M&S Sales Slump Pushes Out Spreads

The five-year credit-default swap spread on U.K. retailer Marks & Spencer widened sharply after it released poor sales figures for the seventh successive quarter.

  • 15 Jul 2005
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The five-year credit-default swap spread on U.K. retailer Marks & Spencer widened sharply after it released poor sales figures for the seventh successive quarter. Spreads swelled to 97-100 basis points on Wednesday from 92-93 bps on Monday as investors reacted to the news and bought protection, traders reported. The move came as M&S directors prepared to face scrutiny at the company's annual general meeting.

One trader said M&S credit spreads earlier this month had been steady around 100 bps and prior to the release of its sales figures had tightened to the low 90s, in line with the retail sector as a whole. "The sector had had a good run," he said. The blowout then hit mid-week when it was announced sales of M&S general merchandise were down 2.4%, while like-for-like sales fell 5.4% and total clothing sales fell 9.2%. Retail turnover was down 11.2%.

"The headlines read very poorly and this has had an immediate impact on spreads," said Omar Saeed, senior analyst at Standard & Poor's in London. S&P rates M&S BBB. Saeed said he could not rule out placing the retailer on a negative outlook and cited the poor U.K. economic environment as a factor in pushing spreads wider on both M&S and other high street retailers.

M&S is rated Baa2 minus by Moody's Investors Service and BBB plus by Fitch Ratings. Both have the retailer on negative outlook.

  • 15 Jul 2005

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