Fitch rates Grupo Gigante notes BB

Fitch Ratings said it assigned a BB rating to Grupo Gigante SA de CV's proposed offering of up to $250 million of senior notes due 2016. The outlook is stable.

Proceeds from the offering will be used to prepay existing debt.

The agency said the rating is supported by the company's business position in the Mexican food retail market, a multiple-format store strategy that allows Gigante to reach a wide customer base and geographic diversity.

The rating is constrained by the company's financial profile and declining store traffic and same-store sales trend, Fitch said. Over the past several years, the Mexican retail market has become increasingly competitive since Wal-Mart de Mexico entered the market with its aggressive low pricing sales approach. In response to market trends, Gigante redefined its commercial strategy and introduced a store remodeling program, shifted its pricing strategy from high/low to "Everyday low price," closed underperforming units and implemented a company-wide integrated information technology system.

Fitch predicted that the recent operating initiatives will help reverse the negative trend in same-store sales experienced by the company over the past several years and should allow the company to improve efficiency and profit margins within a highly competitive industry.

At Dec. 31, the ratio of total adjusted debt to EBITDAR was 4.1x.

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