S&P gave Decathlon a short-term issuer rating of A-2 because the French retailer’s performance exceeded the rating agency’s 2020 expectations. S&P was also pleased with the apparent recovery in the Decathlon’s chief markets, thanks to relaxed lockdowns, and with management’s preservation of cash and protection of credit metrics.
Decathlon’s sales declined by 7.5 percent in 2020, but its S&P Global Ratings-adjusted Ebitda rose from 12.5 percent in 2019 to a record level of nearly 14.0 percent. Adjusted debt to Ebitda was 1.0x, rather than the 3.0x S&P was expecting. At year’s end, Decathlon recorded a peak cash position of €1.6 billion, with a decrease in capital expenditure (CAPEX) from €540 million in 2019 to €390 million.
“Decathlon also benefits from its relative niche positioning,” said S&P, “with a differentiated value proposition – notably against large branded sports retailers such as Nike or Adidas – focused on affordable specialized sporting goods.” Because of the pandemic, however, S&P now expects Decathlon’s growth to “rely less on store expansion and more on online penetration.” This presents an “execution risk,” as it will demand an overhaul of both marketing and the supply chain. In any case, the rating is founded largely on Decathlon’s “prudent financial policy.” S&P’s “base-case scenario” excludes major increases in shareholder remuneration or acquisitions.
