S&P cuts O'Charley's rating

Move comes three days after Cracker Barrel downgrade

Email | Print By Geert De Lombaerde

Standard & Poor’s Ratings Service has cut its ratings of O’Charley’s debt, saying the restaurant company’s numbers will not improve until well into year.

In the report, analyst Charles Pinson-Rose said there is a “strong possibility that the sales and profitability declines in the past three quarters, which have weakened the company’s credit metrics, will continue through the balance of the year and likely into 2009.” Prior to this morning's report, S&P already rated the Nashville-based chain's debt at junk levels.

Pinson-Rose’s downgrade comes in the same week as analysts at Moody’s Investors Service lowered their rating of CBRL Group’s debt. They, too, cited the restaurant sector’s poor outlook in the coming quarters.

O’Charley’s lowered its profit outlook last month and lost almost $8 million last quarter. The company has about $148 million of debt on its books, which amounted to 43 percent of its mid-July equity.

Shares of O’Charley’s were up more than 3 percent in morning trading to $10.10. Year to date, they’re down 32 percent. CBRL shares (Ticker: CBRL) was up almost 2 percent.