TOYS“R”US, INC. OUTLINES “TRU TRANSFORMATION” STRATEGY
April 2, 2014

New CEO and U.S. President Discuss Plans to Make Company Fit for Growth by Fixing Foundational Issues, Putting Disciplines into Operational Processes and Right-Sizing Cost Structure; Strategic Plan Places Focus on Improving Customer Experience In-Store and Online, Simplifying Promotions and Developing a Clear Pricing Strategy

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WAYNE, NJ (March 26, 2014) At presentations today for investors, industry analysts and the media, Toys“R”Us, Inc. outlined its strategy for improving the company’s operational performance and positioning the business to drive profitable growth in the future. Antonio Urcelay, Chairman of the Board and Chief Executive Officer, Toys“R”Us, Inc., and Hank Mullany, President, Toys“R”Us, U.S., provided a comprehensive assessment of the company’s fiscal 2013 performance and discussed the go-forward priorities and actions that will drive its “TRU Transformation” strategy.

“As we look to the future, our strategy will establish a path to sustainable business growth, building upon the company’s unique strengths. Toys“R”Us is one of the most recognized brands in the world with a strong international presence and a large and loyal customer base,” Mr. Urcelay said. “Our global network of stores generates strong profitability, and together with our $1.2 billion global e-commerce business, is integral to our growing omnichannel capabilities. And, as the world’s leading dedicated toy and juvenile products retailer, we have well-established relationships with our manufacturing partners, and can provide them with a year-round distribution outlet that showcases the broadest selection of their products in 36 countries around the world.”

Mr. Urcelay added, “Our 2013 performance was, no doubt, disappointing. While this was partly driven by macro conditions, such as the decline in birth rates since 2007 which has contributed to stagnating overall toy and baby industry sales, and the rapid growth of online shopping, we cannot blame these factors. We believe that several execution issues also impacted these results. Over the past several months, we have undertaken a comprehensive analysis and diagnosis of the business, and believe we have four main issues to resolve – improve the customer experience in-store and online, make progress on changing price perception, put disciplines back into inventory management, and right-size our cost structure on a global basis. We are encouraged that all of these foundational issues are firmly within our own control to fix, and our strategy will address these to improve the business over the short-term and put the company on track for the future.”

Mr. Mullany noted, “Our ‘TRU Transformation’ strategy is grounded in consumer research and customer insights, and is anchored by three guiding principles – Easy, Expert, Fair. Among our highest priorities will be to deepen our focus on the customer, build meaningful relationships through loyalty and targeted marketing programs, and improve the shopping experience both in-store and online. This will include putting more emphasis on the distinct needs of our customer base of new and expectant parents and gift-givers. We are committed to delivering on our mission to bring joy into the lives of our customers by being the toy and juvenile products authority and definitive destination for kid fun, gift-giving solutions and parenting services.”

For 2014, the objective of “TRU Transformation” will be to slow the company’s sales decline, stabilize cash flow and improve EBITDA to effectively position the business to grow revenue and profits in 2015 and beyond. “TRU Transformation” will focus on four key priorities:

  • Transform the shopping experience in-store and online. To improve the customer experience in-store and online and become a customer-centric business, the company has already begun to implement initiatives, such as cleaning up existing stores and improving in-store execution; improving out-of-stocks and the speed of checkout; solidifying customer relationships through strengthened loyalty and targeted marketing programs;improving price perception by developing a clear pricing strategy and simplifying promotional offers; and optimizing the e-commerce experience by capitalizing on the online shopping growth and omnichannel integration with stores.During the meeting, Mr. Mullany unveiled a new customer promise to provide the broadest selection of products to help kids and babies develop, learn, have fun and be safe; be the easiest place to research and find solutions throughout the journey of parenthood; and be the best resource for children’s gift-giving occasions – all at fair prices in an environment that offers expert service and unique services with the ability to shop whenever, wherever and however they want.
  • Collaborate with business partners to drive differentiation, innovation and value. As part of “TRU Transformation,” Toys“R”Us will leverage business partner relationships in the U.S. and abroad to drive category leadership and effective differentiation in products, events and services, and create exciting shops and product statements in-store.
  • Develop high-performing, highly engaged, diverse talent. Internally, priorities will include reviewing the organizational structure, creating an infrastructure that promotes talent development, maintaining a culture of productivity and accountability, driving training in the areas that matter most for customers, cultivating a culture of engagement, and enhancing the ability to hire and retain great talent.
  • Become fit for growth. The company will focus on improving operational and financial performance, while positioning the business to capitalize on future growth opportunities through the implementation of a right-sized cost structure, a strong focus on disciplined inventory management, and the deployment of capital to key growth initiatives.
    • Right-size the cost structure. Overall, the company is in the midst of a renewed assessment of its operations and business structure to determine where greater efficiencies can be created and where additional resources can be allocated to help best serve customers. As part of this evaluation, in a comprehensive review of functional areas throughout the organization, a number of opportunities were identified to streamline functions and reduce headcount. In total, throughout its U.S. and International operations, Toys“R”Us, Inc. has now eliminated more than 500 positions across all functions. The company has been actively helping with the transition of those impacted by offering all eligible employees severance benefits and outplacement services. In addition, there are some areas of the business where the optimal go-forward structure is still being evaluated based on strategic reviews currently underway.
    • Like all retailers, the company regularly looks at the performance of its physical locations to ensure they are meeting the needs of the business. While it may close some stores during the year primarily due to lease expirations, at this time the company has no plans to close a significant number of stores. After a thorough evaluation of its current fulfillment capabilities in the U.S., the company has made the decision to close the McCarran Distribution Center in Storey County, Nevada effective June 1, 2014. Over the past few years, the company has expanded its omnichannel capabilities and the ability to ship online orders from stores and distribution centers that serve stores, resulting in the ability to flex inventory more efficiently, leverage underutilized space and ship from points closer to customers. The company will continue to open stores and expand fulfillment capabilities in markets where it makes the most sense, including in China where growth has accelerated.
    • No near-term debt, strong balance sheet, ample liquidity. The company ended the year with a strong liquidity position of approximately $1.8 billion and reduced its total long-term debt by $322 million to $5 billion. In addition, it successfully refinanced its $1.85 billion senior secured revolving credit facility in last week, a key component of the company’s capital structure. The execution of this transaction ensures the company’s ability to appropriately fund the working capital needs of its operations at rates that are significantly lower than the prior revolving credit facility. The company has no material outstanding debt repayments due until 2016, providing a large window to grow and develop new strategic initiatives.

To learn more about “TRU Transformation,” please visit the company’s corporate website, Toysrusinc.com, where it has posted presentation materials.

About Toys“R”Us, Inc.

Toys“R”Us, Inc. is the world’s leading dedicated toy and juvenile products retailer, offering a differentiated shopping experience through its family of brands. Merchandise is sold in 873 Toys“R”Us and Babies“R”Us stores in the United States and Puerto Rico, and in more than 715 international stores and over 180 licensed stores in 35 countries and jurisdictions. In addition, it exclusively operates the legendary FAO Schwarz brand and sells extraordinary toys in the brand’s flagship store on Fifth Avenue in New York City. With its strong portfolio of e-commerce sites including Toysrus.com, Babiesrus.com, eToys.com and FAO.com, it provides shoppers with a broad online selection of distinctive toy and baby products. Headquartered in Wayne, NJ, Toys“R”Us, Inc. employs approximately 70,000 associates annually worldwide. The company is committed to serving its communities as a caring and reputable neighbor through programs dedicated to keeping kids safe and helping them in times of need. Additional information about Toys“R”Us, Inc. can be found on Toysrusinc.com. Follow Toys“R”Us, Babies“R”Us and FAO Schwarz on Facebook at Facebook.com/Toysrus, Facebook.com/Babiesrus and Facebook.com/FAO and on Twitter at Twitter.com/Toysrus and Twitter.com/Babiesrus.

Forward-Looking Statements

All statements that are not historical facts in this press release, including statements about our beliefs or expectations, are forward-looking statements.  These statements are subject to risks, uncertainties and other factors, including, among others, the seasonality of our business, competition in the retail industry, changes in our product distribution mix and distribution channels, general economic factors in the United States and other countries in which we conduct our business, consumer spending patterns, our ability to implement our strategy including implementing the strategy described above and initiatives for season, the availability of adequate financing, access to trade credit, changes in consumer preferences, changes in employment legislation, our dependence on key vendors for our merchandise, political and other developments associated with our international operations, costs of goods that we sell, labor costs, transportation costs, domestic and international events affecting the delivery of toys and other products to our stores, product safety issues including product recalls, the existence of adverse litigation, changes in laws that impact our business, our substantial level of indebtedness and related debt-service obligations, restrictions imposed by covenants in our debt agreements and other risks, uncertainties and factors set forth in our reports and documents filed with the Securities and Exchange Commission (which reports and documents should be read in conjunction with this press release).  In addition, we typically earn a disproportionate part of our annual operating earnings in the fourth quarter as a result of seasonal buying patterns and these buying patterns are difficult to forecast with certainty.  We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements.  Forward-looking statements speak only as of the date when made, and we undertake no obligation to update these statements in light of subsequent events or developments unless required by the Securities and Exchange Commission’s rules and regulations.  Actual results and outcomes may differ materially from anticipated results or outcomes discussed in forward-looking statements.

Daniel Pickett
Daniel “Julius Marx” Pickett has been around toys his whole life. The first line he ever collected was Mego’s World’s Greatest Super Heroes line back in the 70s. He has been surrounded by collectables ever since. In 1999 he was confounded by a lack of information and news about some of his favorite toy lines he was collecting. Since he couldn’t find the information he decided to pursue it himself thinking other people might also be interested in the same news. He started writing a weekly column on the toy industry and action figure for a toy news site and in a years time he tripled the sites daily traffic with his updates, reviews and product features. He built relationships with every major toy manufacturer and many sculptors, painters and mold makers. He grew his hobby into a world wide expertise that the industry has embraced. In 2004 he teamed up with his toy buddy Jason “ToyOtter” Geyer and they created their own website www.ActionFigureInsider.com. Daniel has been quoted in both industry and mass media press outlets. Over the years Daniel and AFi have been sought out as experts in the field. Daniel was regularly featured on “Attack of the Show” on the G4 network as the primary contributor to their “Mint On Card” segment, and our front page has been linked to from USA Today’s “Pop Candy” Blog twice. Daniel’s content has also been featured on MSNBC.com, Wired.com, Fark.com, Boing-Boing, Gizmodo.com, Ain’t It Cool News, the Official Star Wars blog, Geekologie, G4, CNet and Toy Fare magazine, among many others. He has consulted on toy lines, books, documentaries and TV shows. But all of that really just sounds snooty and “tootin’ his own horn” – the long and short of it is that Daniel loves toys and he LOVES talking about them.
Read other articles by Daniel Pickett.

 

 

 

5 Comments »

  • stewbacca says:

    How about lowering your prices to be on par with every other retailer–

    Legos are 25% higher if not more– DVDs, action figures are usually 10-20% more- Exclusives sometimes even more so–
    And the practice of jacking up the price of an item after initial sellthrough– pretty much kills repeat business -
    not to mention never turning over inventory by actually clearance pricing out items not just slapping a clearance sticker on it– and dropping the price 10% and leaving it that way for a year… (although I will admit I guess the new colored label clearance process may be addressing this..)
    - make the stagnant sales is the fact that I can buy something online shipped- cheaper than buying it in store from TRU (when its in stock) .

  • Smuggeorgeclooney says:

    So I agree with Stewbacca big time! Every point you brought up is so valid. I am not sure about the dynamics of the business but what I do know is I never got to see some of my highly anticipated action figures distributed like the Prometheus Fifield and Shaw figures. Now we can blame NECA all day for how they decided to allocate which characters belong in each series but TRU did not do anything mind blowing to push these figures what so ever! They just ordered a few pressure suit engineers figures and Trilobite 2 pack, put them out on the pegs and hope the sell. I have the whole line and I had to buy my Chair Suit Engineer, Deacon and David from ebay! The figure for this movie that would’ve been the golden ticket for this line to continue was the Chair Suit Engineer that was the whole reason why most people wanted to see Prometheus was because it’s the Space Jockey from Alien spin off movie! Not keeping a good supply of them to sell was like Eff you with a smile to the fans, Randy Falk and NECA for getting the rights to create and sell these figures and lets not forget about the effort the people a NECA put into making these figures. Now that is just for the Prometheus line. We can talk about how TRU employees will tell a customer that the Pacific Rim line has been canceled too but I am not gonna go there now. My other beef is about Star Wars and GI Joe. Now lets start with Gi Joe. So Gi Joe Retaliation the movie got pushed back for its release date from a Summer release to a release for the following Spring. We get it, the investors of this movie saw that it was up aganst Avengers which came out a week or two prior to its actual summer release date and they could see that it would starve in the box office. However the toys were released in the stores as if the movie was going to have a summer release. So I know that this had set up an obstacle for Hasbro however after the movie was released in the Spring and the toy line was in the stores you would think that TRU would start to have some of the newer lines of the figures on the shelf, right? Wrong all I really saw from this toy line were the plethora of different of styles of the Rock as Roadblock, Zartan, Storm Shadow and Snake Eyes. Now I have see some of the lines that came out after wave 1 and 2 BUT AT WALGREENS!!!!! NOW they are exclusive to have these 30 year anniversary figures! Star Wars has sucked too in the last couple of years! It seems that wen they changed the Star Wars Legends to the Phantom Menace 3-D packaging that was what sent Star Wars into its downward spiral. You would think that TRU would do something to keep people interested in purchasing this new packaging for Star Wars buy having a lot of the figures that seem to be sought after but NOOOO just like Gi Joe it seems like they just want to keep Anikin, Jar Jar, that Pilot Guy Ric Olie something like that, but there were still a lot of the cool clone wars characters that were involved in this series where were they at?! I know sometimes you have to time going to the TRU just right to get the figures you want, but I see a problem when Walgreens has a better selection of sought after figures than TRU and that’s pretty sad. TRU when I was a kid you slaughtered the Kangaroo that granted me my magical memories known as Lionel Playworld because of all of your hype and smoke and mirrors but at the end of the day your prices were higher and the customer service SUCKED as well! So that’s all I got! I would love if Lionel Playword came back from the ashes and just brought an end to your wicked toy monopoly! In the meantime you should probably apalogize to Randy Falk and everybody at NECA for not doing a good job of promoting the figures they put a lot of effort into as well as the slander that they have received due to the cancelation of the Prometheus line that you failed to distribute properly with that said you should apalogize to the fans that were eager to see Elizabeth Shaw and Fifeld get their figures on the shelves so they could go home and make a supee cool diorama dedicated to the movie. Hey and while we are at it you should apalogize to Ridley Scott for treating something he put a lot of his heart into like how your employees ask “can I help you find something” in a manner where you feel like they are the hot cheerleader captain and you are the annoying not so popular kid who has no merit. Because that’s what you did TO RIDLEY SCOTT!!!!! You also bullied Lionel Playworld.

  • JM says:

    How about same prices for things like the prior poster said. Why does Wal Mart & Target have the same Lego set for 24.99 and your selling it for 32.99? Maybe two cashiers when the line is 3 or more deep. Paying your help more this will cause workers to care more rather then just hiring someone to be a body.

  • Dave says:

    Toys “R” Us will never fix its problem and this is coming from a guy that worked for them for 7 years. They have no idea of how to treat there customers or employees. For example legos are way more expensive at TRU and one of the reason Ive been told why is because they get them earlier then everyone and they carry a bigger selection making them the store for people to buy them outside the lego store. Another example the new mattel dc total heroes line at walmart and tru was 10 dollars a figure. Well in the last week they’ve change the price twice. Frist they went from 10 to 13 and now they are 15. Also the new tmnt line is another example the took the turtle sewer playset from 99 dollars to 130 in one week. They just keep on coming up with new big ideas to fix the problem, but in all honestly they won’t fix because they have no rrue idea of what they do wrong.

    • john says:

      Dave you are so right. Their pricing has become like the stock market constantly changing, upwards mostly. Pacific rim went from 16.99 in series 2 to 21.99 in series 3 with one of them going up to 24.99. Even the simpsons 25th anniversary figs went from 11.99 to 15.99 between series 1 and 2 and they are not selling. The other thing is their tru.com order system. Their inventory is not real time so you can keep ordering even when there is no stock and then it gets cancelled. You would think that orders get filled in the order they were received, nada that is not the case. I have also had popular figures replaced with other junk when it arrives. There’s also the problem of TRU employees being scalpers themselves who grab the good stuff for themselves. Even managers are involved. This happens in stores and at tru. com warehouses. Even popular figs get swapped in the cases on the truck with old ones. TRU. com website staff are also in on it. They know what figs are popular and often mislabel or hide stuff or post everything from an assortment except the most wanted.

      Their employees are totally clueless as to what they sell and those who do know either keep stuff for their own benefit or choose to play master controller and distrbutor of the stuff people want. Many of the employees in local stores are really friendly with the worst offending scalpers but unhelpful to other people. Then the other half hates any guy who buys an action figure as if all “collectors” are the same, more so if you are chubby and/or dark skinned. Soccer moms are like the worst scalpers and they get the best service.

      TRU is totally messed up but Walmart is way worse

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