Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nyse  >  Wal-Mart Stores    WMT

SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets

5 Billion Reasons Toys 'R' Us Struggles as Amazon Soars

share with twitter share with LinkedIn share with facebook
share via e-mail
0
07/17/2017 | 09:44am CEST
By Miriam Gottfried 

Toys "R" Us Inc. will get a new website this summer as it struggles to compete online with its cash-rich rivals. The toy retailer, laden with $5 billion in debt, has spent $100 million over the past several years to help boost its online sales.

That won't stop the toy chain from falling further behind its rivals. Wal-Mart Stores Inc. bought Jet.com last August for $3.3 billion and since then has purchased three more online retailers. Target Corp. is investing billions to lower prices and improve online sales.

Toys "R" Us is one of many retailers fighting to keep up. High debt loads, increasingly nervous lenders and falling sales make it impossible to invest enough to compete online. And when companies do generate online sales, the margins are so tight that future investments are harder to make.

Macy's Inc. had $5.5 billion in net debt at the end of the first quarter. A year ago, it said it would improve its performance and use the cash to pay down debt. Instead, the retailer struggled and had to use nearly two-thirds of its free cash flow last year to pay off $750 million in maturing debt. It bought back more this year, further hurting its ability to fund plans to revive sales, including improving its mobile app and expanding its off-price concept Backstage to more stores.

Worries that borrowing will become more expensive or won't be there at all have prompted some relatively healthy companies to focus on paying down their debt, which further limits the amount they can invest.

Retailers sold just four high-yield bonds this year worth $2.8 billion, compared with seven bonds worth $5.7 billion last year. That is down from a 20-year peak of 28 bonds totaling $10.7 billion in 2013, according to Dealogic. The amount of retail bank and bond debt rated by Moody's is up 65% since 2007.

Toys "R" Us and other struggling chains can likely survive for years, but they will constantly struggle to catch up with the competition while still turning a profit. During holiday 2015, the toy retailer had to resort to "sales prevention" by halting some online deals after a deluge of web orders overwhelmed its ability to get products to customers in time for Christmas. The company had planned to launch its new website ahead of Christmas 2016 but was forced to delay it to fully test the new platform.

On a conference call with analysts June 15, Chief Executive David Brandon said a clunky online registry tool and the lack of a subscription feature for parents to receive regular shipments of diapers and other products were holding back Toys "R" Us's baby business.

"It's just one of a number of examples where we're limited in terms of how we can compete until we transition over to our new website," Mr. Brandon said.

Meanwhile, Amazon.com Inc. sold an estimated $4 billion worth of toys last year, more than a third of what Toys "R" Us sells, according to analytics firm One Click Retail. Amazon's toy sales were up 24%, compared with 5% for the overall market and five years of declines for Toys "R" Us.

For big retail chains, one of the few levers left to pull are store closures. "We're in a period where we're going to see indefinite top-line and gross-margin declines until there have been enough store closures," said Jenna Giannelli, a retail credit analyst at Citigroup. Store closures will likely continue for the next five years or so as leases expire, she said.

Toys "R" Us, which was taken private in 2005 in a $6.6 billion leveraged buyout by Bain Capital, KKR & Co. and Vornado Realty Trust, has swapped debt coming due this year and next for longer-term debt with a higher interest rate. Analysts expect it to do the same with another $400 million bond due next year, but that could be tough. On June 20, S&P Global Ratings lowered its outlook for the retailer, saying that if markets are nervous or the company's business gets worse, it might not be able to pay off that bond when it comes due.

Toys "R" Us declined to comment.

Macy's has been forced to rethink its strategy in other ways. In March 2015, Chief Financial Officer Karen Hoguet said the company "liked having control of our real estate." That November, Macy's announced it was exploring joint ventures for its four flagship properties. In 2016, it sold its men's store in San Francisco's Union Square, reached an agreement to sell its downtown Minneapolis store and began work on a plan to shrink its store on Chicago's State Street to make way for a buyer or joint-venture partner.

When Macy's laid out plans at its investor day June 6 for a revamped marketing strategy and greater focus on exclusive products, it warned that its 2017 gross-margin rate could be weaker than it had expected in February. The company cited excess inventory and bigger discounting in the beauty business. As recently as November 2016, Macy's was touting lower inventory levels.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com

Corrections & Amplifiations

This article was corrected July 18, 2017 at 3:19 p.m. ET because the original version incorrectly stated that Macy's held its investor day event two weeks ago instead of June 6th.

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on WAL-MART STORES
12:42a Asda eyeing 4.4 bln stg bid for B&M - Sunday Times
07/22 WAL MART STORES : Bewildered Boomer
07/22 WAL MART STORES : Love Bites by Carnie to host Aug. 26 opening with appearance b..
07/22 WAL MART STORES : Encore Plastics wins big contract from Walmart
07/22 WAL MART STORES : Update on Ongoing Measles Investigation in Sedgwick County
07/22 WAL MART STORES : Burley moves forward with eminent domain process
07/22 WAL MART STORES : Coming Up
07/22 WAL MART STORES : Leave the dog home
07/22 WAL MART STORES : Frederick biscuit company's products to be sold at Wal-Mart
07/22 Democrats in U.S. Congress urge review of Amazon's Whole Foods deal
More news
News from SeekingAlpha
07/21 BED & BATH BEYOND : A No Brainer, Management Optionality Undervalued
07/21 INSIDE MY PORTFOLIO : What I Hold And Why
07/21 Vanguard Prepares To Destroy The S&P 500 Again
07/21 Dividend Champion On Clearance Rack And In My Portfolio
07/21 Plug Power up 14% on new Wal-Mart deal
Financials ($)
Sales 2018 495 097 M
EBIT 2018 22 469 M
Net income 2018 13 160 M
Debt 2018 39 415 M
Yield 2018 2,72%
P/E ratio 2018 17,43
P/E ratio 2019 16,49
EV / Sales 2018 0,55x
EV / Sales 2019 0,53x
Capitalization 230 853 M
Chart WAL-MART STORES
Duration : Period :
Wal-Mart Stores Technical Analysis Chart | WMT | US9311421039 | 4-Traders
Technical analysis trends WAL-MART STORES
Short TermMid-TermLong Term
TrendsBearishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 31
Average target price 80,2 $
Spread / Average Target 5,3%
EPS Revisions
Managers
NameTitle
C. Douglas McMillon Chief Executive Officer & Director
John Furner President
Gregory B. Penner Non-Executive Chairman
Michael J. Bender Chief Operating Officer-Global eCommerce
Brett M. Biggs Chief Financial Officer & Executive Vice President
Sector and Competitors
1st jan.Capitalization (M$)
WAL-MART STORES10.17%230 853
ALIMENTATION COUCHE TARD INC-1.42%27 518
CARREFOUR-8.30%18 958
WHOLE FOODS MARKET, INC.35.60%13 329
DAIRY FARM INTERNATIONAL HOLDINGS LTD15.54%11 063
YONGHUI SUPERSTORES CO., LTD36.25%9 661