Shop the Curve: Investment-Grade Retail Initiation of Coverage

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M

Foundation

August 17, 2026 03:30 PM GMT

Retail Credit Research | North America

Morgan Stanley & Co. LLC

Jenna L Giannelli

Credit Analyst

Shop the Curve: InvestmentGrade Retail Initiation of

Coverage

Roopi Bhangu

Credit Analyst

We initiate coverage on 10 investment-grade retail credits with a

selective constructive sector view. Overall sector spreads are

tight vs. the IG market and via a historical lens, but supported by

healthy fundamentals.

Key Takeaways

Cash flow and liquidity are broad supports. Median FCF / debt is about 38%, eight

of 10 issuers < 2.0x gross leverage, and near-term maturities are modest.

We prefer home improvement over off-price and dollar stores, given longer-term

upside cyclical convexity. HD offers the cleanest A-rated credit, we believe, while

LOW offers the better spread expression.

We generally like brands, but brand relevance and execution drive the ranking.

Coach supports TPR, even if slowing, while NKE remains in a reset in a difficult

category. PVH lacks a visible catalyst, in our view.

Off-price fundamentals remain strong, but TJX and ROST spreads largely reflect

that quality. We have no active trade in either name.

Capital allocation, tariffs, and execution around M&A remain the common risks.

Covenant packages provide limited protection.

The group is generally high quality, cash generative, and well scaled, with limited

near-term maturity risk and supportive consumer fundamentals through the first

half. However, IG Retail trades near 62bp, ~9bp inside BBB Retail and 16bp inside the

broad IG index. Home improvement is our preferred category, with longer-term

cyclical upside. HD is our preferred A-rated credit, while LOW, TPR, and DKS are our

preferred BBB-rated credits. We view NKE as neutral / tight, with no active trade.

See links here to our detailed initiations on each credit:

• Dick's Sporting Goods (DKS)

• Dollar General (DG)

• Dollar Tree, Inc. (DLTR)

• Home Depot, Inc. (HD)

• Lowes, Corp (LOW)

• Nike, Inc. (NKE)

• PVH, Corp (PVH)

• Ross Stores, Inc. (ROST)

• Tapestry, Inc. (TPR)

• TJX Companies (TJX)

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