Research Update: The Michaels Cos. Inc. Upgraded To 'B-' From 'CCC+' On Improved Performance And Credit Metrics; Outlook Stable

U.S.-based arts and crafts specialty retailer The Michaels Cos. Inc. reported significant improvement in operating margin and cash generation in fiscal 2023, causing credit metrics to strengthen ahead of our previous expectations. Despite ongoing sales pressures, we anticipate the company will generate relatively steady adjusted EBITDA in fiscal 2024, achieved through product and labor cost savings, that keeps S&P Global Ratings-adjusted leverage in the low- to mid-5x area. We also forecast continued positive free operating cash flow (FOCF) generation. Therefore, we raised our issuer credit rating on Michaels to 'B-' from 'CCC+'. The outlook is stable. At the same time, we raised our issue-level ratings on the company's term loan and senior secured notes to 'B-' from 'CCC+'. The recovery

...- U.S.-based arts and crafts specialty retailer The Michaels Cos. Inc. reported significant improvement in operating margin and cash generation in fiscal 2023, causing credit metrics to strengthen ahead of our previous expectations. - Despite ongoing sales pressures, we anticipate the company will generate relatively steady adjusted EBITDA in fiscal 2024, achieved through product and labor cost savings, that keeps S&P Global Ratings-adjusted leverage in the low- to mid-5x area. We also forecast continued positive free operating cash flow (FOCF) generation. - Therefore, we raised our issuer credit rating on Michaels to 'B-' from '###+'. The outlook is stable. - At the same time, we raised our issue-level ratings on the company's term loan and senior secured notes to 'B-' from '###+'. The recovery rating remains '3'. We also raised our issue-level rating on the company's senior unsecured notes to '###' from '###-'. The recovery rating remains '6'. - The stable outlook reflects our expectation...

Research Update