S&P Global Ratings has revised its outlook on Esselunga, one of Italy's biggest supermarket chains, to 'negative' from 'stable', after cost inflation hit its profitability more than expected.
In September, Italian European Union-harmonised consumer prices (HICP) accelerated to 9.5% year on year from 9.1% in August, the highest level since the index was launched in 1997.
The figure has been at elevated levels since the beginning of the year.
The ratings agency noted that Esselunga had reported an almost halved EBITDA margin of 5.5% in the first half of the year due to an inflation-related increase of its cost base combined with an aggressive price campaign.
'Structural Deterioration Of Credit Metrics'
'The challenging operating environment, characterised by weaker consumer demand and surging costs, will constrain Esselunga's profitability and cash flow over the next 12 months, potentially leading to a structural deterioration of credit metrics,' S&P Global said in a report.
S&P Global, which affirmed Esselunga's long-term issuer credit rating at 'BB+', added it could lower ratings if the company's EBITDA margin does not recover to above 7% in the next 12 months.
Recently, the Italian supermarket chain has expanded its online shopping solutions available to customers, as well as delivery options.
New features include ‘Presto a casa’, with home delivery within three hours of ordering for purchases made through a dedicated app.
In July of this year, it published its third sustainability report, titled 'Abbiamo a cuore il futuro (We care about the future)', with the results and initiatives from the group, including renewing attention to customers, people, the environment, suppliers, and the wider community.
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