Press Release

VIS Assigns Initial Entity Ratings to Service Sales Corporation (Pvt.) Limited

Karachi, May 20, 2024: VIS Credit Rating Company Limited assigns initial entity ratings to Service Sales Corporation (Pvt.) Limited ('SSCPL' or 'the Company') to 'A-/A-2' ('Single A minus'/'A-Two'). Medium to long term rating of 'A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The outlook for assigned ratings is “Stable”.

Service Sales Corporation (Private) Limited was incorporated in 1965 as a private limited company. The principal activity of the Company is retail and wholesale of footwear products and related accessories. The head office of the Company is situated at 2nd Floor, EFU House, 6-D, Main Gulberg, Jail Road, Lahore. SSCPL's retail segment comprises the brand name Ndure, along with an E-commerce channel. All retail outlets are operated by the company, including 13 stores situated on company-owned properties, while the remainder are leased. The wholesale segment encompasses the Calza and Liza brands, distributed through 800 independent retailers across Pakistan, supported by 8 Wholesale Business Centers and E-commerce channels.

Assigned ratings incorporate the medium to high business risk profile attributed to high cyclicality and competition within the footwear industry. The demand for footwear is closely linked to consumer preference and household income, rendering it susceptible to economic fluctuations. Despite facing intense competition, the sector benefits from low regulatory and technological risks, which provides some support to the overall business risk profile.

Assigned ratings also consider the Company’s financial risk profile. The profitability profile reflects sustained sales growth, driven by higher prices despite a contraction in volumetric sales in FY23. Improved gross and operating margins in FY23 demonstrate the Company's ability to pass on increasing input costs to customers. The capitalization profile remains elevated, characterized by a high proportion of operational rental leases. Adequate coverage and liquidity profiles further support the ratings, although a slight contraction in coverage metrics was observed in FY23 due to increased financial charges.

Going forward, ratings are sensitive and consider the planned alignment of capitalization and debt service metrics with assigned ratings, which are regarded to be relatively elevated. Moreover, ratings will also consider support of consistent growth in export sales of subsidiaries as an important consideration going forward.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.



Applicable Rating Criteria: Industrial Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale:
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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