Moody’s Ratings changed Kohl’s Corporation’s debt ratings outlook to positive from stable due to a recent better-than-expected operating performance.
Additionally, Moody’s affirmed the retailer’s B2 corporate family rating (CFR) and its B2-PD probability of default rating (PDR). The rating agency also affirmed the B3 rating of the Kohl’s senior unsecured notes and the Ba3 rating of the company’s senior secured first lien notes. The speculative grade liquidity rating (SGL) is upgraded to SGL-2 from SGL-3.
“The positive outlook reflects Kohl’s better than expected operating performance in 2025 and improved liquidity resulting in credit metrics that are better than our previous expectations”, Moody’s Ratings Vice President Mickey Chadha stated. “For fiscal 2025 Moody’s-adjusted EBIT/interest expense was 1.4x versus our expectation of 1.0x and Moody’s-adjusted debt/EBITDA was 4.5x versus our expectation of 5.3x. We expect that metrics will show further modest improvement in the next 12-18 months”, Chadha further stated.
Ratings Rationale
Moody’s said, “Kohl’s B2 CFR reflects the company’s significant market position and scale with approximately $15.5 billion of revenue for fiscal year 2025 and its good liquidity. Kohl’s has a long-term track record of innovative merchandising, which includes a high level of private label and exclusive merchandise that resonates with its value-oriented customers. However, Kohl’s sales cadence has been negative with continued declines in 2025 as the company’s core customer remains stressed in the face of the ongoing high cost of essentials. We expect sequential improvement in quarterly comparative store sales in fiscal 2026 with the company returning to topline growth by the end of the year. Sales at Sephora continued to grow but that has not been enough to offset the weakness in Kohl’s other merchandise categories, such as footwear and legacy home. We anticipate that improved inventory management and new merchandising efforts particularly in proprietary brands will have a positive effect on overall profitability. However, the company still must navigate a challenging macroeconomic environment and a stressed consumer. We forecast Moody’s-adjusted debt/EBITDA and EBIT/interest to improve modestly to 4.4x and 1.5x in the next 12-18 months respectively. Kohl’s rating also reflects its good liquidity.
“The positive outlook reflects our expectation that operating performance including sales growth and credit metrics will continue to improve and liquidity will remain good. The positive outlook also reflects that Kohl’s will continue to pursue a balanced financial strategy.”
Photo courtesy Kohl’s
