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Highlights

  • TOY shares are down nearly 82% in one year.
  • For the half-year ended 31 January 2023, revenues of the company declined by 4.6% to AUD 22.3 million compared to AUD 23.4 million in pcp.
  • The company has adopted several cost reduction strategies, and it expects to save nearly AUD 4 million in the calendar year 2023.

Shares of Toys "R" Us ANZ (ASX: TOY), a direct-to-consumer retailer of toys, hobby and lifestyle products, ended 5.88% higher at AUD 0.018 per share on Friday, 5 May 2023. With today's gains, this penny stock's one-week gains rose to 38.46%. But despite this gain, TOY shares are down nearly 82% in one year. Let's scan through this toy retailer's fundamentals to assess its path to profitability.

TOY Financial Performance

For the half-year ended 31 January 2023, revenues of the company declined by 4.6% to AUD 22.3 million compared to AUD 23.4 million in pcp. The revenue drop was because of its business-to-business wholesale unit, whose revenue fell by nearly 28% in the reporting period. However, this revenue drop was partially offset by a 5.7% increase in the company's business-to-consumer unit revenue as TOY expanded into the United Kingdom during the seasonally strong trading period.

Its EBITDA was negative AUD 6.7 million in 1HFY23 compared to negative AUD 3.8 million in 1HFY22. The company said the EBITDA loss was because of several non-recurring items because of the one-time costs associated with the setup in the UK, consolidation of Australian operations into the Clayton distribution facility, and expansion of the AMR storage capabilities.

TOY’s Path to Profitability

The company has adopted several cost reduction strategies, and it expects to save nearly AUD 4 million in costs in the calendar year 2023. To turn profitable, the company is taking a few other steps that include investment in deeper Australia and UK retail and e-commerce leadership, improvement in Australia and UK margin and marketing support from its suppliers, board renewal to deliver deeper sector and international market, governance and fund-raising capabilities. Other than the ones mentioned above, TOY is also focusing on brand building, increasing the visibility and awareness of Toys"R"Us in licensed territories.

TOY Price Chart

On the daily chart, TOY share price is sustaining above the horizontal trendline support zone. Meanwhile, the momentum oscillator RSI (14-period) shows a reading of ~57.03, indicating chances of further upside in the stock. Also, the stock is trading above the trend-following indicators 21-period SMA, which may act as a support zone for TOY shares.

 

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, is 6 May 2023. The reference data in this report has been partly sourced from REFINITIV.