NEW YORK Jan 23 U.S. retailers offering more
discretionary products, like apparel or home goods, may find
themselves squeezed between poor operating results and a need to
tap outside financing sources in the next two years, according
to a report released on Friday.
In a review of 41 retail and consumer product companies,
Fitch Ratings said in a report that 26 are considered to have
strong liquidity. Seven are rated as moderate, while eight rank
as weak, meaning they will have to access external sources to
meet financing needs over the next 24 months, which could be
"Cash flow generation for some of the more discretionary
companies may be at risk, which, if impaired versus current
expectations, could reduce their relative liquidity positions,"
The credit ratings agency said the liquidity of these
companies is of particular importance in today's recession, as
consumers' incomes, wealth and capacity to borrow erodes.
Blockbuster Inc BBI.N, Bon-Ton Stores Inc (BONT.O),
Burlington Coat Factory, Neiman Marcus, Rite Aid Corp (RAD.N),
Saks Inc SKS.N, Sears, and Toys "R" Us have weak liquidity
positions relative to the rest of the sector, Fitch said.
It said Blockbuster, Neiman Marcus, Rite Aid, Sears Holdings
Corp (SHLD.O) and Toys "R" Us have committed bank facilities
that expire over the next two years and there is some risk of
obtaining that funding.
The ratings agency said liquidity could be pressured at
Bon-Ton, Burlington Coat Factory and Saks if the companies
continue to generate negative free cash flow, face significant
vendor financing related issues or violate any applicable
On the other hand, retailers and consumer product companies
offering value-oriented and non-discretionary products should
have more stable operating results and cash flow generation.
Fitch said retailers including Wal-Mart Stores Inc (WMT.N),
Safeway Inc SWY.N, Costco Wholesale Corp (COST.O), Kroger Co
(KR.N), and Target Corp (TGT.N) have strong liquidity
Of the consumer products companies in its coverage, Fitch
said Alberto-Culver, Avon (AVP.N), Black & Decker Corp BDK.N,
and Hasbro Inc HAS.N have large cash balances relative to debt
maturities, also giving them strong liquidity.
Others with strong liquidity positions include
Colgate-Palmolive Co (CL.N), Constellation Brands Inc (STZ.N),
Fortune Brands FO.N, Kimberly-Clark Corp (KMB.N), Mattel Inc
MAT.N, Levi and Stanley Works (SWK.N), helped by a combination
of expected cash flow generation and cash support.
(Reporting by Nicole Maestri, editing by Matthew Lewis)