Tesco’s troubles are piling up these days. The supermarket chainstore is shutting down its stores and cutting spending to shake off the consistent run of poor performance. Britain’s largest supermarket announced that it will be closing 43 stores in the UK that had become unprofitable. On top of that the company’s credit rating is being slashed by one agency after the other. Yesterday, Moody’s downgraded Tesco’s credit, today Standard & Poor’s has also slashed Tesco to junk.

In its credit rating update, Standard & Poor’s said that the company’s initiatives are unlikely to reduce the financial risks faced by Tesco and therefore it is not possible to give the company an investment-grade rating.

Chart via Novus Research – Data as of end of November 2014

Turnaround plan not enough, says S&P

Tesco shed over 40% of its share price last year, partly due to investigation into its earnings after it overstated $398 million in profit last year. Tesco is facing intense competition from German retailers, Aldi and Lidl, which are quickly expanding their business in the UK. Tesco has been following a turnaround plan under the leadership of its new CEO Dave Lewis. Under the new management, the company is putting greater focus on building smaller convenience stores and setting up online retail as the trend of building hypermarkets is going out of fashion.

S&P also said that the cost cutting plans taken up Tesco will possibly generate cash flow of 3 billion pounds by the end of 2016. However, the intense competition from foreign stores will continue to make survival difficult for Tesco.

A few Hedge Funds have also bet on Tesco’s downfall, among which Lansdowne Partners has the longest standing short. Lone Pine Capital has also shorted Tesco in the past.

Less new stores for Tesco, bad holiday season

The troubled grocer has also faced a reduction in the square footage for building new stores in 2014. Tesco received approval to build new stores on 1.09 million square feet in 2014, which is 55% less than the average of last four years, reports Bloomberg. Other UK-based retailers, J Sainsbury and Wm. Morrisons Supermarkets are also undertaking less new development compared to their historical average.

When nearly all local retailers reported a reduction in Christmas sales, the German stores were showing as much as 22% increase in revenue from the holiday season.

Despite the credit downgrades, Tesco’s stock has gained 13% this year.