Marsh's future remains uncertain

By Anita Awbi

- Last updated on GMT

Related tags Supermarket Profit Wal-mart

As the American retail sector struggles to compete with Wal-Mart's
discount strategy, Marsh has become the latest in a string of
supermarkets to sell out to a private equity firm.

Marsh, which also operates under the LoBill and Village Pantry banners, has suffered from tumbling profits for some time, as number one supermarket Wal-Mart works to squeeze prices and win customers on price wars.

Even with 2005's sales over $1.7bn (€1.34bn), Marsh has found it increasingly hard to etch out a secure position in the highly consolidated grocery sector.

In February, it posted a third-quarter loss, announcing it would cut jobs at its headquarters, including four members of the chairman's family, and close stores in Indiana.

But following the recent sale of the chain to Sun Capital, the future of the firm still hangs in the balance.

Moody's ratings firm today announced it will place Marsh under review, indicating a possible downgrade of its B3 rating due to "uncertainty about the company's future capital structure and operating structure"​following the acquisition.

Moody's will assess the capacity of the chain to compete in the current retail climate. It will focus on Sun Capital's plans to boost Marsh's falling operating profit margin and build its market share.

The buy-out marks the latest acquisition in an industry struggling to compete against supermarket behemoth Wal-Mart.

Earlier this year Albertson's fell under the hammer, quickly followed by Foodarama supermarket, as companies struggle to keep up with number one discounter Wal-Mart's tough stance on price and greater distributor and supplier leverage.

Meanwhile Wal-Mart, the world's biggest retailer, announced earlier this month that April same-store sales beat analyst forecasts, rising 6.8 per cent.

This was due to a surge in demand over the Easter break for non-food items, and marks the chain's biggest monthly gain since August 2003.

Wal-Mart's total sales for the four-week period ended April 28 rose to $25.87bn, up 16 per cent.

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