S&P Global Ratings on Aug. 27 downgraded L Brands Inc.'s long-term issuer credit rating to BB from BB+, with a negative outlook.
S&P said the revised rating reflects its view that L Brands' Victoria's Secret label will continue to struggle to regain its competitive position in the market. Comparable sales of the lingerie brand fell 1% in the second quarter, and the company's net income dropped to $99 million from $138.9 million in the quarter ended July 29, 2017.
The lackluster performance during the three-month period prompted L Brands to lower its full-year EPS outlook again.
The rating agency said it expects the company's operating performance to remain under pressure over the next 12 months. It also expects L Brands' adjusted debt to EBITDA to stay above 3x and adjusted cash flow from operations to debt close to 20% over the next two years.
S&P said it could lower the rating if it believes shifting customer preferences would weaken the company's Victoria's Secret and Pink brands further, without sufficient offset from Bath and Body Works.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.