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Investing.com -- S&P Global Ratings has revised the outlook for Salt Lake City-based outdoor grill manufacturer, Traeger Inc., from stable to negative due to increased exposure to tariff-related headwinds. Despite this, the ’B-’ ratings for the company have been affirmed.
Traeger Inc., which imports a significant portion of its grills and accessories, is likely to see weakened credit metrics, including EBITDA interest coverage, potentially reaching 1.5x by the first half of 2026. The severity of this impact will be determined by the effectiveness of the company’s mitigation strategies, which include price increases, cost management, and changes to its outsourced manufacturing suppliers over time.
The negative outlook reflects the risk to the company’s EBITDA over the next 12 months due to tariffs, which could significantly weaken credit measures. This comes after the U.S. implemented new tariffs, affecting Traeger’s grills as they are subject to a 25% duty on all products made with non-U.S. steel. These tariffs are excluded from any reciprocal tariffs between the U.S. and China, which are currently on hold.
With Traeger sourcing 80% of its grills from China, approximately half of its cost of goods sold is now exposed to tariffs. The remaining 20% of its grills are sourced from Vietnam, which could also become subject to tariffs following the expiration of the current 90-day suspension on July 9, 2025.
The company’s accessory segment, which accounts for about 26% of sales, is mostly sourced outside of China. This includes Traeger’s MEATER product line, sourced from Taiwan, which is subject to a 10% reciprocal tariff.
Despite showing resilience in grill sales, Traeger’s operating outlook remains uncertain. This uncertainty led the company to withdraw its full-year guidance and report its first-quarter 2025 results ended March 31, 2025. While the grills segment saw a year-over-year revenue increase of 13%, the consumables and accessories segments saw declines of 6.1% and 26.6% respectively.
Traeger is implementing mitigation strategies to manage working capital amid this uncertainty. These include cost reductions through supply chain renegotiations, limiting new hires, pricing, and sourcing diversification. The company aims to significantly reduce production reliance on China by 2026.
However, the negative outlook reflects the possibility of a ratings downgrade for Traeger over the next 12 months, if it cannot offset tariff-related margin pressure through cost reduction and pricing, or if the company’s liquidity becomes constrained.
A downgrade could occur if the EBITDA interest coverage ratio declines to 1.5x or lower, or if the company fails to extend the maturities of its working capital facilities. Conversely, the outlook could be revised to stable if tariff costs reduce over the coming quarters, or if the company successfully implements its mitigation strategies while maintaining better-than-expected sales.
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