It looks like US consumers’ thriftiness really will wreck Christmas, as far as US retailers and restaurateurs – and Standard & Poor’s – are concerned.
In a report on Tuesday, the rating agency said the consumer products, media and entertainment, and retail/restaurant sectors continue to be the most negatively affected by the economic downturn:
These sectors consistently have the highest levels of risk among our lists of distressed companies (defined as speculative-grade companies with securities trading in excess of 1,000 basis points above U.S. Treasuries), weakest links (companies rated ‘B-’ or lower with either a negative outlook or ratings on CreditWatch with negative implications), and potential bond downgrades (investment-grade or speculative-grade companies that have either a negative outlook or ratings on CreditWatch negative).
The pain in the consumer-facing sectors will spill over into consumer product manufacturers, S&P said in a separate report:
This will be especially true for issuers in the apparel, furniture, bedding, and appliance subsectors, since they have close ties to the retail environment and housing market, both of which remain weak.
The U.S. consumer products companies that Standard & Poor’s rates include an array of subsectors, including packaged food, alcoholic and nonalcoholic beverages, tobacco, household products, apparel, personal care, appliances, lawn care, home and office furniture, agriproducts, commodity foods, cosmetics, and service companies. About 32% of companies in the sector are in the more stable investment-grade category, with the remaining 68% in the more volatile speculative-grade category.
And how’s this for anecdotal evidence of the spending pinch and consequent hard-sell from retailers, from the FT Alphaville inbox on Monday:
From Hyde Park to the Spanish Steps to St-Germain-des-Pres …
The most fashionable women dressed from the Ungaro Fur Collection.
A fantastic selection of fur jackets and coats from the Emanuel Ungaro and Alixandre Fur Collections. Sizes 2 to 16. Savings start at 70% percent off. Also … European and American designer ready-to-wear, handbags, jewelry and accessories from Gucci, Valentino, Marni, Chloe, Steilmann, Jennifer Tyler Cashmeres, The Wrights and many more.
American Express, Visa & Mastercard accepted. All sales final. No strollers or children under 12 admitted.
Related links:
Holiday sales set to fall as buyers hang back – FT
Walmart cuts toy prices early – FT