Fitch Ratings says in a new report published today that European consumer-related industries are facing varying degrees of liquidity strain caused by reduced store traffic, lower or even negative sales volumes, and limited pricing power. These factors are constraining cash flow at a time when there is limited potential for asset sales and reduced access to the bank/capital market for lower-rated issuers.
"The companies most at risk are those in emerging Europe and/or in economically sensitive sectors, particularly if they are highly leveraged," says Philip Zahn, a Senior Director in Fitch's retail and consumer products team.
In western Europe, Fitch believes that manufacturers and retailers of large-ticket discretionary consumer products are feeling the most pressure. By contrast, the more highly-rated packaged food companies and food retailers appear to be well-positioned to weather the global economic downturn.