Standard & Poor's pessimistic on consumer-facing industries

09 April 2009

NEW YORK: Companies in the consumer goods, media and retail sectors remain the most vulnerable to the downturn in the US, according to Standard & Poor's, the ratings agency, which warns many corporations in these industries will face downgrades over the course of 2009.

Standard & Poor's notes that 422 firms in these categories are likely to see their profit margins threatened by falling consumer spending, and has previously warned of the "negative" outlook facing WPP and Publicis.

While the internet is likely to increase its revenues and share of the US ad market, Standard & Poor's argues that the broader media and entertainment climate is particularly exposed to the current economic downturn.

It reports that 97.5% of its alterations in ratings for companies operating in this sector over the last 12 months have been negative, and the category is home to the largest number of firms with “speculative ratings” in the “B” category.

Rising costs and declining consumer expenditure were also having an impact on the consumer products sector, although US consumer sentiment did improve in March month-on-month, and orders for durable goods also rose by 3.4% in February.

However, S&P added that over 83% of its ratings activity in this field over the last year has been to downgrade companies, compared with 76.4% for retailers and restaurants.

Data sourced from Wall Street Journal; additional content by WARC staff