Macy’s was upgraded to investment grade by Fitch, making it a rising star. It was upgraded to BBB- from BB+ with a stable outlook. The upgrade reflects Macy’s strong topline trajectory which Fitch notes, points to evidence of “successful implementation of omnichannel and other topline initiatives”. Macy’s reported 2021 EBITDA improved to $3.2bn, higher than its $2.2bn reported in 2019 on the back of good cost control and reduced promotional activity. EBITDA margins also rose to 12.7% vs. 8.6% pre-pandemic. However, overall annual revenues could stabilize at $25bn with EBITDA margins coming back to 8-9% levels. Macy’s credit profile was underscored by its actions and financial flexibility since the pandemic which included aggressive reductions to operating expenses, capex, inventory and the suspension of its dividend. The retailer also reduced its adjusted leverage target to 2x from its pre-pandemic range of 2.5-2.8x, reducing debt by ~$850mn from the end-2019 to the end-2021. Macy’s demonstrates strong liquidity with free cash flows (FCF) of $2bn in 2021. The retail company was last rated at BBB- pre-pandemic in Feb 2020.

Macy’s bonds were higher with its 4.5% 2034s up 1.45 points to 88.63, yielding 5.77%

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