EyeInTheSky
Veteran
Game over for Toys "R" Us?
Crippled by big discounters
By SOO YOUN
DAILY NEWS BUSINESS WRITER
Retailer plans to keep all its local stores open through the holidays.
Toys "R" Us may not be with us much longer.
That's what the retailer said yesterday as it warned that it might sell off its global toy business.
The troubled chain reported declining sales and a loss of $28 million in its latest quarter.
Toys "R" Us, which itself drove to the edge such staples of the business as FAO Schwartz, thus becomes the latest victim of discounters like Wal-Mart and Target.
"Wal-Mart has, for the last few seasons, used toys as a loss leader, which means undercutting everyone on price to bring in traffic. At times that has meant selling toys below cost," said independent toy analyst Chris Byrne, who added that last year Wal-Mart began cutting prices on Christmas toys in October.
"Target has also done that. They can afford to lose money on toys because they make it up in nail polish and soap," Byrne said. "Ironically, in the '60s and '70s that is what Toys 'R' Us was blamed for doing."
That is precisely what sent FAO Schwartz into bankruptcy, though its flagship Fifth Avenue store will reopen under new ownership later this year.
Meanwhile, Toys "R" Us said it will keep its New York stores open through the holidays this year and is exploring all options. Analysts also said other retailers could be interested in the chain's real estate, especially here.
For the moment, the retailer will continue its troubled partnership with Amazon.com which sells toys on its Web site through the company, though a hearing is scheduled for today on lawsuits filed by both sides seeking to redefine the accord.
Toys "R" also said yesterday that it plans to separate its ailing toy business from its successful Babies "R" Us franchise.
The move "will provide a better opportunity for Babies "R" Us to continue its healthy growth" as the largest baby product store in the world, said Toys CEO John Eyler.
The news at first sent Toys "R" Us shares diving more than 6% before they recovered to end down 27 cents at $16.15.
Toys "R" also said yesterday it would slash expenses by more than $125 million in the next 18 months at its Wayne, N.J., headquarters.
Analysts said the company may cut as much as 20% of its global workforce. During the peak holiday season, it employs about 135,000 people globally, and about 65,000 year-round.
Still, the problem for toy retailers is not the holiday season, but the rest of the year where it loses customers to the mass retailers. In addition, manufacturers are selling toys through nontraditional venues like Best Buy or Bed Bath & Beyond.
"If you don't need a birthday or holiday gift, why would you go there?" asked Jim Silver, publisher of industry bible Toy Books. "How do you draw people in? This year is the first time they are addressing that, offering haircuts, portrait studios and now for the first time, Toys 'R' Us will have Santa Claus."
Originally published on August 12, 2004
Wow, take the word "toys" out and put in "airline" and gee it sounds like US Airways. Except, our "Santa" is named Seth?
Crippled by big discounters
By SOO YOUN
DAILY NEWS BUSINESS WRITER
Retailer plans to keep all its local stores open through the holidays.
Toys "R" Us may not be with us much longer.
That's what the retailer said yesterday as it warned that it might sell off its global toy business.
The troubled chain reported declining sales and a loss of $28 million in its latest quarter.
Toys "R" Us, which itself drove to the edge such staples of the business as FAO Schwartz, thus becomes the latest victim of discounters like Wal-Mart and Target.
"Wal-Mart has, for the last few seasons, used toys as a loss leader, which means undercutting everyone on price to bring in traffic. At times that has meant selling toys below cost," said independent toy analyst Chris Byrne, who added that last year Wal-Mart began cutting prices on Christmas toys in October.
"Target has also done that. They can afford to lose money on toys because they make it up in nail polish and soap," Byrne said. "Ironically, in the '60s and '70s that is what Toys 'R' Us was blamed for doing."
That is precisely what sent FAO Schwartz into bankruptcy, though its flagship Fifth Avenue store will reopen under new ownership later this year.
Meanwhile, Toys "R" Us said it will keep its New York stores open through the holidays this year and is exploring all options. Analysts also said other retailers could be interested in the chain's real estate, especially here.
For the moment, the retailer will continue its troubled partnership with Amazon.com which sells toys on its Web site through the company, though a hearing is scheduled for today on lawsuits filed by both sides seeking to redefine the accord.
Toys "R" also said yesterday that it plans to separate its ailing toy business from its successful Babies "R" Us franchise.
The move "will provide a better opportunity for Babies "R" Us to continue its healthy growth" as the largest baby product store in the world, said Toys CEO John Eyler.
The news at first sent Toys "R" Us shares diving more than 6% before they recovered to end down 27 cents at $16.15.
Toys "R" also said yesterday it would slash expenses by more than $125 million in the next 18 months at its Wayne, N.J., headquarters.
Analysts said the company may cut as much as 20% of its global workforce. During the peak holiday season, it employs about 135,000 people globally, and about 65,000 year-round.
Still, the problem for toy retailers is not the holiday season, but the rest of the year where it loses customers to the mass retailers. In addition, manufacturers are selling toys through nontraditional venues like Best Buy or Bed Bath & Beyond.
"If you don't need a birthday or holiday gift, why would you go there?" asked Jim Silver, publisher of industry bible Toy Books. "How do you draw people in? This year is the first time they are addressing that, offering haircuts, portrait studios and now for the first time, Toys 'R' Us will have Santa Claus."
Originally published on August 12, 2004
Wow, take the word "toys" out and put in "airline" and gee it sounds like US Airways. Except, our "Santa" is named Seth?
