We see a significant risk that U.S.-based arts and crafts specialty retailer The Michaels Cos. Inc. ?s profitability and cash flow could weaken materially because of its substantial supply chain exposure to China, which is now subject to sharply higher tariffs. The extent of the impact of tariffs is highly uncertain at this time, but we expect Michaels? performance to be challenged by higher input costs and a deteriorating economic environment that pressures discretionary spending. If tariff pressures persist, the hit to Michaels? profitability could cause credit metrics to erode and cash generation to weaken to levels that are not consistent with our view of a sustainable capital structure. Therefore, we placed all our ratings on Michaels on CreditWatch with
