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ReBoot
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O8th
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Armada
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Pretty soon, Toys "R" Us might NOT be one of those places to stop by for toys.
Quote:
Toys "R" Us Inc., battered by price wars from discounters, particularly Wal-Mart, is considering getting out of the toy business.
The nation's second-largest toy retailer behind Wal-Mart Stores Inc. announced plans Wednesday to restructure its toy business, but said it is considering selling the business outright as part of an effort to dramatically reduce operating and capital expenses.
The $11.6 billion company is also pursuing a possible spinoff of its fast-growing Babies "R" Us, whose 200 stores sell furniture, including cribs and bedding, as well as accessories. The company will begin operating the toy and baby business as separate entities in the meantime.
The Babies "R" Us division has been the company's growth vehicle, and has not been as vulnerable to discounters, Standard & Poor's credit analyst Diane Shand said in an S&P statement affirming its ratings on Toys "R" Us remained on CreditWatch with negative implications.
The company's U.S. toy division, however, has been inconsistent since the mid-1990s, when Wal-Mart ramped up its toy department as it also dramatically expanded the number of stores.
"Traditional toys have decreased in importance, as children are turning to video games, computer software, sporting goods, and music for entertainment at younger ages," Shand said.
Babies "R" Us, which represents 15 percent of the company's total revenues, posted sales of $1.76 billion, up nearly 11 percent, for the year ended Jan. 31. Meanwhile, the Toys "R" Us' U.S. revenues fell 4 percent to $6.48 billion. Toys "R" Us has 683 toy stores in the United States and 579 international toy stores. It also sells through its Internet sites.
The announcement "is extremely positive for investors, as one of the critical pieces to unlocking shareholder value in (Toys "R" Us) is separating its crown jewel, Babies "R" Us," said Mark Rowen, an analyst at Prudential Equity Group Inc.
Still, shares fell 27 cents to close at $16.15 on the New York Stock Exchange.
John Eyler, chairman and chief executive officer, said the global toy and Babies "R" Us businesses are at "fundamentally different phases in their growth cycle," and separation would give the baby business more opportunity to continue its healthy growth.
Company officials declined to elaborate on their plans.
Richard Hastings, an analyst with Bernard Sands, was critical of the plan and said the Toys "R" Us announcement "is not as transparent as we would prefer."
The big question is who would buy the toy business, given that the industry has been reduced to cutthroat price wars?
Hastings said a buyer, should one emerge, would be more likely to be a private equity investment than a public company, as happened with rival FAO Schwarz. He could not estimate a price.
"They seem to be throwing this up in the air to see where it lands," Hastings said. "This sounds like the aftermath of some very, very weak results."
Toys "R" Us said Wednesday it would delay releasing its second quarter 2004 earnings until Aug. 23. The figures were to be released Monday. In the first quarter, the company's profit declined 48 percent in its fourth fiscal quarter, which ended Jan. 31 and covered a disappointing holiday sales season. Disappointing results continued into the first quarter, with the retailer posting a wider-than-expected loss and lower sales.
Poor holiday 2003 results helped lead to the bankruptcies of FAO Schwarz and K-B Toys.
Toys "R" Us has been retrenching for much of the last year to improve its bottom line. In November, it said it would close 146 freestanding Kids "R" Us clothing chain and 36 Imaginarium specialty toy stores, which sold educational toys, cutting up to 3,800 U.S. jobs.
Regarding the latest plan, Eyler said, "whatever form the separation takes, these steps should facilitate the execution of a restructured — and substantially leaner and more focused — global toy business that we believe can generate significant cash."
Toys "R" Us said it planned to "substantially restructure" the company's Wayne headquarters, reducing operating expenses in the headquarters and U.S. toy business by more than $125 million by fiscal 2005 as compared to fiscal 2003.
Spokeswoman Susan McLaughlin declined to say if layoffs are contemplated. The company said it has recorded severance and other related charges of approximately $14 million which will be reflected in the second quarter results, and additional charges will occur in subsequent quarters.
The company had 65,000 employees at the end of January.
Toys "R" Us has hired Credit Suisse First Boston to advise it on any sale. The possible retreat comes after Toys "R" Us has spent millions to renovate its stores and sought exclusive rights to certain toys to differentiate itself from the discounters, whom it couldn't beat on price.
"How do you make a profit in a business where margins are so squeezed?" said New York-based independent toy consultant Chris Byrne. "Wal-Mart really has functioned as a category killer in this."
"Ironically, this is what Toys "R" Us was doing in the '60s and '70s, as they were trumping all the regional toy chains," Byrne said, citing Lionel Leisure and Kiddie City.
Byrne said buyers for the global toy business would be scarce, considering the company's real estate liability and debt.
Toys "R" Us said it was focusing on preparing its toy stores for the upcoming holiday season and did not expect to make a decision before then on any store closings.
"Customers should know that we will operate our toy business with renewed energy," Eyler said in the release.
Jim Silver, publisher of the Toy Book, a New York-based industry magazine, said Toys "R" Us said the restructuring could help the company's finances.
"They're looking to make things more profitable. I think that's why you're seeing that there are management changes, they are going to get to leaner and meaner," Silver said, speaking from Orlando, Fla. With store closing expected, he said the company "can be successful as a 500- or 600-store chain."
Eyler will continue in his role as chairman and CEO. Richard Markee, vice chairman of Toys "R" Us Inc., was named president of Babies "R" Us and will become its CEO and president once the companies separate. Toys "R" Us treasurer Jon Kimmins will become chief financial officer of Babies "R" Us, and John Barbour, currently president of Toys "R" Us International, will become president of U.S. toy stores, the company said.
i never shopped there anyway... they're way overpriced _________________ The problem with America is stupidity. I'm not saying there should be a capital punishment for stupidity, but why don't we just take the safety labels off of everything and let the problem solve itself?
Wed Aug 11, 2004 10:00 pm
AdmiralGreer
Joined: Nov 08, 2002
Post subject:
Last month I went to Toys R Us for the first time in... Years it must have been, to find army men (fireworks + army men + lake = good times)... They didn't have any. 'nuff said. _________________ Ice cream has this erotic sense to it- kinda like the one choclate and strawberries have.
-Me
Wed Aug 11, 2004 10:38 pm
JJc14
Joined: Nov 07, 2002
Post subject:
hmm...i remember buying a lot of video game-related stuff at the local toys "r" us, because in the early-to-mid-'90s, it was the only place my folks would shop that had a gaming department...usually they'd dump me there while shopping for my little sister and then come back for me when they were done...
my first issue of gamepro, original game boy and most of those titles, and sega genesis and half of those games came from toys "r" us, but by the late '90s, i stopped going there completely, as mall stores and outlets opened up closer, which combined with online shopping through ebay, phased out my dependance on the store...
i've maybe been there twice since 1997, so while i'm a bit saddened, i guess this news was inevitable... _________________ "Life's a journey, not a destination..." -Aerosmith ('Amazing')
Current RPG(s): (None)
Thu Aug 12, 2004 10:04 am
JohnnyPsycho
Joined: Nov 14, 2002
Post subject:
I still find myself going to Toys R Us every now and then if only because usually they have a larger action-figure section than any of the local dicount stores, so when I'm looking for a specific Ninja Turtles toy that I can't find at Target or Walmart or Meijer, I can usually find it at Toys R Us. Same usually goes with most newer McFarlane Toys.
Other than that, the only time I go to Toys R Us is to buy birthday or christmas gifts for my neices... _________________ "The principles you live by create the world you live in; if you change the principles you live by, you will change your world." -Blaine Lee
"I plan to live forever. So far so good." -Steven Wright
Thu Aug 12, 2004 2:21 pm
Andromaton
Joined: Nov 17, 2003
Post subject:
Toys R Us is generally reasonably priced when it comes to Action Fi... well just about everything. There was nothing I fealt was horrendously overpriced last dozen times I went in. Though that could be from my absolute refusal to step even one foot into a Walmart (I hate walmart and EVERYTHING it stands for, it is cheapening america).
I'd rather see Walmart decide "Hey, we're going to stop trying to be a monopoly and actually try to do something with quality and worth. Let's close down".
Thu Aug 12, 2004 4:32 pm
dougisfunny
Joined: Oct 29, 2002
Post subject:
i like target
oh... i did buy something from toys 'r us online... my gba sp bundle pack _________________ The problem with America is stupidity. I'm not saying there should be a capital punishment for stupidity, but why don't we just take the safety labels off of everything and let the problem solve itself?
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