Circuit City, once a well-known retail fixture, is no more. If it can't survive this holiday season's impending price war, bookseller Borders
Wal-Mart Stores
Even beyond that dire outlook, Borders must confront serious financial challenges. Check out how its key metrics stack up against those of some of its book-selling rivals:
Company Name |
TTM Revenue Growth/(Loss) |
TTM Profit/(Loss) |
Debt/Equity Ratio |
Quick Ratio |
---|---|---|---|---|
Borders |
(13.2%) |
($4.60) |
210% |
0.1 |
Barnes & Noble |
(5.1%) |
$1.28 |
0% |
0.2 |
Wal-Mart |
1.8% |
$3.41 |
67.5% |
0.2 |
Amazon |
19.6% |
$1.70 |
3.2% |
1.0 |
All data from Capital IQ, a unit of Standard & Poor's. TTM = trailing 12 months.
Borders clearly still shows a nauseating loss, with revenue dropping at a daunting pace. Although Barnes & Noble also seems risky at present, at least it's still profitable, despite its own decreasing sales.
Borders' formidable debt load has been a major risk for a long time. The ruthless price wars this holiday season portends could make paying down that debt even more difficult. A quick ratio below 1.0 can be a red flag, particularly if a company's sales and profit margins are suffering mightily, and especially if it may have to deeply discount prices to clear out its inventories. For a very strong retailer like Wal-Mart, with a laser-focused supply chain, a low quick ratio is no problem. For Borders, it could be serious trouble. And if its major shareholder, Pershing Capital Management, withdraws its ongoing support, Borders' life could get even rougher.
In October 2008, I outlined three retailers I thought we might have to kiss goodbye. One was Circuit City. Borders and Talbots
With unemployment at a multidecade high, and even employed consumers likely wanting to save money or pay down debt, this holiday season could be difficult for retailers.
On a more positive note, the chart data above might make you a bit jealous of Amazon shareholders. At a staggering 76 times earnings, the stock is admittedly pricey, even for the tech sector; fellow heavyweight Apple