Amazon.com Inc continues its aggressive expansion into all things consumer and tech, as the ecommerce giant threatens to put long-time toy maker Toys R Us Inc. out of business.
While the Seattle-based online retailer saw its toy segment sales jump an impressive 24% versus just 5% for the overall market, once-market-leader Toys R Us has posted a disappointing five years of decline.
Wal-Mart, Target Step Up Digital Game
The Wayne, N.J.-based retailer’s $5 billion debt load, alongside its rapidly decelerating sales, have made it extremely hard for Toys R Us to invest enough to compete on the booming digital front. At the same time, cash-rich rivals such as Wal-Mart Stores Inc. (WMT
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With so much debt on its hands, Toys R Us faces increasingly cautious lenders. Further, tighter margins online make investments harder to justify. Investors worry Toys R Us could slip down the same slope as Macy’s Inc.
The Cost of Debt
The Wall Street Journal notes that while struggling chains can likely survive for years, their options have been significantly cut as they focus on paying off debt. As a result, Toys R Us and its beaten-down brick-and-mortar peers will likely lag behind their competitors.
In June, S&P Global Ratings lowered its outlook for the retailer, warning that it might not be able to pay off a new high interest, longer-term debt that it swapped for an existing one earlier this year.
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Date:July 17, 2017