Michaels gets S&P upgrade on improved performance and credit metrics.

Michaels, the arts and crafts specialty retailer, has received an upgrade in its corporate credit rating from S&P Global Ratings. The upgrade is due to Michaels' improved operating margin and cash generation in fiscal 2023, which exceeded expectations. Despite ongoing sales pressures, S&P predicts that Michaels will continue to generate steady adjusted EBITDA in fiscal 2024 through cost savings. Michaels has implemented initiatives to improve store-level operations, such as self-checkout kiosks, and has seen growth in high-margin private brand products. However, S&P expects that consumer demand for arts and crafts will remain muted in 2024, leading to soft topline trends. Michaels' main rival, Joann, recently filed for Chapter 11 bankruptcy, but S&P believes this will have minimal impact on Michaels. Michaels' credit rating could rise further with sustained improvement in operating performance, while weakening performance or liquidity could lead to a downgrade. [Extracted from the article]