Standard & Poor's said Thursday it has revised its outlook on Whole Foods Market Inc. to stable from negative and affirmed its junk rating on the grocer's corporate debt.
The positive revision in S&P's outlook was based on improvement in Whole Foods' operating performance, since declines of sales at stores open at least a year have become less steep and profitability has improved over the past year. Also, S&P expects the company's credit quality to improve as $425 million in preferred stock is converted to common shares.
The rating agency affirmed a rating of BB-, which is three notches into junk territory, on the company's debt. That rating is based on the fierce competition among grocers as well as Whole Foods' highly leveraged capital structure. It also assumes consumers will continue to shun higher-end groceries as they keep costs down amid high unemployment and economic uncertainty.
S&P said as of Sept. 27, 2009, Whole Foods had about $797 million in outstanding debt.
Whole Foods shares rose 13 cents to $27.54 in after-hours trading Thursday after closing at $27.41, down 78 cents from a day earlier.