Moody’s Upgrades Its Outlook on the Retail Sector

Moody’s Investors Service (MCO) upgraded the retail sector Friday, upping its rating to “positive” from “neutral.” The rating agency said credit conditions for the industry will improve over the next 18 months.

FBN: “We expect overall U.S. retail operating income to grow in the mid single digits,” said Maggie Taylor, vice president and senior credit officer at Moody’s, in a statement. “We believe that this growth in operating income will be driven by increases in consumer spending and retail sales and not just from aggressive cost saving programs.”

Moody’s also said it expects that earnings growth for the U.S. retail industry to be higher in the first half of the year than in the second, and that retailers will begin offering shareholder dividends as conditions improve.

The agency warned, however, that consumers continue to face high unemployment, personal debt and tight credit which could weigh on consumer sentiment, slowing spending. As a result, Moody’s sees the sales at stores open at least a year, which have been quite strong, moderating over the near term.

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