Research Update: Harbor Freight Tools USA Inc. 'BB-' Rating Outlook Revised To Negative On The Pressure It Will Face From Tariffs

Discount tool and equipment retailer Harbor Freight Tools USA Inc. is expected to face performance pressures from the recently imposed U.S. tariffs on certain products from China, where the company sources a majority of its private label products. We are revising our outlook to negative from stable. At the same time, we are affirming all ratings, including our issuer credit rating of 'BB-'. The negative outlook reflects the potential for a lower rating over the next 12 months if performance deteriorates beyond our expectations, likely from lower margins stemming from tariffs, which would lead to adjusted debt to EBITDA sustained above 4x. The negative outlook therefore takes into account the uncertainty around the full extent and timing of the impact

...+ Discount tool and equipment retailer Harbor Freight Tools USA Inc. is expected to face performance pressures from the recently imposed U.S. tariffs on certain products from China, where the company sources a majority of its private label products. + We are revising our outlook to negative from stable. At the same time, we are affirming all ratings, including our issuer credit rating of '##-'. + The negative outlook reflects the potential for a lower rating over the next 12 months if performance deteriorates beyond our expectations, likely from lower margins stemming from tariffs, which would lead to adjusted debt to EBITDA sustained above 4x. The negative outlook therefore takes into account the uncertainty around the full extent and timing of the impact of tariffs, as well as the company's ability to mitigate the impact on margin through sales price increases or changes in financial policies....

Research Update