Toys R Us may sell global business
Baby goods business split in first stage of restructuring
Toy retailer Toys R Us is considering a sale of its worldwide chain of stores, and is separating its Babies R Us baby goods business in preparation for a split of the two chains.
The US-based company, which has been struggling with flagging sales in the face of fierce competition from retailers such as Wal-Mart and Target, has been conducting a strategic review of its operations for some months.
It was overtaken by Wal-Mart as the biggest US toy retailer several years ago, and the latest annoucement effectively hoists a ‘for sale’ sign over the Toys R Us chain, inviting offers from other retailers.
The company said that it will now start to separate ownership of the global toy and the US-only Babies R Us businesses, and that among the options is to explore “the possible sale of the global toy business as well as to prepare for a possible spin-off of Babies R Us”.
As a first step, the two businesses will operate as separate entities within the Toys R Us corporate structure.
The company is also looking for substantial cost savings in the toy business. This will initially see $150m in markdowns in the US to liquidate stocks. Store closures are also possible, but no decisions will be taken until after the Christmas trading period.
John Eyler, chairman and chief executive officer, said: “The series of steps we are announcing today reflect the fact that our global toy business and our Babies R Us business operate in distinct markets, and are at fundamentally different phases in their growth cycle. Consequently, by ultimately operating them as separate entities, we will provide a better opportunity for Babies R Us to continue its healthy growth.
“In addition, 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.”
[img r]babiesrussign.jpg[/img]Richard Markee, vice chairman of Toys R Us, has been appointed president of Babies R Us and will become CEO on separation. Markee, a founder of the Babies R Us business, said: “I am thrilled to be rejoining the Babies R Us team. Babies R Us is a vibrant, 200-store specialty retailer that has delivered strong growth since it opened in 1996 by delighting its guests with an industry-leading range of baby and juvenile products.
“Given this, we anticipate that it will thrive as a stand-alone entity by continuing to cater to the distinct buying behaviour of expectant and new parents, while growing and enhancing its store base and offerings across the US, as well as a number of new international markets.”
Toys R Us has 683 toy stores in the US and 579 international toy stores, including licensed and franchise outlets.
