BABIES “R” US

Babies “R” Us

Table of Content

Contents

Introduction3

Horizontal Analysis4

Trends Noted4

Changes Noted5

Possible explanations for trends and changes and likely impact5

Vertical Analysis5

Trends Noted5

Notable Changes6

Potential explanations for trends and changes and likely impact6

Ratio Analysis with interpretative points6

a. Current Ratio6

b. Quick Ratio7

Net Working Capital8

Networking Capital Ratio8

Debt to Equity Ratio9

Times Interest Earned Ratio (Interest Coverage Ratio)9

Break even Analysis9

Unethical Practices10

Conclusion10

Appendices13

Babies “R” Us

Introduction

In order to provide one destination to parents for buying, Toys “R” Us has merged itself with Babies “R” Us through a bid. They have almost 25 stores all over providing full size toy and baby stores under one roof. Baby “R” Us is a private toys company that works as a retailer of toys, baby products and children's apparel. The main operations of the company are in Australia, US, France, Austria, Japan, Canada, Spain, Portugal, Switzerland and UK. The head quarter of the company is located in Wayne, New Jersey and it has almost 68,000 employees (Altman 1968).

Babies "R" Us (BRU or "the company")) is a privately held retailer of toys, baby products and children's apparels. The company's key products and services include the following products: Assortment of toys, games Baby products, Children's apparel, Computer software, DVDs, Electronics, Juvenile furniture, Products for newborns and infants Sporting goods, Video game hardware and software. The company is the largest specialty toy retailer in its key domestic market, and the company's retail network and product portfolio has positioned it as a formidable player. However, the cyclical nature of the video games market has been impacting the revenues adversely, and trends in the market suggest a decline which will be detrimental for BRU. Apart from opening stores owned and operated by the company also franchises and licenses to foray into new markets. Franchising will help BRU to take advantage of the local expertise coupled with the company's scale, and long standing experience in the toy market to establish string network of retail stores. The company can penetrate new markets easily with low investments. Franchises and licenses help in building a global brand in a way that is capital light and low-risk (Market data & stock price 2005).

Babies “R” Us Stock Chart

Horizontal Analysis

Horizontal analysis of the company's financial is calculated by measuring the difference between the two years financial data.

Trends Noted

In order to measure the horizontal analysis of the company, data from 2009 and 2010 balance sheet and income statement has been calculated. The revenue of Babies “R” Us is $13,568 in January 2010, this revenue has decreased by 11.1% compared to 2009. The decrease in net sales has also been noticed and the main reason behind this decrease is the decrease in the demand of video game systems, and other related accessories. The operating profit of Babies “R” Us has also increased by 26.2% from 2009 to 2010 and reached $784 million (Millichamp 1990). The increase in net profit by 26.2% has also been noticed from 2009 to 2010 and reached $312 million.

Changes Noted

From 2009 to 2010, there have been some noticeable changes in the company's balance sheet ...