Philip Clarke’s turnaround of Tesco has suffered an early set back after Moody’s downgraded its credit rating.
Moody’s warned on Friday night that Tesco’s £1bn UK investment plan “will take time” and damage profit margins, reported the Telegraph.
It also said there were “risks” in the supermarket giant’s plan to increase sales in the UK as well as revive its non-food offering, due to more fierce competition from rivals.
The move came two days after Tesco unveiled a £1bn investment programme to revive its ailing domestic arm that has seen its share fall as competitors gained ground.
The credit rating agency said: “While Moody’s considers that Tesco’s scale can certainly benefit its online non-food offering, the rating agency cautions that the company faces fierce competition from ‘pure-player’ retailers and from other food retailers that now have a greater focus on multi-channel strategies.”
Tesco’s debt has been downgraded from A3 to Baa1.
A spokesman for Tesco said: “Earlier this week we announced record group profits and strong international growth. As Moody’s notes, Tesco remains on a stable outlook with solid store network and supply chain in the UK and dynamic growth overseas.
“We also announced a £1bn plan to build a better Tesco here in the UK and we are focused on delivering the fantastic shopping trip our customers deserve.”