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Retailers Shining

20 August 2019 by jbchevrel

The US clothing retailer targeting middle income earners Kohl’s (KSS 158 – BBB/BBB/Baa2) saw its 5y CDS tighten by 15bp at the open before reverting to -4.3bp, remaining the 6th widest constituent in the CDX IG s32 -- tighter than Encana (ECACN 167 - BBB/BBB/Ba1), wider than DXC Technology (CSC 146 – BBB+/Baa2). The stock went from +6% to -6%. KSS reported comparable sales down -2.9% vs an average estimate of -2.4% although within the quarter, the CEO noted that comp sales reverted into growth territory over the 2nd half of Q2 (+1%) and added that this positive trend extended through now, ahead of the school comeback. That was the 3rd consecutive quarter of decline for top line. Adjusted EPS came a tad above what the consensus had expected and if the stock enjoyed some outperformance in pre-market (+6%), it reverted down, this time underperforming the broader US benchmark (-6%). EPS guidance has been maintained at [$5.15,$5.45]. KSS remains in a sector seen as pressured going forward by AMZN, but the steps taken (accepting returns for AMZN customers at all stores since July) are likely to support the business. In Europe, Casino (COFP) was among outperformers in the CrossOver s31, tighter by c50bp on the day, after it announced it plans a fresh round of asset disposals (real estate + unprofitable shops, potentially the discount chain Leader Price) that would raise an additional c€2B, which one can reasonably think that the proceeds will be used to reduce debt. Last round was of comparable size. This is to put in regard with net debt c€5B as of H1-19. Timing-wise, completion is due by the end of Q1-21. Strategy-wise, COFP said it would skew its strategy toward more profitable e-commerce and premium segment (Monoprix). Elsewhere, it was a session that saw risk revert after a strong run (Main +1.8 Xover +5 CDXIG +0.6 CDXHY +4.1).