Moody’s Investor Service has downgraded Woolworth’s one notch from Baa1 to Baa2 (outlook negative).

The downgrade comes after the supermarket giant announced its first loss in more than 20 years.

“The downgrade principally reflects Woolworths’ continued operational challenges across much of its portfolio,” said Ian Chitterer, a Moody’s vice president and senior analyst.

Woolworths has unveiled a total first-half loss of $2.09 billion last week and announced the appointment Brad Banducci as its new chief executive.

The hit came from a $3.25 billion one-off impairment on Woolworth’s exit from its Masters home improvement stores. The loss attributable to equity holders was $972.7 million.

“The trend in comparable-store sales growth at its core Australian food and liquor business has been negative for the past three quarters and Woolworths does not expect a significant improvement in the 2H2016. The 1HFY2016 result highlights the loss in market share and margin erosion in the supermarket business, only partially offset by the continued strong performance in liquor,” said Chitterer.

Moodys said while Woolworths’ intended exit from Masters, is a long-term positive from a credit perspective, it is likely to require a high level of management attention and Moody’s believes that there may remain a risk that unexpected cash costs could impact the firm’s financial profile.

Moody’s said given the negative outlook, a rating upgrade in the next 12 to 18 months is not likely. For an upgrade to be considered once the outlook is stabilized, comparable store sales in the Australian food and liquor business would need to revert to a positive number, the general merchandise division would have returned to growth, and the exit from the home improvement segment would need to be well progressed, with an outcome in-line with expectations.

Standard & Poor’s rating of Woolworths as BBB+ (negative outlook) remains unchanged.

“Woolworths continues to have a solid credit profile and is confident the execution of its strategy will deliver the best outcome for its customers and investor,” Woolworths said in a statement to the market today.

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