The debt ratings of Macy's (M) - Get Report, Tapestry (TPR) - Get Report, parent of Coach, and Capri Holdings (CPRI) - Get Report, parent of Michael Kors, on Wednesday were reduced to junk status by Fitch Ratings, as shutdowns driven by the coronavirus pandemic drag down the retailers' profits.
Shares of the three companies at last check were lower, Macy's by 9%, Tapestry 15% and Capri 17%.
"Fitch has assumed a scenario where discretionary retailers in the U.S. are essentially closed through mid-May, with sales expected to be down 80% to 90% despite some sales shifting online, with a slow rate of improvement expected through the summer," the credit-rating company said.
The rating cuts classify the three companies as so-called fallen angels, a reference to bonds that were initially given investment-grade ratings but have been reduced to junk status.
Fitch cut Macy's long-term issuer default rating one notch to BB+ from BBB-, the agency's lowest investment-grade rating.
Capri's IDR was reduced to BB+ from BBB-; and Tapestry's fell two notches to BB from BBB-.
"Numerous unknowns remain, including the length of the outbreak; the time frame for a full reopening of retail locations and the cadence at which it is achieved; and the economic conditions exiting the pandemic including unemployment and household income trends, the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior," Fitch said.
Macy's was also dropped from the S&P 500 on Wednesday after shedding more than 70% of its value this year.
S&P Dow Jones Indices said Macy's, which has a market value of around $1.5 billion, will be added to its small-cap index on April 6. HVAC equipment maker Carrier Global will replace it on the benchmark S&P 500 on April 3.
Earlier this week, Macy's said it would furlough around 130,000 employees nationwide, and slash pay and benefits for its top executives, as coronavirus closures and shelter-at-home orders keep its stores closed around the country.