Standard & Poors (S&P) lowered its debt ratings on Kohl’s Corp. and Nordstrom Inc. due to the coronavirus impact and related economic uncertainty.
The rating agency lowered its issuer credit rating on Kohl’s to ‘BBB-‘ from ‘BBB’.
“We believe coronavirus-related social distancing, temporary store closures and a downshift in consumer spending for discretionary merchandise will lead to a protracted decline in profit and cash flow for Menomonee Falls, WI-based Kohl’s Corp.,” said S&P. Based on its revised forecast assumptions for Kohl’s, S&P now expects profit and cash flow generation to weaken significantly and leverage to spike in 2020.
The negative outlook reflects its belief that Kohl’s could underperform its updated forecast due to a prolonged social distancing impact or weaker-than-expected subsequent recovery, hindering the company’s ability to restore credit metrics in 2021.
S&P lowered its overall debt rating on Nordstrom to ‘BBB-‘ from ‘BBB,’ as well as its short-term commercial paper rating on Nordstrom to ‘A-3’ from ‘A-2’.
S&P said, “We expect the spread of the coronavirus will result in a swift and severe drop in consumer spending this year as restrictive mandates to contain the outbreak and deflating confidence upend near-term consumer behavior. We believe Nordstrom Inc.’s operating results will be significantly weaker than we previously expected, pressuring credit metrics and potentially resulting in the need to amend its maximum leverage covenant.”
Nordstrom’s negative outlook reflects the risk for a lower rating if there is a prolonged disruption to consumer spending that causes us to reassess Nordstrom’s overall relative competitive and financial position.
Photo courtesy S&P