News Feature | September 18, 2013

Toys "R" Us Kids Have Grown Up And They Aren't Buying Toys

By Sam Lewis, associate editor
Follow Me On Twitter @TheSJLewis

Losing Money

Toy retailer triples losses in second quarter

It seems famous toy retailer Toys “R” Us has taken steps to revamp its stores, reinvent its customer experience, and ultimately revive sales prior to the holiday season, which account for up to 40 percent of any given retailer’s annual revenue. However, the announcement of the new initiatives was quickly followed by enormously disappointing second-quarter results for the toy store.

The Wayne, NJ-based retailer’s loss for the quarter ending August 3 came to $113 million, more than tripling the $36 million loss it suffered in the same time frame last year. Toys “R” Us saw revenue fall seven percent to $2.38 billion, from $2.55 billion in 2012. Stores open for at least one year, a key barometer regarding a retailer’s financial health, dropped three and a half percent in the U.S. and almost four percent internationally.  Adjusted earnings before interest also took a huge hit, dropping 45 percent to $81 million, down from $148 million for the second-quarter of 2012. Toys “R” Us chalks the devastating numbers up to cautious consumer spending, accompanied by a lengthy lull in video game sales. Most peculiarly, these declining numbers haven’t stopped Toys “R” Us’ plans to open 100+ stores domestically and internationally by 2013’s end, a plan most likely created by former CEO Jerry Storch.

In February, Storch announced his resignation from the company, which ultimately led the retailer to withdraw its planned IPO. The interim CEO, Antonio Urcelay, has inherited quite the turnaround project, which he says he is “intensely focused” upon. “We believe that the initiatives we have recently announced in the U.S., including an enhanced Price Match Guarantee and a comprehensive suite of programs to encourage early buying, in combination with our expertise in the identification and ownership of the hottest toys, will strongly appeal to consumers as they develop their holiday shopping lists,” he says.

Toys “R” Us faces tough competition in the form of online stores and discount retailers, which have dominated the toy market for some time now. New omni-channel efforts, store-in-store models, price matching, free layaway, accompanied with early holiday shopping incentives for loyalty shoppers aim to position the toy retailer for success during the holiday season. These endeavors could also allow Toys “R” Us to take back some control in the toy market that it once dominated. The company is putting forth these many efforts in order to avoid the fate suffered by former rivals Children’s Palace, Zany Brainy, and K-B Toys.