Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Coming Financial Collapse Moderated -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (450)	7/5/2001 7:34:32 PM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 974

dailynews.yahoo.com Thursday July 5 4:19 PM ET S&P Warns of Bleak Outlook for Retailers By Jonathan Stempel NEW YORK (Reuters) - The slowing U.S. economy and weakened consumer confidence is battering U.S. retailers, which faces a ''bleak'' second half this year, a leading credit rating agency said on Thursday. Standard & Poor's said there was a good chance many retailer credit ratings will decline, despite reports last week from the Conference Board (news - web sites) and the University of Michigan showing two straight months of rising U.S. consumer sentiment. Falling ratings would make it costlier for some retailers to raise cash and more difficult for others to stay afloat. ``Some of these companies have little financial flexibility, and the debt markets are expected to remain timid in the face of the uncertain U.S. economy,'' Gerald Hirschberg, an S&P director in corporate ratings, said in a new report. ``Moreover,'' he added, ``companies have been adjusting their earnings guidance (downward) for the year. If consumer confidence continues to wane and the economy continues to slow, more companies may be affected.'' Many already have been. S&P said it downgraded 25 U.S. retailers in the first half of the year, and downgraded eight companies more than once. Nine slid to ``D,'' or default, because they missed interest payments or sought bankruptcy protection, S&P said. ``The economy is believed to be the number-one culprit ... but the loss of consumer wealth due to declines in the stock market and fashion problems were important contributing factors,'' said Hirschberg. Among those suffering downgrades were discount retailer Ames Department Stores Inc. (NasdaqNM:AMES - news), dot-com retailer eToys Inc. (ETYSQ.PK), restaurant chain Friendly Ice Cream Corp. (AMEX:FRN - news), upscale department store chain Nordstrom Inc. (NYSE:JWN - news) and pet retailer PetsMart Inc. (NasdaqNM:PETM - news). On Thursday, Federated Department Stores Inc. (NYSE:FD - news), parent of the Macy's and Bloomingdale's chains, became the latest to cut its profit forecast, though S&P said its ratings won't change as a result. Investors, though, feared more widespread weakness. Hirschberg said many downgrades resulted from overoptimism among companies and bond investors. Too many companies missed their performance projections, and then found capital markets seizing up when it came time to refinance debt, he said. Restaurant chains are the worst off, contributing eight of the 25 downgrades, including four to ``D.'' Meanwhile, discounters such as Ames and Shopko Stores Inc. (NYSE:SKO - news) had trouble competing with big rivals such as Wal-Mart Stores Inc. (NYSE:WMT - news), Hirschberg said. S&P said 35 percent of retailers have ``negative'' outlooks, meaning current conditions make future downgrades possible. There are signs that conditions could improve. The Conference Board said its index of consumer attitudes rose to 117.9 in June from a revised 116.1 in May, while the University of Michigan's consumer sentiment rose to 92.6 in June from 92.0 in May and a nearly five-year low of 90.6 in February. S&P said more is needed for retail. ``We have had some recent positive news, but we need sustained improvement,'' said Diane Vazza, S&P's head of global fixed-income research. ``Restaurants in particular will likely remain under the most pressure for the longest period.'' KJC