Tailored Brands Inc. Upgraded To #B+# On Proposed Refinancing And Improved Operating P Outlook Stable

Stocks and Financial Services Press Releases Tuesday March 20, 2018 09:31
NEW YORK--20 Mar--S&P Global Ratings

NEW YORK (S&P Global Ratings) March 19, 2018--S&P Global Ratings today raised its corporate credit rating on Houston-based specialty retailer Tailored Brands, Inc. to 'B+' from 'B'. The outlook is stable.

At the same time, we assigned a 'BB-' issue-level rating and '2' recovery rating to the term loan. The '2' recovery rating indicates our expectation for substantial (70%-90%; rounded estimate: 75%) recovery in the event of default. We also raised the issue-level rating on the senior notes to 'B-' from 'CCC+'. The '6' recovery rating is unchanged and indicates our expectation for negligible (0% to 10%; rounded estimate: 0%) recovery in the event of default.

The rating action reflects the consistent improvement in operating trends at Men's Wearhouse and Jos. A. Bank throughout fiscal 2017, along with strengthening credit metrics as a result of enhanced company profitability and meaningful debt repayment. Positive operating trends in 2017 culminated in the fourth quarter, with both brands delivering positive comparable sales. We expect positive trends to continue over the next 12 months, as we believe that the company's emphasis on enhanced marketing, expansion of the custom business, and continued investment in personalization solutions such as Look Finder will drive growth in the short term and will put the company in a better position to compete and succeed in the long term. E-commerce has not yet disrupted the menswear industry as significantly as some other areas of apparel retail because of the higher importance for personal fit. However, we believe competition from e-commerce will become more of a threat as technology improves, and Tailored Brands' initiatives, such as building an affordable custom clothing business, will help better position the company for that competition.

The stable outlook reflects our view that credit metrics will improve moderately over the next 12 months due to a combination of EBITDA growth and continued healthy debt repayment. We forecast FFO to debt of around 19% and fixed-charge coverage of around 1.9x at fiscal year-end 2018.

We could lower the ratings if Tailored Brands is unable to maintain its recent positive momentum, and operating trends turn negative on an extended basis as a result of increased competition from department stores and e-commerce retailers, ineffective marketing, and/or inability to execute on key growth initiatives. Under this scenario, company-wide comparable sales would decline in the low-to-mid single digits, with one or both of the Men's Wearhouse and Jos. A. Bank brands in negative territory, and EBITDA margin would decrease by 100 bps below our base-case forecast. This would lead to FFO to debt in the mid-teens range and fixed-charge coverage in the mid-1.0x area despite a moderate level of debt repayment.

We could raise the rating if the company can sustain good operating trends at Jos. A. Bank and Men's Wearhouse, resulting in positive comparable-sales at both brands and stable or improving company-wide EBITDA margin, while also continuing to repay meaningful portions of its outstanding debt with healthy free operating cash flow generation. This could happen if the company can continue to successfully execute on marketing and merchandising that resonates with consumers, as well as further grow its custom business. Under this scenario, FFO to debt would be in the low-20% range, and fixed-charge coverage would be in the low-to-mid 2.0x area. We could also raise the rating if consistent improvement in operating metrics, supply chain efficiency, and omnichannel capabilities ultimately lead us to assess the company's business more favorably.

Latest Press Release

KTC announces new Pocket Book KTC Cultural Dining Experience which includes 50 premium-level restaurants and several privileges.

Mrs. Pranaya Nithananon, Vice President - Credit Card Business, "KTC" or Krungthai Card Public Company Limited, has announced a "KTC Cultural Dining Experience" Pocket Book; the book includes a pristine selection of premium-level restaurants, some...

Helix Homes America Asia Expansion

Helix Homes America announces the two-year anniversary of Indonesia operations and the grand opening of the Company's newest international offices in Ho Chi Minh City, Vietnam. Helix Homes America offers Single Family Rental properties to...

Thai 2018 CG Score Hits Record Listed Firms Emphasizes More on Stakeholders

The 2018 Corporate Governance Report of Thai Listed Companies (CGR), conducted by the Thai Institute of Directors (IOD) with support from the Stock Exchange of Thailand (SET), showed a 'very good' result and marked a historical high at 81%. The robust...

Sonic Interfreight Pcl. Advances Its Business Potential with an Eye on Growth To Be Leader in Integrated Logistics and Supply Chain Management in ASEAN

Sonic Interfreight Pcl. (SONIC), a leading regional provider of integrated freight and logistics services, is ready to be traded in the Market of Alternative Investment (MIA) for the first time on October 19 with full confidence of positive investors'...

Bangkok Bank reports nine-month net profit of Baht 27,229 million

The Thai economy continued to grow on the back of strong exports and buoyant domestic demand. In spite of the risks from the US trade policies and retaliatory measures of trading partners, exports continued to expand given diversified export...

Related Topics