Moody’s Investors Service changed its debt ratings outlook on Golden Goose S.p.A. to positive from stable due to the Italian luxury sneaker maker’s strong performance in 2023 and its solid credit metrics.
The rating agency said, “The positive outlook reflects Moody’s expectations that Golden Goose’s turnover and earnings will continue to grow over the next 12-18 months as it continues to expand its retail network in a controlled manner, despite weak consumer sentiment and subdued macroeconomic growth prospects. The positive outlook also incorporates Moody’s assumption that the company will maintain good FCF and a balanced financial policy.”
Moody’s estimates that at the end of September, Golden Goose’s leverage (Moody’s-adjusted gross debt/EBITDA) reduced to around 3.5x, compared to 6.5x at the time of the May 2021 rating assignment. This significant deleveraging reflects the company’s strong operating performance, with sales and EBITDA growing by double-digit figures, by 19 percent and 22 percent respectively during the first nine months of 2023. Moody’s said it expects the company’s growth to soften in the next 12 to 18 months because of challenging trading conditions, notably some deceleration in the U.S. market, and “anemic economic growth” in Europe. Moody’s added, “That being said, the company’s underlying market still presents good growth prospects, supported by the casualization trend. Moody’s foresees at least high single-digit growth for both sales and EBITDA in 2024, driven by continued store openings, expansion into ready-to-wear products, and continued customer acquisitions across all geographies. Moody’s expects the company’s leverage to trend towards 3.0x in the next 12 to 18 months.”
Moody’s affirmed the company’s B2 corporate family rating (CFR), its B2-PD probability of default rating (PDR), and the B2 instrument rating on the company’s €480 million senior secured notes due May 2027.
The B2 CFR reflects (1) the company’s brand recognition in the growing luxury sneaker market, with a diversified channel mix and geographical footprint; (2) good performance since 2020, supported by organic growth and store network expansion; (3) good growth prospects because of the growing uptake of athleisure wear and the company’s retail expansion strategy; (4) increasing vertically integrated model, which enables better control of the supply chain and mitigates social risks; and (5) strong credit metrics for the rating category, high margins and good liquidity.
Moody’s stated, “Golden Goose’s liquidity is good. The company’s liquidity is supported by a large cash balance of €136 million and access to a €63.7 million revolving credit facility (RCF) maturing in December 2026, which was fully available as of the end of September 2023. Moody’s also notes that the company has a supply chain financing program, under which the outstanding usage was around €9 million as at end-September 2023 (€20.9 million in December 2022). Despite increased capital spendings in relation to new store openings, the company has good FCF, which Moody’s expects to remain at least at €50 million per year from 2024. There is no significant debt maturity before the senior secured notes mature 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.”
Photo courtesy Golden Goose
