The storm battering the retail sector entered a new phase this week as two credit-rating firms downgraded a major mall operator’s debt to junk status for the first time since the financial crisis, the Wall Street Journal reported yesterday. Both S&P Global Ratings and Fitch Ratings slashed the rating of CBL & Associates Properties Inc. after the company last week reported weaker-than-expected third-quarter earnings and announced a sharp cut to its dividend. The moves are the clearest signal yet that the troubles facing the retail property sector are intensifying as landlords grapple with the growth of e-commerce and fast-changing consumer behaviors. Fitch and S&P both downgraded CBL’s debt one notch to BB+, one level below investment grade. CBL, based in Chattanooga, Tenn., is the sixth largest real-estate investment trust in the U.S. focusing on malls. It primarily operates so-called B-class malls, which have fared better than the weakest properties but aren’t as profitable as top-tier malls in higher-income markets. So far this year, lower-tier mall owners have been bearing the brunt of that shift. There have been more than 6,000 announced store closures so far this year, up from around 2,000 last year, with malls in overbuilt areas experiencing more departures as retailers look to right-size their store footprint and focus on their e-commerce offerings.
