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 [email protected]

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
02:39p WAL MART STORES : Delta Recalls Strollers Due to Fall Hazard
02:39p WAL MART STORES : Anderson Recognized By Mass Market Retailers Magazine
02:37p WAL MART STORES : Lee County School District Accepting Donations for Students an..
02:02p WAL MART STORES : Coveris UK Adopts X-Rite ColorCert and eXact Scan as Label Man..
12:51p WAL MART STORES : 5 ways to create 'remarkable experiences'
11:30a WAL MART STORES : Target to raise minimum wage to $15
10:06a SUPERMAX BERHAD : Water and some food scarce as Puerto Rico emerges from storm
09:31a WAL MART STORES : American Legion donates to hurricane relief effort American Le..
12:54a MACY : Employers preparing to compete for seasonal workers as holidays approach
09/25 WAL MART STORES : State rests case in Lookout Valley murder trial
More news
News from SeekingAlpha
09/25 Does Amazon Plus Kohl's Equal Retail's Future?
09/25 The Rise (And Stall) Of Amazon
09/25 COSTCO'S HIDDEN UPSIDE : Wal-Mart Vs. Amazon
09/25 WAL-MART VS. TARGET : Survival Of The Fittest?
09/22 KROGER : Addressing The Implosion
Financials ($)
Sales 2018 496 B
EBIT 2018 22 726 M
Net income 2018 13 002 M
Debt 2018 39 608 M
Yield 2018 2,58%
P/E ratio 2018 18,49
P/E ratio 2019 17,11
EV / Sales 2018 0,56x
EV / Sales 2019 0,54x
Capitalization 236 B
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
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 33
Average target price 82,2 $
Spread / Average Target 3,9%
EPS Revisions
Managers
NameTitle
C. Douglas McMillon Chief Executive Officer & Director
John Furner President
Gregory B. Penner Non-Executive Chairman
Brett M. Biggs Chief Financial Officer & Executive Vice President
Jeremy King Chief Technology Officer & Executive VP
Sector and Competitors
1st jan.Capitalization (M$)
WAL-MART STORES15.76%236 437
ALIMENTATION COUCHE TARD INC-2.54%27 380
CARREFOUR-27.72%15 283
YONGHUI SUPERSTORES CO., LTD58.25%11 113
DAIRY FARM INTERNATIONAL HOLDINGS LTD4.94%10 049
AVENUE SUPERMARTS LTD0.00%9 831