satyr

Retail Firms at Risk for Bankruptcy

As has been noted in many other places and on various blogs, Audit Integrity's approach to analysis appears to lack... integrity. Nobody knows quite for sure how they arrived at their list, other than some reference to "fundamental analysis". Uh huh. What investors would do well to do is to take the time to look at individual financial statements for these companies and draw their own conclusions.

One company on the list that I follow closely is RAD. They have no major debt coming due this or next year, and have net positive cash flow. In fact, they have announced that they will begin reducing debt beginning February 2010. How that translates to BK is beyond comprehension. As Chris Rodriquez notes, they do have real estate on the market. But, when you have around 5,000 locations, it is not unusual to be shifting footprint, as well as closing under performing stores while newer, better located stores are opened. This is part of an ongoing and well-documented effort by RAD management.

Quickly, regarding LilBob's comments about RAD pricing - while I can believe that they are selling items for 10% or 20% more than other stores, you do have to remember to compare apples to apples. 7-11 gets a lot for a can of tuna when compared to Wal-mart. But, when you want to stop make a quick purchase, it is still worth it. Most of the front-end product in drugstores is more about impulse and convenience than trying to compete with large grocers and discounters. If you compare RAD prices to Walgreen or CVS, I think you will find them to be similar. But don't take my word for it. Independent research has proven this out. In an individual market this may or may not be true. However, none of us can visit 15,000 stores to determine the true mean, so we rely on independent samples to tell us the story.

As for the rest of the list, I have no specific opinion, other than to say that the outfit that produced it does not have a good track record.