Moody's cuts Kohl’s to junk

Moody's Investors Service said it downgraded Kohl's Corp.’s senior unsecured rating to Ba2 from Baa2 and assigned Kohl's a Ba1 corporate family rating, Ba1-PD probability of default rating and an SGL-2 speculative grade liquidity rating.

The outlook is stable. These actions conclude the review for downgrade started on Sept. 20.

“The downgrade reflects Kohl's erosion of market position and the deterioration in credit metrics to levels not reflective of an investment grade rating. Governance considerations are also reflected most notably Kohl's completion of $658 million of share repurchases year to date including a $500 million accelerated share repurchase program in November despite the weakness in operating performance, senior management turnover and negative free cash flow over the past 12 months,” Moody’s said in a press release.

“Although Kohl's operating performance is poised to improve from its inventory realignment, continued Sephora rollout as well as lower freight costs, the company faces a weakening economic environment, which is dampening demand as it works to return profitability to historical levels. As such, Moody's expects its recovery in credit metrics will be prolonged,” the agency added.

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