Fitch Flags Winners And Losers As U.S. Retail Industry Undergoes More Change In 2012

by: Research Recap

Amid a reallocation of market share across the U.S. retail industry in 2012, Fitch Ratings expects the stronger, growth-oriented retailers will continue to take market share, while others struggle to maintain relevance in a mature but dynamic sector.

Positive or negative traction on this front will be central to ratings movement. Fitch notes market share defensibility is a crucial consideration when assessing retail credit profiles. At one end of the spectrum are Costco Wholesale Corporation (NASDAQ:COST), Macy’s, Inc. (NYSE:M), and AutoZone, Inc. (NYSE:AZO), whose strong positive comparable store sales exceed their respective industry growth rates, indicating strong market share gains. At the other end are RadioShack Corp. (NYSE:RSH), Best Buy Co., Inc. (NYSE:BBY), Sears Holdings Corp. (NASDAQ:SHLD), and SUPERVALU Inc. (NYSE:SVU), whose negative comparable store sales suggest continued slippage of market share.

Another key theme for 2012 is the changing business models for U.S. retailers, especially the specialty retail segment, which faces enhanced competition, the development of newer channels and the need to adapt accordingly.

Fitch expects overall credit stability for U.S. retailers in 2012, reflecting mid-single-digit sales growth amid the backdrop of changing business models and the ability of companies to defend market share. Five retailers currently have Negative Outlooks and one a Positive Outlook, suggesting modest downward pressure on ratings over the next 12 months.

Same-store sales are expected to increase 2%-3% with modest expansion in square footage.

Liquidity will remain generally strong and 2012 debt maturities are moderate ($12 billion in debt coming due across the 45 companies rated or monitored by Fitch).

For the 2012 holiday season, Fitch projects 2%-3% growth over 2011, following a strong back-to-school season. These expectations recognize the weak recovery in consumer spending and an ongoing focus on value.

For details, see the full U.S. Retail 2012 Outlook: Muddling Through in Maturity is available at ‘’ This outlook report covers all segments within Fitch’s retail industry ratings portfolio: discounters, food and drug retailers; department stores; and specialty and apparel retailers.