The upgrade reflects Tendam’s good operational performance in 2021 and its substantially stronger credit metrics than initially expected, which have recovered to almost pre-pandemic level

Credit rating agency Moody’s has announced it is upgrading Tendam — one of Europe’s leading omni-channel groups in the speciality fashion sector — to a B1 with a stable outlook.

According to the Moody’s report the upgrade reflects Tendam’s good operational performance in 2021 and its substantially stronger credit metrics than initially expected, which have recovered to almost pre-pandemic levels. Despite our expectations of more difficult trading conditions in the next 12 months owing to the current high inflationary environment and uncertain economic prospects in Europe in relation to the Russia/Ukraine conflict, Tendam will be able to withstand a stress to its cost base and on consumer purchasing power, thanks to its good liquidity and strong credit metrics.

In its report, Moody’s explains that Tendam’s B1 CFR reflects (i) the company’s solid track record of earnings growth and positive free cash flow (FCF) generation; (ii) its strong brand awareness and differentiated market position in the Spanish apparel market; (iii) above-peer EBITDA profitability, underpinned by an efficient supply chain and a successful omnichannel distribution model; and (iv) its good liquidity and balanced financial policy historically.

The stable outlook reflects Moody’s view that Tendam’s sales and earnings will remain broadly stable despite the high inflation environment, supported by cost savings initiatives achieved in 2020-21 and thanks to a growing contribution from the online segment and the company’s new brands. The stable outlook also incorporates Moody’s expectations that Tendam will generate positive FCF and will maintain a good liquidity profile.