Standard & Poor's cuts Tesco to junk

Jessica Morris
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S&P lowered Tesco's rating to junk (Source: Getty)

Standard & Poor's (S&P) today downgraded Tesco to junk status, suggesting the ratings agency is unconvinced by the turnaround strategy unveiled by new chief executive Dave Lewis last week.

The grocer's senior long-term credit rating was lowered to BB+ from BBB-. It is unlikely to go any lower than this however, with S&P saying the outlook was stable.

Tesco's efforts to improve its cash position - such as scrapping its dividend, cost-cutting and the sale of Dunnhumby - will add more than £3bn over the next financial year, S&P said.

But this could too little too late for the supermarket, which has to contend with a price war sparked by the growing dominance of German discounters Aldi and Lidl.

"We anticipate increased competitive and price pressures in the UK from both traditional and discount retailers could suppress any benefits from various management strategies oriented toward improving trading performance," it said.

S&P has followed rating agency Moody's which lowered its rating to Ba1 from Baa3 last week.

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