend of lower-than- expected profitability,” S&P said. “Metro’s global diversification fails to compensate for operating underperformance in some of its European markets.”
S&P’s downgrade mirrors that of Moody’s Investors Service, which on Oct. 9 cut the rating on Metro to Baa3, one level above junk. Metro, the owner of Media-Markt electronics outlets and Kaufhof department stores, said last week that earnings before interest and taxes will decline to about 2 billion euros ($2.6 billion) in 2012 as Europe’s debt crisis weighs on sales in the south and east of the region. It had previously forecast earnings would be about the same as 2011’s 2.37 billion euros.
Chief Executive Officer Olaf Koch is focusing on the Cash & Carry wholesale business and the Media-Saturn electronics chain while cutting investment in Kaufhof and Real grocery outlets, both of which he has said he may sell.
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