By Clare O'Connor, Forbes Staff
It’ll come as no surprise to retail watchers that Barnes & Noble NE -0.3% is in trouble, with Amazon continuing its decimation of the brick and mortar book world. But it’s not the only main street stalwart limping into 2014 by any means.
Independent agency Rapid Ratings measures the financial health of companies using public filings, assessing their efficiency based on 62 weighted data points from profitability to cash flow.
Rapid’s year-end figures for 2013 show stores in every category, from apparel to electronics, facing a struggle going into the next quarter.
“What this measures, essentially, is how prepared these companies are to withstand a difficult season,” said James Gellert, Rapid’s CEO.
“The companies we’ve determined as weak or deteriorating should be on a closer watch list.”
Based on Rapid’s 0-100 point scale, these brick and mortar retailers are operating with the least efficiency and are considered “high risk” by the ratings firm.
In reverse order:
Burlington Coat Factory = 50
RadioShack = 30
Sears = 30
Barnes & Noble = 24
Aeropostale = 23
Gellert said that Aeropostale’s low score is indicative of a tough teen apparel segment, although its competitors — like Abercrombie & Fitch and American Eagle — scored ahead of the sector average. The former came in at 67, tied with Best Buy BBY +1.69% and Urban Outfitters, all of which have hovered around the mid-60s in Rapid’s ratings system for years.
Barnes & Noble is worse off than Aeropostale despite its marginally higher score, said Gellert. “We’ve seen abnormal items on its balance sheet for many quarters now,” he said. “They’ve struggled to maintain any kind of profitability. The company has to make changes to improve and, ultimately, to survive.”
The company measured as most efficient might surprise you, given its relatively low profile. Rapid rated the following retailers as the most healthy going into 2014, in ascending order:
Neiman Marcus = 68
American Eagle = 69
Macy’s = 74
Nordstrom = 76
TJX = 81
The top scorer, TJX, operates off-price mall staples T.J. Maxx, HomeGoods and Marshalls. “It’s consistently profitable,” said Gellert. “Cash flow coverage is really strong, and there’s a good return on capital employed.”
Gellert emphasized that Rapid’s scores are not tied to equity prices, and merely measure how efficiently each company is run. “There could be momentum trading, or a rumor in the market,” he said.
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