It dropped 9% in comparable sales to $498.8 million and closed 16 stores last year while opening only one. Despite generating $12.2 billion in net revenue, Wayfair losses mounted in 2022 to $1.3 billion.Ĭasper went private after being acquired by Durational Capital Management in late 2021 and remains on edge, as does Kirkland’s Home. Wayfair came off a particularly troubling year, with net revenue down 10.9% and active customers dropping 19% year-over-year. stores, Mattress Firm is 50% owned by Australia-based Steinhoff International, which announced it withdrew registration for a Mattress Firm IPO earlier this year. Rapid Ratings FHR and CHS scores for home retailers Graph by Pamela Danziger In addition to Mattress Firm and Wayfair, at least four other home retailers may not have the resilience to adapt to the changing market dynamics. However, some 14 companies fall well under the industry averages in short and longer-term health and are on Rapid Ratings’ watch list for potential default. But since 2021, both the industry’s FHR and CHS scores have risen, from 57.3 and 49 respectively. Overall, the retailers included in Rapid Ratings’ database average an FHR score of 63.3, in the low-risk for default range, and a CHS score of 57.6, indicative of only medium health. And the CHS value is also weighted to industry-specific measures. Similarly, a CHS under 40 indicates poor underlying company health, with a CHS from 0 to 19 indicating very poor health. The Core Health Score (CHS) is a longer-term measure of a company's overall health, measuring efficiency and competitiveness from an operational and structural perspective. Based on over 25 years of data collection and analysis, 91% of companies that filed for bankruptcy had an FHR signaling high or very high risk. The Financial Health Rating (FHR) index, numbered from 0 to 100, provides a short-term view of a company’s estimated probability of default based on financial statements and leveraged against industry-specific models.Īn FHR score under 40 indicates a company is at high risk for default, with a score from 0 to 19 at very high risk. These two companies are weak in both quantitative measures Rapid Ratings developed. Mattress Firm and Wayfair are top on his list of retailers to watch, based on the company’s proprietary algorithm that provides two measures of a company’s financial health. “Healthy companies are in the best position to withstand a shock,” adding that his company’s ratings are measures of financial health and not credit ratings. “Financial corporate health is a good deal like physical health,” he explained. That’s when we’ll see an uptick in bankruptcies,” he continued. “On the edge are highly leveraged retailers with debt that can’t be refinanced and are doing poorly operationally. “I suspect that will be the story over the next 24 months,” James Gellert, chairman and CEO of Rapid Ratings International, a research and analytics firm that assesses the financial health of thousands of public and private companies worldwide, shared. Increasingly, the question isn’t if a recession occurs but when. “I don’t think it is going to be a bloodbath in retail, but if we are headed for a recession, that is when the snowball starts to go downhill and picks up speed,” he continued.
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