Bass Pro Group Outlook Revised To Positive On Expectation For Improved Credit Metrics; 'B+' Rating Affirmed

  • U.S.-based sporting goods and outdoor recreation retailer Bass Pro Group LLC has successfully executed its Cabela's integration plan, achieving cost synergies that are well ahead of schedule.
  • We are revising our outlook on Bass Pro to positive from stable, and affirming the 'B+' issuer credit rating.
  • The positive outlook reflects our expectation that credit metrics will meaningfully improve over the next 12 months driven by continued execution on the integration initiatives and moderate debt repayment.
NEW YORK (S&P Global Ratings) Dec. 6, 2018--S&P Global Ratings today took the 
rating actions listed above. The outlook revision reflects our expectation 
that credit metrics will improve significantly over the next 12 months, 
including debt to EBITDA declining to the low-5.0x area at fiscal year-end 
2019 from the current high-7.0x range. We expect substantial profitability 
improvement as the company's highly profitable credit card business grows, 
one-time expenses related to the Cabela's merger roll off, and overhead cost 
reduction and merchandise optimization continues.  An important element of the 
company's strategy is increasing the number of customers using its credit 
card. We also expect Bass Pro to benefit from better economics under the 
company's new credit card arrangements with MasterCard. The credit card 
business leverages strong brand loyalty that stems from a devoted core 
customer base, although the extent to which the company can expand this 
operation across banners remains unproven.

The positive outlook reflects our expectation that the company will continue 
to execute well on its integration plan, resulting in debt to EBITDA improving 
to the low-5.0x area by year-end 2019 as profitability improves and the 
company uses FOCF to repay debt. 

We could revise our outlook back to stable if we expect debt to EBITDA will 
remain above 5.0x. This could happen if Bass Pro's competitive standing 
weakens because of increased competition from big-box and online retailers, or 
if the company experiences issues integrating the Cabela's business or 
transitioning the credit card business to new third-party financial 
institutions. Credit metrics could also underperform our forecast if the 
company adopts a more aggressive financial policy, resulting in a higher 
outstanding debt balance than we currently assume.

We could raise the ratings if we expect debt to EBITDA of about 5.0x or less 
on a sustained basis.  This could occur if we expect positive comparable-sales 
and EBITDA margin expansion of about 500 basis points (bps) benefitting from 
the roll off of one-time costs, growth of highly profitable credit card sales, 
and better retail execution in combination with moderate debt repayment in the 
coming 12 months.