S&P Global Ratings has upgraded Co-operative Group’s long-term credit rating from BB- to BB, citing improved profitability and lower leverage.
The influential rating agency projects that the group's S&P-adjusted EBITDA will reach £480 million in 2024, rising to more than £530 million in 2025, driven by growth in transaction volumes fueled by membership pricing, e-commerce expansion, and enhanced operational efficiencies.
Co-op’s efforts to deleverage are evident in its repayment of £200 million in bonds due May 2024 and its plans to repay an additional £109 million in subordinated notes maturing in December 2025, said S&P.
S&P highlighted Co-op’s resilient food segment, which grew revenue by 3.2% in the first half of 2024, despite challenges in the broader convenience market.
This growth was supported by membership sales, which contributed 36.2% to the food segment, and e-commerce expansion, which is set to continue driving sales density and overall profitability.
The stable outlook reflects S&P’s expectation that Co-op will sustain its credit improvements over the next 24 months, maintaining leverage at or below 3.0x. The group is also expected to consistently generate positive free operating cash flow after leases over the forecast period.
The Co-operative Group is owned by its 5.5 million-plus members.