Moody’s might lower Kohl’s

Moody's Investors Service sad it placed Kohl's Corp.’s Baa1 senior unsecured rating for review for downgrade.

Moody’s said the review for downgrade acknowledges Kohl's persistent declines in earnings that started in 2011 and shows no signs of abating.

The review also considers the company's expected fourth quarter of fiscal 2015 earnings and its recent downward earnings revision. The company now expects full year fiscal 2015 earnings per share to be in the range of $3.95 to $4, down from previous guidance of $4.40 to $4.60 per share.

While sales growth was slightly positive in 2015, the company's operating margins remain low and below peers and its revised earnings guidance signals that margins eroded further in 2015. Moody’s believes that the company's competitive profile has moderated as off price and discounters have gained share in Kohl's product categories a trend that we expect to persist.

The action also considers that Kohl's remains above its stated leverage trigger of rent adjusted debt to EBITDAR (as defined by Kohl's) of 2.25 and has been above this level for an extended period, the agency said.

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