17 November 2020 by jbchevrel
Kohl's Corp. (KSS) owns and operates family-oriented department stores. It offers apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows and house wares targeted to middle-income customers. Its stores generally carry a consistent merchandise assortment with some differences attributable to regional preferences. The company was founded in 1962 and is headquartered in Menomonee Falls, WI. KSS CDS is a constituent of CDX IG since series s10 included, and contrary to Nordstrom and Macy’s, it didn’t get relegated to CDX HY at last roll. Thus, it is the 2nd widest single-name CDS in CDX IG s35, at 285bp, behind Ovintiv (OVV) which stands at 340bp. For ref – the fair spread of CDX IG s35 is 55bp. Back in summer, the Q2 release had taken KSS 5y CDS wider (+55bp to 328bp) as KSS warned that COVID effects would drag into H2. Revenue had decreased by about a quarter in Q2, and July sales didn’t start well. Today KSS 5y CDS was tighter by -9bp and the stock rose +9% after Q3 beat. In line with what was feared this summer, LFL sales missed, down -13.3% YOY vs -12.3% consensus. However, the company made a net loss (-$12m) which was slimmer than what the consensus was fearing. KSS reported cash & equivalents at $1.9B as of Oct 31, $2.2B accounts payables and $2.5B long-term debt. Operating cash flow was $606m for the period and capex was $68m. With $27m additional on financing, FCF was wrapped at +$511m, to be compared with +$578m at the end of Q3-2019. On the -ve credit / +ve equity side, the company affirmed that they plan to reinstate their dividend in H1-2021. To be continued!