Niche position in the value-priced tools sector; Vertically integrated business model that contributes to some gross margin benefit over big box industry players; and Promotion-heavy pull strategy contributes to positive sales trends but also somewhat pressures EBITDA margins. Solid cash flow generation and adequate liquidity; Aggressive capital structure, with a practice of debt-financed dividends; and Very aggressive financial policy influenced by the sole shareholder. S&P Global Ratings' stable rating outlook on Harbor Freight Tools USA Inc. (HFT) reflects our expectation that credit metrics will improve over the next 12 months, such that adjusted debt leverage is below 4x because of revenue and profit growth, and strong cash flow generation. We expect the company to maintain positive comparable sales growth. We
