S&P Global Lowers KinderCare Outlook to Negative on Enrollment Concerns

S&P Global Ratings has revised its outlook on KinderCare Learning Cos. Inc. to negative from stable, citing concerns that declining enrollment will pressure profitability and push the company's debt leverage beyond a key threshold. The ratings agency affirmed its ‘B+’ issuer credit rating for the childcare provider.

Leverage Expected to Rise

The primary driver for the outlook change is the expectation that KinderCare's lease-adjusted leverage will increase above its 5.0x downgrade trigger in 2026. According to S&P, leverage stood at 4.7x in the second quarter but is projected to climb into the low-5.0x range by the end of the year.

This anticipated rise stems from a combination of lower center utilization, costs related to a footprint optimization program, and what the agency described as temporary industry-wide headwinds. S&P now forecasts a low-single-digit percent decline in revenue for KinderCare in 2026, with profit margins contracting to approximately 19%.

Enrollment Pressures and Restructuring

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S&P highlighted that enrollment softness is expected to materially affect KinderCare’s 2026 EBITDA. The company’s same-center utilization was approximately 69% in the second quarter, and the ratings agency anticipates this figure will continue to fall, reaching about 65% by year-end. S&P noted that utilization levels below 70% erode a company's operating leverage and profitability.

In response, KinderCare is accelerating the closure of underperforming locations. The company plans to close 80-85 centers in 2026, a significant increase from its historical rate of about 20 closures per year. While this is part of a longer-term optimization strategy, S&P expects the closures to weigh on revenue and EBITDA in the short term.

The negative outlook indicates that S&P could downgrade KinderCare's credit rating if weak enrollment trends persist and keep adjusted leverage above the 5.0x threshold. The agency anticipates that management, under the 69% ownership of Partners Group, will prioritize deleveraging in the coming quarters.