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Retail- highest risk
Tuesday, July 06, 2010
  |  
Tags: Retail news   

 

Rite Aid
Altman Z-Score, Trailing 12 Months: 2.18
Altman Z-Score 2009: 2.18
 
Rite Aid -- a legitimately troubled company -- hasn't been profitable for several years, and last week the drugstore reported yet another loss in its first-quarter of $73.7 million, or 9 cents a share.
 
Much of Rite Aid's woes come from its acquisition of Brooks/Eckerd back in 2007, which has been a drag on the company.
 
The drugstore is also being beat out by rivals CVS Caremark(CVS) and Walgreen(WAG), which are better capitalized. Discount behemoth Wal-Mart(WMT) is also poised to take market share, as it looks to grow its pharmacy business.
 
Chatter surfaced earlier in the year that Rite Aid may be a takeover target for one of these companies.
 
Cost Plus
Altman Z-Score, Trailing 12 Months: 2.15
Altman Z-Score 2009: 1.76
 
Cost Plus, a home decorating retailer, significantly narrowed its first-quarter loss, as it cut it expenses and saw a slight uptick in sales.
 
During the quarter, the company lost $10.3 million, or 47 cents a share, compared with a loss of $41.6 million, or $1.88, in the year-ago period. Revenue edged up 3% to $182.9 million, while same-store sales climbed 5.6%.
 
Looking ahead, Cost Plus forecasts second-quarter sales between $189 million and $192 million, and same-store sales growth in the range of 5% to 7%.
 
Zale
Altman Z-Score, Trailing 12 Months: 2.08
Altman Z-Score 2009: 2.11
 
Zale is definitely one of the riskier retailers, as it continues to see its Z-Score decline to 2.08 from 2.11 last year.
 
The jeweler has been seeking financing to repay its debt, and last month closed on a much needed $150 million, five-year loan with Golden Gate Capital. The private-equity firm will receive warrants that, if executed, would give it a 25% stake in Zale.
 
Zale has also made headlines for its credit-card deal with Citibank. The company finally made a $5.3 million partial payment to the bank after months of deciding whether or not it would repay its more than $1 million fine, which it incurred due to a shortfall in the minimum volume of credit sales.
 
The company has seen a 13% drop in sales and a loss of $155 million over the past 12 months. As a result, shares of Zale have plunged nearly 40% over the past year, currently trading at $1.63.
 
Quiksilver
Altman Z-Score, Trailing 12 Months: 1.95
Altman Z-Score 2009: 1.52
 
Clothing retailer Quiksilver narrowly clears the bankruptcy-danger zone, with a Z-Score of 1.95.
 
Earlier in the month, Quiksilver said it reached an agreement with private equity firm Rhone that would allow Quiksilver to swap 16.7 million shares in exchange for $75 million in debt. The stock would be priced at $4.50 per share. The deal also includes an option to require Rhone to swap another $65 million in debt for more stock.
 
In its second quarter, Quiksilver reported a surge in profit to $9.4 million, or 7 cents a share, from $2.8 million, or 2 cents, in the same period last year. Revenue dropped 5% to $468.3 million.
 
Quiksilver also lowered its debt by $201 million over the past year, ending the first quarter with $744 million outstanding.
 
Borders
Altman Z-Score, Trailing 12 Months: 1.67
Altman Z-Score 2009: 1.67
 
Borders is one of three retailers deemed most likely to file for bankruptcy over the next two years, with a disconcertin Z-Score of 1.67.
 
Borders has been struggling to remain relevant as the digitalized book market grows, with first-quarter revenue falling 16% to $547.2 million.
 
Wall Street has worried that Borders was slow to react to the e-reader trend, lagging behind Barnes & Noble and Amazon in launching a device and electronic bookstore. The company said in the beginning of June that it was on track to launch its own e-bookstore by the end of the month, but that plan has yet to bear fruit.
 
The company's upper management ranks have also been in disarray. Chief Financial Officer Mark Bierley took on the additional role of chief operating officer; Bennett LeBow, chairman and largest shareholder, was named chief executive; and Mike Edwards was appointed CEO of the company.
 
Bluefly
Altman Z-Score, Trailing 12 Months: .31
Altman Z-Score 2009: -1.64
 
Bluefly, an online high-end apparel and accessories retailer, has been struggling to achieve profitability since it was founded in 1977, suffering nine consecutively quarterly losses. Since 2007, it has seen its stock fall nearly 40% a year.
 
Still, the company is at least moving in the right direction, as its Z-Score improved to .31 from a horrific -1.64 in 2009.
 
Management has been able to repay its debt and currently has $14 million in cash on its balance sheet. In its first quarter, Bluefly narrowed its loss to $1.5 million, or 7 cents a share, from a loss of $3.1 million, or 23 cents, in the year prior. Revenue inched up 1.7% to $20 million.
 
Blockbuster
Altman Z-Score, Trailing 12 Months: -4.64
Altman Z-Score 2009: -3.6
 
Unsurprisingly, Blockbuster has the most depressed Z-Score at of all the retailers tracked by TheStreet. The beleaguered movie rental retailer has been struggling for some time, as Coinstar's Redbox and Netflix continue to steal its market share.
 
Blockbuster is currently in the process of negotiating with bond holders to restructure its nearly $1 billion in debt. Earlier in the year, CEO James Keyes said that if the company did not shore up enough cash, it might be forced to file for bankruptcy.
 
Blockbuster's annual meeting last week did little to calm investors' fears. After being delayed for 30 days, Keyes still had nothing knew to report in regards to the future of the company.
 
While the company was able to regain compliance on the New York Stock Exchange after being warned of a potential delisting, the stock is currently trading at 23.8 cents, well below its 52-week high of $1.56.
T
Jul 6, 2010 / 4:52 PM
Interesting Blog

 
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