Asda’s parent company Bellis Finco had its rating cut from ‘B+’ to ‘B’ by ratings agency Fitch - Getyy/Loop Images Asda’s turnaround efforts have been dealt a fresh blow after its debt was downgraded deeper into junk status, threatening the struggling supermarket with higher borrowing costs.
Leading ratings agency Fitch confirmed on Monday that it has cut its rating of Asda’s parent company, Bellis Finco, from “B+” to “B”, as it sounded the alarm over the retailer’s future performance.
In particular, Fitch warned that profits would fall by more than previously expected this year as it ploughs more money into price cuts and struggles with the fallout from a botched £1bn IT transition.
It added that a recent deal to sell and lease back dozens of supermarkets worth almost £600m would impact the company’s finances as it would need to pay more in rent.
Fitch said its negative outlook “reflects the heightened execution risk” and the further investment needed to regain shoppers after its market share hit a record low.
The downgrade will raise fresh questions over Asda’s revival after a turbulent few years under the ownership of private equity firm TDR Capital and billionaire petrol tycoon Mohsin Issa.
Allan Leighton, who was parachuted back into Asda as executive chairman a year ago, has boasted of a “war chest” aimed at winning back customers through price cuts, product availability and improved stores.
However, turnaround efforts are yet to pay off.
The latest figures from Worldpanel show Asda’s market share has fallen to 11.6pc, down from 12.7pc when Mr Leighton took charge in November 2024.
Asda’s trading woes have been compounded by pressure on its balance sheet as rising interest rates have driven up the cost of servicing its £3.8bn debt pile.
The company has roughly £1bn of liabilities falling due by 2028, including £900m owed to former owner Walmart.
Last week’s deal to sell off 30 supermarkets and a depot was aimed at paying down debt, but it will also leave Asda with a higher rent bill as it continues to occupy the sites.
Asda’s turnaround efforts were dealt a further setback in June, when a planned switchover from Walmart’s IT systems caused disruption and led to issues with the availability of some products.
Fitch warned that fierce pricing competition could make Asda’s plans to improve food sales volumes and increase footfall more competitive, leading to a further squeeze on profits.
An Asda spokesman said: “Asda is a highly cash-generative business that serves millions of customers each week. We remain confident in our long-term strategy and the strength of our customer proposition.”
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