Kids rule the aisles while parents tag along for the ride at
Toys "R" Us. The company is one of the world's largest toy
retailers despite losing its top position in the US to retailing
behemoth Wal-Mart . Toys "R" Us sells its wares in more than 1,690
retail and 255 licensed stores worldwide, as well as online. Of its
880 Toys "R" Us and Babies "R" Us stores in the US and Puerto Rico,
the retailer operates nearly 225 juvenile stores and more than 210
side-by-side stores, which sell both toys and juvenile products. It
also runs over 125 smaller Express stores for seasonal times. Toys
"R" Us is privately held by investment firms KKR and Bain Capital
and real estate firm Vornado Realty Trust.
Toys "R" Us operates two business segments: Toys "R" Us Domestic
and Toys "R" Us International.
Its Domestic segment, which generates 60% of the company's total
revenue, sells five categories of products: core toy, juvenile
(including baby), learning, entertainment, and seasonal. The
segment has stores in 49 US states, as well as Puerto Rico and
Guam. The company's International segment (40% of revenue) peddles
the same product categories through 574 traditional toy stores, 210
side-by-side stores, 16 long-term express stores, and 14 baby
stores. The International segment covers 37 countries. Both
segments have an e-commerce presence.
The toy maker and marketer's business is supported by 18
distribution centers: eight devoted to domestic operations and 10
focused on international operations (excluding licensed business).
The company's third party logistics providers JB Hunt Transport and
Performance Team Freight Systems manage the delivery of inventory
from the company's distribution centers to its stores. It also has
an agreement with DHL Supply Chain to provide warehousing and
fulfilment for company's US e-commerce operations.
Some of the company's subsidiaries include Toys "R" Us
Properties (UK) Limited; Toys "R" US Europe, LLC; and Toys "R" Us
Australia Holdings, LLC. The company also owns the KB Toys brand
and e-commerce site. The Toys "R" Us website is Toysrus.com, which
also sells Babies "R" Us products.
Toys "R" Us operates in the US and nearly 40 countries around
the world. The company's major international markets are Europe,
Japan, Canada, the UK, and China.
Sales and Marketing
The toy retailer utilizes a variety of marketing and advertising
channels to reach its target audiences. Its mass marketing programs
include email marketing, national television and radio spots,
direct mail, targeted magazine advertisements, digital and social
media, catalogs/rotos, and ads in national or local newspapers.
Other strategies include targeted door-to-door distribution, direct
mailings to loyalty program members, and in-store marketing.
Toys "R" Us's most effective piece of advertising in the United
States is 'The Great Big Toys "R" US Book of Awesome' promotional
catalog, which features an interactive digital app and is sent
before the holiday selling season via direct mail, newspapers, and
in its stores.
Toys "R" Us's annual revenue has fallen for five consecutive
years. In fiscal 2017, it fell a further 2% to $11.5 billion due to
lower comparable store sales and store closures. Toys "R" Us has
been notably slow to respond to the rise of e-commerce and has seen
its sales eroded by online competitors. Store closures also played
a major role in the disappointing figures, particularly the sale of
the FAO Schwarz flagship store in New York. The strong US dollar
also impacted on International sales.
Toys "R" Us recorded a net loss of $36 million, its fourth year
in the red. While a poor figure, this nevertheless represents a
narrowing of the $130 million loss from the previous year due to
lower SGA and income tax expenses, offset by lower margins.
Cash used in operating activities was $1 million, a fall from
$238 million provided from operations the previous year. The drop
was down to increased domestic vendor payments.
As one of the last big toy retailers, Toys "R" Us has been
grappling with how to grow its business amid a weak selling
environment for specialty retailers. The toy chain competes with
Wal-Mart Stores and Target , which both lure shoppers with
groceries and other basics. Furthermore, its breadth of selection
is being challenged by online giant Amazon.com .
To turn around its situation and set the company up for
long-term profitability, the retailer in 2016 reiterated its
customer convenience-oriented strategy to integrate both its online
and brick-and-mortar offerings by utilizing its "In-Store Pick Up,"
"Ship from Store," and "Ship to Store" fulfilment channels. In
recent years, it's also been using its "juvenile integration"
strategy, seeking to boost sales and profits by offering customers
"one-stop shopping" by building new side-by-side stores, which
combine its Toys "R" Us stores and Babies "R" Us stores merchandise
under one roof, and by converting existing stores to the hybrid
The company has also been looking to improve its supply chain
management, optimize its inventory mix, and upgrade its automated
replenishment system to improve its inventory turnover.
The toy retailer also continues to expand its stores globally as
the US market continues to mature, opening its 100th store in China
in January 2016. Toys "R" Us's international sales are increasing
as a proportion of total sales.
In March 2013, Toys "R" Us withdrew its IPO after sitting on it
for almost three years. Despite an impressive turnaround as a
private company under CEO Jerry Storch, the wild swings in the
stock market and fear of another recession finally spurred the
company to formally withdraw the offering. More fundamentally, the
toy seller's sales growth had stalled and competition had
increased, which ultimately conspired to doom its IPO
Toys "R" Us was taken private in 2005 by a private equity group
after being a public company for nearly three decades (1978 through
2005). The toy retailer first ventured overseas in 1984.