Global 400 Retail Watch List
Rating the Intrinsic Competitive Advantage of Retail & Real Estate
Beyond Static NRSRO Ratings & Bubble Asset Prices
The G-400 Composite Index provides a comprehensive hybrid rating for 455 credits and formats that operate in the bricks & mortar space. Conceived in 1995, the G-400 remains the only rating system that deconstructs the business model into five profit pillars to determine where the competitive advantage lies in the short and long term accounting for the myriad of structural changes occurring in the global spatial and capital markets and consumer economy.
The G-400 is the only “credit” rating system deconstructing retail operating model and real estate platform to assess levels of stress by qualifying financial metrics reported by the companies against the structural trends reshaping the twin industries screened in the commentary of Retail MAXIM and MAX-SI Spatial Index.The Composite Rating provides a penetrating analysis of which credits are structurally sound, or impaired and beyond the fix of opportunistic capital, enhanced by the break out of the five profit pillars.
The only source of preemptive retail and real estate ratings that identify inflection points in retailer performance and dislocations in the spatial markets well in advance of real estate capital markets attributed to the extensive breakout of the operating model to isolate value and risk within the five key facets to provide independent ratings for core divisions, derivative formats, wholesaling, e-commerce and overseas enterprises.
Behind the Rating
• G-400 Composite is an all inclusive hybrid rating for the “five profit pillars” deconstructed under the G-400 Business Advantage Rating that measures the full competitive advantage of the retailer’s business model to determine short and long term viability of the credit and format
• Strength of the composite rating is implicit of the above average operating and productivity metrics that impacts the underlying value of the real estate
• G-400 composite rating rests on quantitative and qualitative analytics predicated on audited financials of retailer, periodic guidance of management, latest strategies of retailers for growth, merchandising, capitalization, supply chain initiatives, real estate expansion and monetization and omni-channel convergence, empirical data from property inspections and market surveillance and 40 years of monitoring structural trends in retail, real estate, consumer economy, capital & credit markets.
• After 40 years of real estate securitization and structured finance innovation, the G-400 remains the only hybrid retail-real estate index isolating retail and real estate risk at the retailer and property level
• Alternative fundamental ratings free of bubble valuations and dynamics in overheated asset markets
Rating System
• Two-way ratings system: Only comprehensive rating assessing the sustainability of the retailer’s business in the context of its real estate and value of the real estate in terms of the viability of the retailer’s profit model. A critical distinction in the current transition of the spatial markets wrought by the structural changes of digitization, global credit crisis, economic dislocation, channel disintermediation, emerging competition.
• Ratings unique to hybrid methodology valuing competitive advantage of retailer model & selling channels (bricks & mortar, wholesaling and e-commerce platform). Detailed account in PDF
| G-400 Rating |
Quasi-Bond Equivalent |
| Positive Watch |
Investment Grade |
| Optimal |
AAA |
| Competitive |
A-AA |
| On-the-Cusp |
BBB/BBB- |
| Negative Watch |
Spec/Junk Credits |
| Challenged |
BB/B< |
| Sinkholes |
C |
| Terminal |
D/no rating |
Coverage
PDF
• G-400 Composite Index comprises 455+ U.S. and foreign-owned retail companies, manufacturer brands and suppliers occupying multi-lease space (shopping centers) and freestanding locations
• Company coverage more extensive than rating agencies, bond shop and online equity research not limited by public corporations, debt-only balance sheets, size (mid-large cap stocks)
• Universe of credits and formats found on every rent roll of every type of shopping center nationwide and freestanding Main Street locations
• Coverage revolves around credits with significant real estate positions and plans to expand into the bricks & mortar space. Actual store capacity, development pipelines and new formats available in the MAX-SI Spatial Index
• Retail real estate accounts for every asset class: Malls, power and lifestyle centers, factory outlet centers, grocery-anchored strip centers, freestanding sites
• Additions & turnover of credits due to mergers & acquisitions, privatization, IPOs, new competition from regional and foreign markets and e-commerce expanding into the B&M space
Benchmarks
• Provides alternative credit ratings for 455+ US & foreign retail formats operating in the bricks & mortar space or an unconventional marketplace that accounts for the extensive structural changes altering every facet of the economy and spatial markets, critical to forward looking analysis
• Forward looking analytics of sustainability of retailer’s advantage in all facets of business model and real estate
• Monthly upgrades and downgrades of business values of US & global companies with greater frequency than credit ratings and bond shops
• Benchmarks fundamental value and risk of the retailer’s profit model and real estate platform to identify industry standard, emerging competition, tenuous turnaround, chronic sinkhole and terminal
• Measures advantage of retailer against prevailing and emerging competition
• Alternative benchmarks grading the lifecycle of operating platforms and real estate overlooked by financial coverage ratios of credit ratings and capital valuations that capture the competitive advantage of the retailer at all points in the business and capital cycles
• Provides alternative baseline values for retailer fundamentals to hedge against mispricing of retail and real estate stocks and bonds in current cycle of speculative capital flows
• Alternative baseline values to differentiate operating and asset fundamentals from distortions resulting from speculative capital flows and misallocations
APPS
• Alternative credit benchmarks for evaluating leasing risk of retail credit and format for lenders, investors and landlords
• Alternative benchmarks that assess “go-dark” risk potential based on ratings assigned to underlying real estate assets and strategies value for relevancy to operating model and four-wall productivity
• Monitors value creation in turnaround situations and distressed credits
• Identifies marginal and high beta credits and formats that cannot be rescued by opportunistic capital
• Opportunistic investing and buyout targets based on Negative Watch ratings that capture systemic risk masked by stock and bond pricing
• Alternative baseline fundamental values for hedging risk in stocks and bonds
• Monitors fundamental advantage of the retailer’s core business, derivative formats & multi/omni-channel platforms with greater depth and frequency than the conventional NRSRO ratings
• Provides more penetrating assessment of retail transition by expanding risk rating beyond the conventional agency rating of the NRSRO that eclipses structural issues altering the spatial markets, consumption patterns and capital allocations
• Preemptive credit rankings that capture dislocations in business models and real estate formats before 2-3 years in advance of debt ratings and equity valuations
Subscription
Included in annual subscription to Retail MAXIM
Sample Copy PDF
G-400 Business Advantage Index
Deconstructing Retail Model for Productivity, Growth & Value
Behind the Rating
• G-400 Business Advantage Index is a derivative of the G-400 Composite Index that provides an independent rating for each of the “five profit pillars” that underpin the business model of retailers, brand manufacturers, wholesalers and e-taillers operating in the bricks & mortar space.
• The first Business Advantage Index rating the competitive advantage of five profit pillars providing benchmarks for isolating value and risks of the overall model.
Rating System
• Aggregate rating comparable to Composite system. Methodology and assumptions embedded within each Pillar Rating is available through subscription. PDF
Five Profit Pillar Rating Inputs
• Rating rests on quantitative and qualitative data sourced from retailer’s financials, press releases, data collected through the MAX-SI Spatial Index, empirical data from local market due diligence (property inspections and competition formats), suppliers, landlords, lenders, underwriters and consumer feedback and 40 years of analyzing projects worldwide. Guidance and forecasts supplied by company management and consultants.
Inputs and Scoring of Five Pillars
• Growth Prospects Advantage. External and internal performance and initiatives leveraging all facets of the retail model, supply chain and real estate platform including online convergence
• Operating Platform-Productivity Advantage. Operating margins and cash flow metrics as a function of merchandising platforms and initiatives, branding & purchasing power, omni-channel convergence, regenerative growth and cash flow strategies and market share positions
• Profit Model Advantage. Profit metrics quality and vision of stewardship, scalability and caliber of supply chain
• Liquidity and Capital Structure Advantage Efficiency and return metrics based on free cash flows, capital allocation in operations, supply chain & real estate, optimal capita structure, speculative funding vehicle s & asset monetization]
• Real Estate Asset Advantage. Quality of locations, productivity of new and vintage store assets, functionality of formats as integral to operating model and consumer, reinvestment in selling GLA, purging of unproductive and non-integral assets, monetizing selling space, leveraging brocks & mortar with online omni-channel venues, property level growth and value metrics.
Benchmarks
• Provides benchmarks of inner working of models that have become industry standards and those that have collapsed to distressed states
• Isolates the drivers of value to determine if retail format is sustainable or being supported by short-lived tactics and speculative capital.
• Isolates risks of operating platform (spine of the profit model) from speculative growth tactics, unstable capital structures, impaired profit models (generating bottom line by short lived tactics and governance by overpaid turnaround execs) that are masked by distorted stock and bond prices
• Hybrid ratings qualifying operating and financial metrics to reflect intrinsic value eluding conventional measures
• Proxies of regenerative cash flow models not dependent on external funding for growth and productivity
• Provides insights into weak links and broken retail models that are potential turnarounds, acquisitions or liquidations
• Assesses impact of capital allocation on various facets of business to achieve growth
• Greater granularity of core fundamental values masked by speculative capital pricing of stocks, bonds and real estate where fundamentals have disconnected
• Frames potential “go-dark” and liquidation risks on real estate side
• Benchmarks impact of new strategies on various facets of business in terms of advancing or adapting to shifting competition, spatial markets and global economies
APPS
• Deconstruct retailer business model by five main pillars of profit to identify drivers of growth, value & risk
• Identify the industry standards and most competitive retailers and formats based on strength of pillar rates that are sustainable, providing greatest growth and value to the marketplace
• Status of turnarounds captured in various pillars that cane be speculated in stock market or avoid lending or leasing to in the real estate market
• Pricing risk premium of credits for valuing stocks, loans and leases based on extent of competitiveness of various profit pillars that are proxies of strength, sustainability and risk. Negative or low ratings for operating platforms and real estate pillars posses inherent systemic risk
• Weak links present opportunities to buyout firms and turnaround firms that can reposition or liquidate to mine value in core assets
Subscription
Included in annual subscription to Retail MAXIM
Sample Copy PDF
G-400 Guidance Index
Forward Looking Risk Analytics
Behind the Rating
• G-400 Guidance Index is a derivative of the G-400 Composite Index that provides forward looking ratings on sustainability of retailers advantage at the corporate level and by business breakout (operational to real estate)
• Guidance is based on fiscal outlook and assumptions provided by management to analysts and investors that are scored for probability and impact of qualitative measures addressing structural and competitive issues that are adding stress and/or advancing the business.
• Guidance ratings are impacted by the rate of volatility or change in composite and profit pillars as measured by the G-400 Volatility Index
Benchmarks
• Provides alternative outlook to credit and format risk, particularly in the break oust by divisions and channels not available in conventional analytics nor in the default ratings or stock valuations (PE multiples)
• Variability of guidance indicates emerging stress in economy and consumer, ineffectiveness of initiative sand strategies or new structural issues dislocating sales (such as regulatory changes)
• Medium-term outlook for upside-downside potential for growth and value creation of format
APPS
• Adjusts expectations on the strength and/or weakness of format and division in the current cycle of protracted deleveraging and economy possessing depression like dynamics experiencing serial relapses, conditions fully discussed in the commentary provided in Retail MAXIM
• Capture volatility of operating environment through Guidance Ratings revised monthly, accounting for actions taken by management in response to emerging exogenous risk, stress factors and structural shifts identify as analyzed in Retail MAXIM
Subscription
Included in annual subscription to Retail MAXIM
Sample Copy PDF
G-400 Volatility Index
Advances & Erosion in Retailer Fundamentals
Behind the Rating
• G-400 Volatility Index is a derivative of the G-400 Composite Index that measures the change in ratings of the Composite Index and Five Profit Pillars each month accounting for the latest financial and market information impacting performance short and mid term
Benchmarks
• Rate and magnitude of change in G-400 values indicate levels of improvement and/or deterioration in fundamentals that over long durations could present risks of irreversible declines, dislocations, inflection points, event risk or asset liquidation
• Volatility and its impact is measured against past periods of strengthening or stress as values date back 15 years of serial bubbles and recessions
APPS
• Manage expectations on medium-term upside potential and downside risk of retailers core and derivative businesses based risk scenarios conducted for the Five Profit Pillars underpinning the G-400 Business Advantage Index including guidance provided by management
• Measure volatility of credit and format rating to determine advantage of retail model and real estate to outperform and withstand systemic stress in marketplace putting format(s) at risk to dislocations, default and liquidation
• Track momentum of turnaround & sinkhole credits and sustainable strength of leading retail credits & formats as indicated by strengthening or deterioration
• Identify inflection points in various facets of the retailer’s model based on advances and declines in the G-400 Composite rating and breakout values of the Five Profit Pillars in the G-400 Business Advantage Index
Subscription
Included in annual subscription to Retail MAXIM
Sample Copy PDF
