The credit rating of TAMI & CO LLC (hereinafter, HENDERSON, or the Company) reflects the Company’s strong business profile, high geographic diversification, medium market position, and medium level of corporate governance. The financial risk profile assessment is based on a very high profitability, strong liquidity, medium cash flow and leverage, and low scores for coverage and the Company's size. The credit rating outlook has been changed to Positive on the Agency's expectations for better leverage and coverage metrics on the back of growing profitability and operational cash flow in 2022 and 2023.
HENDERSON is one of the largest menswear retail chains in Russia. The Company offers a wide range of products under its own brand. The Company’s chain includes more than 160 retail stores in over 60 cities of Russia. In addition to offline business, HENDERSON is actively developing its own online store and expanding its presence on key marketplaces in Russia.
Key assessment factors
Strong operational risk profile. HENDERSON is a menswear manufacturer. According to ACRA's estimates, this industry has a moderate cyclicality of demand. The Company's manufacturing process includes creation of product lines of its own design made specifically for Russian consumers, and its retail chain includes stores in shopping centers of various classes widely spread across Russia. HENDERSON is present in all million-plus cities; the Company's online sales segment is expanding fast and its share in the total revenue has been growing steadily. The Company invests heavily in the development of its brand, and it uses all key promotion channels: outdoor advertising, Internet, mass media, online fashion magazines, social networks. HENDERSON has long-term partnerships with manufacturers of fabrics and clothing, which allows the Company to promptly optimize its product line and promptly respond to changing trends.
Being a competitive player in several categories of the fragmented market, HENDERSON offers products in both the classic men's clothing segment and in smart casual and casual segments; it also has active wear lines. In terms of pricing, the Company's products are in the middle and upper middle segments of the market. The competitive environment consists of Russian and foreign brands. At the same time, ACRA positively assesses the stable turnover growth rates of the Company, which contribute to an increase in HENDERSON's share in the Russian menswear market.
Expanding business and growing profitability. Since 2019, the Company has demonstrated significant growth rates of its revenues: in 9M 2022, the revenue amounted to RUB 8.4 bln and is expected to exceed RUB 10 bln by the end of 2022. FFO before fixed charges and taxes weighted for 2020–2025 should exceed RUB 3.7 bln, while returns are growing on the back of a very high business profitability. In 2022, the Company has managed to maintain its customers' loyalty: the number of visitors to its retail chain is stable, and the average purchase amount grew by 16.1% in the ten months of 2022. The FFO before fixed charges and taxes margin weighted for 2020–2025 is over 33%. In the medium term, the sustainable profitability will facilitate a growth of FFO before fixed charges and taxes and improve the financial risk profile metrics.
Medium leverage. In its assessment of leverage, the Agency used not only the total amount of debt, but the capitalization of operating lease payments as well: the weighted ratio of adjusted debt to FFO before fixed charges was 4.7x. The Company's debt portfolio includes a long-term bond issue, as well as short-term revolving credit lines from the largest Russian banks. Loans were borrowed in rubles at floating and fixed interest rates. The weighted ratio of FFO before net interest to interest and the weighted ratio of FFO before fixed charges to fixed charges were 3.6x and 1.5x, respectively. The difference in the values of the ratios is explained by the volume of lease payments used by ACRA in calculating the coverage of FFO before fixed charges to fixed charges. The Agency expects the leverage and coverage metrics to improve following an increase operational cash flow, while the Company's leverage is to remain unchanged or decline gradually.
The strong liquidity and medium cash flow assessments are driven by ample committed and undrawn credit lines, as well as a positive weighted FCF margin of 1.7%. In 2022, the Company's working capital grew due to the formation of business inventories, while capex increased by 5.5% to revenues in 2022 against 4% a year earlier.
Key assumptions
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Revenue growth of not lower than by 10% p.a. in the forecast period of 2022–2024.
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Investment program in line with the Company's business plan.
Potential outlook or rating change factors
The Positive outlook assumes that the rating will highly likely be upgraded within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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FFO before net interest to interest exceeding 5.0x;
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FFO before fixed charges to fixed charges exceeding 1.5x;
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The ratio of adjusted total debt to FFO before fixed charges declining below 4.0x and concurrent decline in total debt to FFO before net interest below 2.0x;
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FCF margin exceeding 5%.
A negative rating action may be prompted by:
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FFO before net interest to interest decreasing below 2.5x and concurrent decline in the ratio of FFO before fixed charges to fixed charges below 1.0x;
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The ratio of adjusted total debt to FFO before fixed charges growing above 6.0x;
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FCF margin becoming negative;
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Deterioration in the access to sources of liquidity.
Rating components
Standalone creditworthiness assessment (SCA): bbb+.
Support: no.
Issue ratings
No outstanding issues have been rated.
Regulatory disclosure
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
A credit rating assigned to TAMI & CO LLC was published by ACRA for the first time on June 22, 2022. The credit rating of TAMI & CO LLC and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on the data provided by TAMI & CO LLC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of TAMI & CO LLC. The credit rating is solicited, and TAMI & CO LLC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to TAMI & CO LLC. No conflicts of interest were identified in the course of credit rating assignment.
