Fitch Ratings drops its default rating for Nordstrom (JWN -7.9%) to BBB from BBB+ and issues a Negative rating outlook.
"The downgrade and Negative Outlook reflect the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to 7.0x in 2020 from 3.0x in 2019, based on EBITDA declining to approximately $550 million from $1.6 billion on a revenue decline of over 20% to $12 billion. Adjusted leverage is expected to decline to the low 3.0x range in 2021, assuming revenue declines of around 10% and EBITDA declines of about 20% in 2021 from 2019 levels. Leverage could return to under 3.0x in 2022, assuming a sustained topline recovery. A more protracted or severe downturn could lead to further rating actions."
The ratings agency expects Nordstrom could significantly reduce its capital expenditures from its original target of $600M. Nordstrom is seen having the ability to pay its $500M of debt maturing in October 2021.
Shares of Nordstrom are down 55% over the last four weeks.