Moody's Places Kohl's Corp.'s (KSS) Senior Unsecured Rating on Review for Downgrade

Moody's Investors Service placed Kohl's Corporation's (NYSE: KSS) Baa1 senior unsecured rating for review for downgrade.

The review for downgrade acknowledges Kohl's persistent declines in earnings which 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 $3.95-4.00, down from previous guidance of $4.40-4.60 a 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. We believe 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 following ratings were placed on review for downgrade:

On Review for Downgrade:

..Issuer: Kohl's Corporation

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa1

Outlook Actions:

..Issuer: Kohl's Corporation

....Outlook, Changed To Rating Under Review From Stable

Moody's review for possible downgrade will focus on the company's ongoing strategies to stabilize market share, enhance and improve its competitive position and the costs to achieve these objectives in terms of operating margins. The review will also take into consideration the company's ongoing financial policies. We believe that absent any shifts in its current financial policies, any rating action is likely limited to one notch.

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