Fitch revises Kohl's outlook to negative

Fitch Ratings said it has affirmed its rating of Kohl's Corp.'s bank credit facility and senior notes at A and has revised the company's outlook to negative from stable.

Fitch said the negative outlook reflects the company's weaker sales and margins, which could persist well into 2004, and long-term competitive pressures facing the department store sector. Kohl's has been hurt by the weak environment for apparel and competition from the discounters and other department store chains.

Kohl's reported on Thursday that its comparable-store sales for the 2003 holiday period (November/December) were down 2.5% and that its year-to-date comps were down 1.7%. Weaker sales have squeezed margins as the company has had to take larger markdowns in women's and seasonal apparel.

Fitch said softer operations have dampened Kohl's credit protection measures in 2003, with EBITDAR/interest plus rents of 5.1 times in the 12 months ended Nov. 1 versus 5.2x in the year-earlier period. At the same time, lease-adjusted debt/EBITDAR of 2.0x as of Nov. 1 compares with 2.2x a year earlier.

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