Analyst: Trans World “headed, sooner or later, for bankruptcy”

Chicago analysis firm Morningstar released a report today naming five publicly-traded companies — in
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Trans World Entertainment President and Chief Executive Officer Robert Higgins has been called the “last man standing” in the specialty retail music industry, but an independent investment research firm is predicting he might have to take a seat soon.

Chicago analysis firm Morningstar released a report today naming five publicly-traded companies — including Trans World in Guilderland — it believes “are headed, sooner or later, for bankruptcy court.”

Morningstar largely based that outlook, which a Trans World executive refuted, on an August report by analyst Joseph Beaulieu titled, “We don’t think Trans World will be around five years from now.”

Morningstar’s bankruptcy forecast came as retailers are bracing for a dismal holiday shopping season and days before Trans World posts its third quarter results on Nov. 20. Although Beaulieu noted the retailer’s balance sheets are strong enough to enable it to “continue to limp along indefinitely,” he added its business model “is quickly becoming obsolete” and management does not have “a credible plan to change.”

“In it’s current form, Trans World is a no-moat company with minimal prospects of generating solid sales and earnings growth. The firm isn’t even close to earning its cost of capital and is destroying shareholder value. We don’t think that this firm will exist in its current form five years from now,” Beaulieu said in the report.

Trans World Senior Vice President and Chief Executive Officer John Sullivan said the company is not bankruptcy bound and stressed how even the Morningstar report highlights the retailer’s strong balance sheet.

“We’re focused on that. When a company is going through tough times, it’s critical to manage the sheets,” Sullivan said.

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