Toys ‘R’ Us is preparing to sell its global toy business and spin off its Babies ‘R’ Us division.
The retailer will restructure its flagship global business to cut costs and improve cash flow to ready the division for possible sale.
Toys ‘R’ Us will cut operating expenses by $125 million by fiscal 2005; the company won’t say how those cuts will affect marketing spending. Toys ‘R’ Us spent $129.5 million on measured media in 2003, and only $10.6 million in first-quarter 2004, per TNS Media Intelligence/CMR.
Toys ‘R’ Us will cut jobs, but won’t say how many.
Wayne, NJ-based Toys ‘R’ Us also will liquidate some U.S. inventory this fall to clean up its supply chain. The retailer does not plan to close any stores before the holidays; its 683 U.S. toy stores rely on holiday sales to meet sales expectations for the year. (There are 579 stores overseas.)
“Customers … can expect the same unique product assortments and high level of industry knowledge that our stores and Web site have always provided during the upcoming holiday season,” said Chairman-CEO John Eyler in a statement.
Last year Toys ‘R’ Us closed its 146 Kids ‘R’ Us stores (selling 124 to Office Depot), its 36 Imaginarium stores and the three distribution centers that served them.
Babies ‘R’ Us will spin off by August 2005 under new management: Co-founder Rick Markee has returned as president and will add the CEO title when the 200-store chain is officially spun off. Toys ‘R’ Us Treasurer Jon Kimmins will become Babies ‘R’ Us CFO on spin-off. Babies ‘R’ Us will continue to target new and expectant parents and plans to add stores in the U.S. and overseas.
“Our global toy business and our Babies ‘R’ Us business operate in distinct markets, and are at fundamentally different phases in their growth cycle,” Eyler said in a statement. “By ultimately operating them as separate entities, we will provide a better opportunity for Babies ‘R’ Us to continue its healthy growth.”
Eyler continues as CEO and Ray Arthur remains as CFO. John Barbour, now president of Toys ‘R’ Us International, will replace Markee as president of the U.S. toy stores.
The possible sale and spin-off are part of a business review that’s still underway. Toys ‘R’ Us’ board of directors continues to mull the details.
First-quarter sales fell 2.6% to $2.06 billion for the quarter ended May 1. Fiscal 2003 sales rose 2.3% to $11.57 billion for the year ended Jan. 31, 2004.
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