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DBRS:

has today downgraded the long-term ratings of Loblaw Companies Limited (Loblaw or the Company) to BBB from BBB (high), maintaining the Negative trend. At the same time, DBRS has downgraded the Company’s short-term rating to R-2 (middle) from R-2 (high) and has changed the trend to Negative from Stable.
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The status of the Company’s turnaround plan and most recent operating performance leads DBRS to the conclusion that stabilization of performance at a level that is commensurate with a BBB (high) rating over the course of this year is improbable.
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The deteriorating operating performance, combined with the longer time period and mounting risks associated with changes to the turnaround plan and management team, result in a credit risk profile that is no longer consistent with a BBB (high) rating from DBRS.

In terms of outlook, DBRS has placed the trend at Negative as we believe a meaningful recovery will remain challenging, since Loblaw is expected to continue investing in pricing within an increasingly competitive environment.
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DBRS’s ratings for George Weston Limited remain unchanged following the rating actions on Loblaw.

They weren’t impressed by the profit increase!

Assiduous Readers will doubtless remember their comment at the time of the Weston downgrade:

With the downgrade of Loblaw’s ratings to BBB (high) and R-2 (high), the ratings for Weston at BBB and R-2 (high) reflect more its operating businesses and less the support from the Loblaw rating. As such, if there is any further deterioration in Loblaw’s long-term rating, it will not necessarily affect the long-term rating of Weston.

Loblaw is currently rated BBB by S&P.

Weston has the following issues outstanding: WN.PR.A WN.PR.B WN.PR.C WN.PR.D WN.PR.E

This entry was posted on Wednesday, April 30th, 2008 at 4:23 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.