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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BBB-/Stable issuer rating of HORNBACH Holding AG & Co. KGaA. Scope has also affirmed the S-2 short-term debt rating and the BBB- long-term senior unsecured debt rating.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB- (unchanged). HORNBACH’s business risk profile benefits from its: i) high market share in large and mature markets with good growth prospects and strong long-term fundamentals in key end-markets; ii) broad geographic diversification, with approximately half of sales generated outside Germany; as well as iii) an established omni-channel set-up, providing good access to customers and supporting stable cash flows, thereby minimising operational risk. However, the company's competitive positioning is still constrained by: i) comparatively weak – though stable – profitability due to high asset intensity (own real estate and high inventory levels) and; ii) its moderate size, particularly in comparison to larger peers such as Kingfisher and Adeo.

HORNBACH remains one of the largest DIY chains in Europe and has increased its market share in the main markets it serves during the 12 months to end-November 2025. Sales for the last twelve months to the end of November 2025 grew by 3.3% YoY to EUR 6.4bn. Scope expects further growth in the FY 2026/27 thanks to the opening of four new stores and one rebranding in the current financial year, as well as the company's high market share and customer satisfaction. This has enabled HORNBACH to grow even in competitive markets such as Germany, Austria and Switzerland. Expansion into Serbia, announced in December 2025, could stimulate further growth in the international share of sales from the end of 2027 onwards.

As an integrated retailer, HORNBACH operates an omni-channel setup which provides strong customer access. Its operations are equally split between its domestic market in Germany, which accounts for around 50% of sales, and eight other European countries: Sweden, the Czech Republic, Slovakia, Romania, Austria, Switzerland, Luxembourg and the Netherlands. This enables HORNBACH to benefit from different demand patterns and customer preferences, which in turn supports stable cash flow despite the company's focus on a consumer goods category which is highly seasonal and has low-cyclicality.

Scope expects HORNBACH's announced expansion into Serbia to drive international sales growth. The market offers attractive fundamentals, including high home ownership, rising purchasing power and limited competition. This provides an opportunity for HORNBACH to establish a strong presence. The plan involves opening six to eight large DIY and garden centres, as well as an online shop. The first openings are expected at the end of 2027, with permits anticipated by mid-2026. The programme will involve investments totalling around EUR 200m over five years, at an average of EUR 25m–EUR 40m per location, which will boost expansionary capital expenditure to beyond historical levels. Reliance on Austrian infrastructure will limit additional logistics and administrative costs. While the expansion will support revenue diversification and EBITDA growth beyond 2027, near-term risks such as delays to the implementation process, difficulties with market entry, and macroeconomic volatility could temporarily affect cash generation.

The company’s Scope-adjusted EBITDA margin* is expected to stabilise at around 7.5%–8.0% (LTM Q3 2025/26: 7.8%). This is slightly below Scope’s previous expectations, driven by SG&A expenses exceeding sales growth in FY 2025/26, as well as higher store costs linked to prospective openings between FY 2026/27 and FY 2027/28. However, this development is largely mitigated by the stability of the margin, in Scope’s view.

The return on assets is impaired by a large asset base and is expected to remain between 10% and 15% going forward (FY 2024/25: 12.9%).

Financial risk profile: BBB- (unchanged). HORNBACH's financial risk profile is underpinned by robust cash conversion, which helps to maintain good leverage and strong interest cover.

Scope expects HORNBACH to maintain strong cash conversion, supporting high shelf availability and increased capital expenditure without requiring external funding. Thus, Scope expects free operating cash flow to remain break even, despite an increase in capital expenditure to around EUR 625m between FY 2025/26 and FY 2027/28, including up to 13 new store openings (thereof four in the current financial year), entry into Serbia, and elevated lease payments. The agency therefore anticipates that debt will remain stable at EUR 1.2–1.4bn (end-November 2025: EUR 1.3bn). Fluctuations in working capital due to seasonal business activity are largely offset by a reverse factoring programme and improved inventory management, leading to higher turnover rates. The resulting free operating cash flow/debt ratio is forecasted to remain moderate at around 5% (LTM Q3 2025/26: 0%).

Scope sees HORNBACH's interest coverage profile a key credit strength, supported by stable debt levels and modest EBITDA growth (CAGR of around 1% up to FY 2027/28). Although the company is operating in an environment of structurally higher interest rates, with the weighted average cost of debt projected to rise to around 3.8% by FY 2027/28 – nearly double the level in H1 2022 – Scope projects that EBITDA interest coverage will remain comfortably above 7x over the forecast horizon (LTM Q3 2025/26: 9.7x). This reflects HORNBACH’s disciplined balance sheet management and limited refinancing pressure, offsetting the gradual rise in borrowing costs. Although interest coverage will trend slightly downward, the company’s capacity to cover interest remains robust and provides a buffer against potential earnings weakness or further increases in funding costs.

Scope forecasts that HORNBACH's leverage will remain at around 2.5x debt/EBITDA (LTM Q3 2025/26: 2.5x). This is supported by stable debt levels, continued self-funding of growth, and modest – but consistent – EBITDA growth. Scope projects funds from operations/debt to remain at around 30% (LTM Q3 2025/26: 31%), reflecting stable operating performance and a consistent tax burden, which mitigates the gradual increase in interest payments. Overall, Scope believes that the company’s stable debt base, controlled expansion and steady profitability trajectory will support the maintenance of good leverage levels over the medium term.

Liquidity: adequate (unchanged). Liquidity is adequate. Cash sources (EUR 360m in unrestricted cash and a EUR 500m open committed credit line both at end-November 2025; as well as EUR 161m of free operating cash flow forecasted from December 2025 to end-February 2028) cover uses (debt due in Q4 2025/26: EUR 83m; FY 2026/27: EUR 250m and FY 2027/28: EUR 50m) by more than 200%.

Supplementary rating drivers: credit-neutral (unchanged). Supplementary rating drivers have no impact on the issuer rating.

Outlook and rating sensitivities

The Stable Outlook is based on continued growth of the company's top line (CAGR of 3%-4%) and EBITDA (CAGR of around 1%), helping leverage remain at current levels (debt/EBITDA of around 2.5x) in the coming years. The Outlook includes capital expenditure of around EUR 625m, dividend payments of about EUR 125m and a stabilisation of the EBITDA margin at between 7.5% to 8.0% - all for the three years to end-February 2028.

The upside scenario for the ratings and Outlook is:

• Debt/EBITDA of significantly below 2x on a sustained basis

The downside scenario for the ratings and Outlook is:

• Debt/EBITDA of significantly above 3x on a sustained basis

Debt ratings

The S-2 short-term debt rating is based on the underlying BBB-/Stable issuer rating. It reflects the company's better-than-adequate internal and external liquidity, better-than-adequate banking relationships as well as an adequate standing in the capital markets.

Senior unsecured debt has been affirmed at BBB-, the same level as the issuer rating.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

HORNBACH Holding AG & Co. KGaA

Issuer rating: BBB-/Stable, affirmation

Short-term debt rating: S-2, affirmation

Senior unsecured debt rating: BBB-, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporates Rating Methodology, 14 February 2025; Retail and Wholesale Rating Methodology, 25 June 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Philipp Wass, Managing Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 20 January 2025.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
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