S&P Global Ratings raised the debt ratings on Golden Goose SpA due to its strong operating performance in the first quarter, marketed by 12 percent growth on a constant-currency basis. The company said the Italian luxury brand producer’s ratings could be upgraded further upon the expected completion of its initial public offering.
S&P raised its debt rating to ‘B+’ from ‘B’ on Golden Goose. The ratings were also placed on CreditWatch with positive implications, reflecting the likelihood of an upgrade to ‘BB-‘ following the closing of the IPO and debt refinancing.
S&P commented, “The upgrade mainly reflects the company’s track record of maintaining S&P Global Ratings-adjusted leverage at or below 4.0x, combined with healthy and recurring positive annual FOCF, which we expect to continue. We estimate Golden Goose will report annual FOCF after leases of €50 million to €70 million over 2024/25. Positively, we also highlight the prudent approach in terms of capital allocation policy with the aim to reinforce the company’s balance sheet over time. Within its medium-to-long-term financial objectives for 2024 to 2029, Golden Goose announced a net leverage target of 1.0x to 1.5x, per the company’s calculations after International Financial Reporting Standard 16. At year-end 2023, the group posted S&P Global Ratings-adjusted debt to EBITDA of 3.4x, down from 4.0x in 2022. The deleveraging trend was primarily driven by increased EBITDA thanks to reported sound year-on-year revenue growth of 17 percent and broadly stable S&P Global Ratings-adjusted margin slightly above 33 percent, while S&P Global Ratings-adjusted debt remained close to €665 million in 2023. In our debt calculation for year-end 2023, we factor about €480 million senior secured notes, €26 million reverse factoring, on- and off-balance sheet, about €153 million of lease liabilities, and about €11 million of deferred consideration for the acquisition of Italian Fashion Team. In line with our methodology, we do not net the company’s financial indebtedness with the cash available on the balance sheet.
“During first-quarter 2024, Golden Goose continued to show a good track record of profitable organic growth, and we expect this to continue. In first-quarter 2024, the company reported sales growth of 11 percent (12 percent on a constant currency basis) versus first-quarter 2023. The solid performance was particularly supported by the DTC channel increasing a reported 18 percent year on year, boosted by strong market dynamics in both Europe, the Middle East, and Africa (EMEA) and the Americas, representing more than 80 percent of the company’s annual sales. The company-adjusted EBITDA grew by 17 percent, reaching €54 million as of March 31, 2024, primarily thanks to pricing and flexibility on its cost base. We expect S&P Global Ratings-adjusted EBITDA margin to remain stable at about 33 percent, supported by the company’s DTC business expansion, which now represents about 73.5 percent of total annual sales versus 46 percent in 2019. We also believe the completed vertical integration of two of its suppliers (Italian Fashion Team and Sirio) will allow Golden Goose to maintain a supportive level in its gross margin. The high-end sneaker segment is supported by trends like casualization and personalization, which further accelerated after the pandemic ended and which could support high-single-digit revenue growth over 2024-2025 for the company, in our view. Golden Goose is reaping the benefits of its investments in business digitalization and marketing initiatives (co-creation, repair services, personalization, etc.), which could result in further market share gains. We also think the company maintains a good liquidity cushion to continue to support its expansion, with total cash of about €122 million as of March 31, 2024, and undrawn committed credit lines.
“The positive CreditWatch placement follows Golden Goose’s recent announcement that it plans to be listed on the Euronext Milan and reduce its total debt quantum. After the IPO, we expect the listed company to have a minimum free float of 25 percent of its share capital as per the requirement of Euronext Milan, and we believe that the private equity firm Permira will relinquish control over the medium term. Moreover, as part of the overall transaction, Golden Goose signed a new €310 million TLB. We expect Golden Goose will use the proceeds from the new TLB, the listing of €100 million primary shares, and a portion of cash available on the balance sheet (about €122 million as of March 31, 2024) to early repay its existing €480 million senior secured notes due 2027. Golden Goose will also improve its liquidity profile thanks to a new €150 million multi-currency revolving credit facility (RCF) that will replace the existing, currently undrawn, €65 million RCF, which we expect will remain fully undrawn after the IPO closes. Assuming the IPO closes in line with current expectations, we estimate a material reduction in S&P Global Ratings-adjusted leverage, with expected 2024 S&P Global Ratings-adjusted debt to EBITDA approaching 2.5x, down from about 3.4x at year-end 2023.
“The positive CreditWatch placement reflects the likelihood that we will raise our rating on Golden Goose to ‘BB-‘ when the announced IPO and refinancing transaction closes, assuming the transaction is completed as proposed.”
Golden Goose manufacturers high-end clothing, footwear and accessories, headquartered in Venice, Italy, and founded in 2000. After belonging to The Carlyle Group for three years, it was sold to Permira in 2020.
