Moody’s Ratings upgraded Golden Goose S.p.A.’s debt ratings due to its strong revenue and profit performance in recent years with the aid of store openings. Sales have vaulted 60 percent from December 2021 to June 2024.
The Italian streetwear and sneaker brand’s corporate family rating (CFR) were raised to B1 from B2, and its probability of default rating (PDR) to B1-PD from B2-PD. Concurrently, we have upgraded the rating on the company’s €480 million senior secured notes due in May 2027 to B1 from B2. The outlook has been changed to stable from positive.
“Today’s rating action reflects the company’s solid financial performance in recent years and our expectation that the company will continue to grow and successfully maintain strong financial metrics”, said Fabrizio Marchesi, a Moody’s Ratings vice president. “The company’s rating also reflects our expectation that the company will refrain from any material releveraging in the future.”
Ratings Rationale
Moody’s said, “Golden Goose has grown strongly over the past three years since the initial rating was assigned, increasing revenue by 60 percent on a cumulative basis between December 2021 and June 2024. This growth has been organic, due to significant new store openings as well as like-for-like gains. As a result, the company’s Moody’s-adjusted EBITDA has risen to €195 million, on a last-twelve-month (LTM) basis as of June 2024, up from €128 million in 2021. This has led to a significant improvement in financial metrics, with Moody’s-adjusted leverage of 3.5x, Moody’s-adjusted (EBITDA less capex)/interest of 2.5x and Moody’s-adjusted free cash flow (FCF)/debt in the mid-single digits on an LTM basis.
“Although year-over-year revenue gains have slowed from 30 percent in 2022 to around 10 percent in the June 2024 LTM period, we forecast that growth will continue over the next 12-18 months at around 9-10 percent per year, thanks to ongoing new store openings and mid-single digit like-for-like gains, despite challenging wholesale market conditions. This is likely to drive Moody’s-adjusted EBITDA to around €205 million in 2024 and €225 million in 2025, leading to a further improvement in financial metrics with Moody’s-adjusted leverage declining towards 3.0x by December 2025 and the company delivering high-single digit Moody’s-adjusted FCF/debt per year.
“Golden Goose’s B1 CFR is also supported by the company’s brand recognition in the growing luxury sneaker market, with a somewhat diversified channel mix and geographical footprint; an increasing vertically-integrated business model, which enables better control of the supply chain and mitigates social risks; and good liquidity.
“Concurrently, the rating is constrained by the company’s narrow business focus and small scale; exposure to fashion risk as a single-brand company in the highly competitive luxury sneaker market; execution risks associated with the company’s fast-paced retail expansion strategy.”
Liquidity
Moody’s said, “Golden Goose’s liquidity is good, supported by a large cash balance of €184 million and access to a €63.7 million revolving credit facility (RCF) maturing in December 2026, which was fully available as of 30 June 2024. Despite material capital spending on new store openings, we expect the company to generate at least €55-65 million of Moody’s-adjusted FCF per year from 2024 onwards.
“There are no significant debt maturities apart from the aforementioned RCF and the company’s senior secured notes, which are due in May 2027. The RCF is subject to a net super-senior leverage covenant of 8.35x, which is tested if drawings exceed 40 percent.”
Rating Outlook
Moody’s said, “The stable outlook reflects our expectations that Golden Goose will continue to grow revenue and EBITDA, driven by controlled retail network as well as positive like-for-like sales, such that its Moody’s-adjusted financial metrics continue to improve. The stable outlook also incorporates our assumption that the company will maintain good FCF and a balanced financial policy, including refraining from any debt-funded shareholder distributions as well as refinancing its senior secured notes well-ahead of their scheduled maturity.”
Image courtesy Golden Goose