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Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodologies, including key rating assumptions and models. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Fnac Darty SA (issuer rating: BBB under review for developing outcome, senior unsecured debt rating: BBB under review for developing outcome, short-term debt rating S-2 under review for developing outcome) on 22 January 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

On 16 July 2024, Fnac Darty SA and RUBY lnvestment S.à r.l. announced their decision to launch a voluntary public tender and exchange offer for all the ordinary shares of Unieuro S.p.A., the leading Italian electronics retailer. The issuer has successfully completed the acquisition of 100% of Unieuro on January 8, 2025, leading to a delisting of Unieuro. However, Scope is unable to assess the impact of the transaction on the issuer’s business and financial risk profile as the post-merger accounts are not yet available. Scope will resolve the under-review status as soon as the post-merger accounts are available.

Fnac Darty’s business risk profile (assessed BB+) benefits from its strong position in the French market, its wide product range and its high share of online sales (21% 9M 2024). However, it is constrained by its lack of geographical diversification.

The acquisition will make Fnac Darty the leader in the Italian consumer electronics market, where Unieuro currently has a market share of around 17%, improving Fnac Darty’s market positioning and increasing its sales volume (combined sales of around EUR 10.5bn in the last full financial year, 2023/24).

The transaction is also expected to improve Fnac Darty’s diversification profile. While Fnac Darty currently generates around 80% of its sales in France, the share of domestic sales would fall to around 60% after the acquisition. This would be credit positive as it would reduce exposure to a single country and therefore the risk of cash flow volatility linked to economic downturns or local consumer behaviour.

The post-acquisition outlook for profit margins is uncertain, primarily due to Unieuro’s current lower Scope-adjusted EBITDA margin* compared to Fnac Darty’s (4.6% in FY 2023/24 vs 6.6% of Fnac Darty in 2023). This disparity could initially exert downward pressure on profit margins. However, the integration process offers opportunities to realize synergies (estimated by Fnac Darty of at least EUR 20m from end of 2025) linked to process optimization, centralization and better pricing power. The consumer electronics market in France continues to show weak growth (Fnac Darty's H1 2024 sales were up 1.4%) leading to stable EBITDA YoY (EUR 146m in H1 2024 vs EUR 143m H1 2023). In comparison, Unieuro’s operations showed weakness with H1 2024/25 revenues down 4.2% YoY. However, EBITDA improved YoY (EUR 70m vs EUR 58m), including a EUR 4m contribution from Covercare, a service provider acquired in 2023. Scope therefore expects that both entities will be able to maintain profitability at least at last year’s level.

The financial risk profile (assessed at BBB+) drives the issuer rating, underpinned by leverage (debt/EBITDA) of below 2x and strong EBITDA interest cover ranging between 7x and 12x over the last five years. Based on current information, Scope cannot judge the transaction's final effects on the financial risk profile. Although the issuer will finance the transaction without issuing new debt, reflecting a cautious approach to leverage development, there is a risk that the leverage of the combined entity could increase due to the higher debt level of Unieuro with a debt/EBITDA of 2.8x in FY 2023/24 (Fnac Darty: 2.0x in 2023), and remain above Scope’s rating downgrade trigger (debt/EBITDA above 2.0x), at least temporarily. A return to below 2.0x will depend on the issuer’s ability to deliver synergies quickly and the sales of the Italian business recovering.

The transactions impact on liquidity is expected to be neutral due to the limited cash disbursement for the acquisition and the very limited short-term debt at Unieuro.

Supplementary rating drivers have no impact on the issuer rating.

Under review for developing outcome

Scope has maintained all Fnac Darty’s rating under review for a developing outcome and will closely follow post-acquisition developments.

The ratings could be affirmed if the transaction is executed with overall credit-neutral implications.

Scope could upgrade the issuer rating by one notch if the transaction results in an improved business risk profile due to better geographical diversification of revenues, while maintaining a stable level of profitability and a leverage ratio (debt/EBITDA) that remains at or below 2.0x on a sustained basis.

Scope could downgrade the rating by one notch if the acquisition were to result in a debt/EBITDA ratio of more than 2.0x on a sustained basis, which could be the result of a prolonged period of weaker profitability post-closing and higher-than-expected integration costs.

Debt ratings

The S-2 short-term debt rating is based on the company's issuer rating and is supported by adequate liquidity and stable access to external funding. The senior unsecured debt rating is BBB, the same as the issuer rating. Both ratings have been maintained under review for developing outcome.

*All credit metrics refer to Scope-adjusted figures.

The methodologies applicable for the reviewed ratings (General Corporate Rating Methodology, 16 October 2023; Retail and Wholesale Rating Methodology, 26 April 2024) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Claudia Aquino, Associate Director

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