Toys R Us Struggling as Toy Industry Booms

By Halzack, Sarah | The Charleston Gazette (Charleston, WV), April 15, 2017 | Go to article overview

Toys R Us Struggling as Toy Industry Booms


Halzack, Sarah, The Charleston Gazette (Charleston, WV)


Last year was a good one for the toy business: With the help of tiny collectibles such as Shopkins, slapstick games like Pie Face, and the merchandising juggernaut that is ?Star Wars,? the industry saw a robust 5 percent increase in sales. And yet, big-box behemoth Toys R Us struggled to cash in on your kids? playtime.

The company reported this week that sales sank 1.4 percent last year at its Toys R Us and Babies R Us stores open more than a year. It posted a loss of $36 million ? ? an improvement over last year?s $130 million loss, but nonetheless a sign that the retailer still is in turnaround mode.

Dave Brandon, the chief executive of Toys R Us, laid out the problems on Thursday during a conference call with investors. Some of it was fueled by big-picture cultural shifts: As video gaming increasingly moves to apps, the retailer?s video games and electronics business slowed down dramatically. In fact, Brandon said sales in this area were $200 million short of what they were in the previous year. That?s a meaningful hit for company that saw $11.5 billion in sales overall in 2016.

But there were some tactical errors, too. During the holiday rush, the toy chain saw its rivals go on a discounting spree ? moves Toys R Us suspects were aimed at dumping inventory that simply wasn?t selling that well.

Toys R Us, determined to protect its profit margin, decided not to get into the deals fray, which Brandon called ?a race to the bottom.? But that likely cost the chain some sales, and left it with a fresh problem: It now has an excess of inventory that it has to figure out how to unload. (And given that Toys R Us gets 40 percent of its annual sales during the holiday quarter, you can see what a challenge this might be in the off-season. …

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