New York, September 28, 2020 -- Moody's Investors Service, ("Moody's") Moody's
Investors Service ("Moody's") today upgraded Dollar Tree, Inc.'s
("Dollar Tree") senior unsecured rating to Baa2 from Baa3. Moody's
also upgraded the rating of Family Dollar Stores, Inc. legacy
notes to Baa2 from Baa3 and changed the outlook for Dollar Tree,
Inc. and Family Dollar Stores, Inc. to stable from
positive.
"Dollar Tree has demonstrated continued strong operating performance and
cash flow generation despite the headwinds caused by the coronavirus pandemic
with double digit comparable store sales growth at its Family Dollar stores",
Moody's Vice President Mickey Chadha stated. "The upgrade reflects
the consistent and sustained improvement in credit metrics through increased
EBITDA generation and debt reduction and our expectation that metrics
will remain strong with debt/EBITDA sustained below 3.0x",
Chadha further stated.
Upgrades:
..Issuer: Dollar Tree, Inc.
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
..Issuer: Family Dollar Stores, Inc.
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa2 from Baa3
Outlook Actions:
..Issuer: Dollar Tree, Inc.
....Outlook, Changed To Stable From
Positive
..Issuer: Family Dollar Stores, Inc.
....Outlook, Changed To Stable From
Positive
RATINGS RATIONALE
Dollar Tree's Baa2 senior unsecured rating reflects the company's sizable
scale and its fixed and multi-price point product offerings.
Moody's views the dollar store sector favorably and expects that it will
continue to grow given its low price points and convenient locations especially
for cash constrained consumers. The company has also demonstrated
resiliency in the face of the dislocation and changes in consumer spending
patterns due to the coronavirus pandemic. Moody's expects Dollar
Tree's credit metrics to remain strong in the next 12 months with lease
adjusted debt/EBITDA sustained below 3.0 times. The ratings
also reflect particularly that the company's financial strategies will
be balanced and will support its investment grade profile while maintaining
lease adjusted debt/EBITDA at or below 3.0 times. The topline
growth at the company's Family Dollar banner has seen a significant
increase during the pandemic due the increase in demand for consumables
and has more than offset the lower sales for discretionary and seasonal
products at the Dollar Tree banner. Moody's expects that
the Family Dollar store base will continue to improve as management implements
strategies to improve merchandising, store optimization, improve
store operations, and increase sales of higher margin variety and
seasonal products in Family Dollar stores while also increasing the higher
margin private label penetration in the Family Dollar stores. Ratings
are also supported by the company's excellent liquidity.
The stable outlook reflects Moody's expectation that the company will
continue to have strong operating performance, free cash flow generation
and credit metrics will not deteriorate. The stable outlook also
reflects Moody's expectation that financial policies will be balanced.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade would require continued strong operating performance for both
Dollar Tree and Family Dollar banners including positive same store sales.
An upgrade will also require a balanced financial policy. Quantitatively,
an upgrade would require lease adjusted debt/EBITDA sustained below 2.25x
and EBIT/interest sustained above 6.0 times.
Downward rating pressure would result should Dollar Tree's financial policies
become aggressive. Ratings could also be downgraded should Dollar
Tree's operating performance or liquidity deteriorates or debt levels
increase such that lease adjusted debt to EBITDA is sustained above 3.0
times or EBIT to interest expense falls below 5.0 times.
Dollar Tree, operated 15,429 stores across 48 US states and
five Canadian provinces. Stores operate under the brands of Dollar
Tree, Family Dollar, and Dollar Tree Canada. Revenue
is about $24.6 billion for the LTM period ended August 1,
2020.
The principal methodology used in these ratings was Retail Industry published
in May 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120379.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
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issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
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provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
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For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
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These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
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for additional regulatory disclosures for each credit rating.
Manoj Chadha
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Margaret Taylor
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653