COMPANY PROFILE -Toys "R" Us
Business Sector :Retail, Toys
Operating Geography :North America, United States, Global.
About Toys "R" Us :
Toys “R” Us is an American Toy company based in Wayne, New Jersey. It was founded in the year 1948 by Charles P. Lazarus. It initially started with the name of Children's Super mart with a focus on baby furniture. But as requests for toys for toddlers and older children began to grow, the brand shifted its outlook to producing more toys and renamed the brand to Toys R Us in 1957. The company mascot Geoffrey the Giraffe was also launched in 1957 which became an important “spokes animal” for the firm, helping in promotions. The first international store was opened in 1984. It currently offers a wide range of toys and baby products and besides 750 international stores and 250 licensed ones, the Company also retails them their online websites Toysrus.com and Babiesrus.com
Toys "R" Us Revenue :
US $11,146 million - FY January 28, 2018 (y-o-y growth negative (-3.4%) )
US $11,450 million - FY January 28, 2017.
Ownership / Major shareholders :
The private equity firms Bain Capital LP and KKR & Co., along with Vornado Realty Trust, took over the company in a $7.5 billion leveraged buyout in 2005.
Competitive Analysis of Toys "R" Us
The SWOT analysis comprising of factors influencing the internal analysis and external analysis of Toys R Us are presented below in a matrix. The SWOT analysis report for Toys R Us essays the detailed business case covering strengths, weaknesses, opportunities and threats of this rapidly crumbling specialty retail giant which has recently filed for protection against bankruptcy. Inspite of having a wide worldwide presence and sprawling merchandise spread, the Company has suffered huge losses at the hands of online retail competitor Amazon, by missing out on the early mover's advantage. The Company needs to turn its fortune through a well planned business strategy for embracing innovation, moving to new age global delivery models and capturing new opportunities.
Strengths | Weaknesses |
1. Wide reach with broad spectrum of merchandise
2. Company’s popularity and efficient distribution network
3. Owns unique Baby Brand
4. Toys for differently-abled kids
| 1. Lack of differentiated or unique offerings
2. Bankruptcy filing due to online competition
3. Heavy dependency on seasonal sales
4. Lesser flexibility with sponsors controlling ownership
|
Opportunities | Threats |
1. Joint Ventures and Strategic Alliances
2. Charitable associations
3. Expansion to emerging economies like India
4. Expansion of Private Label Merchandise
| 1. Retail industry is highly competitive.
2. Online retailers are dominating the market
|
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Detailed SWOT Analysis of Toys "R" Us
Strength
This section is available only in the Complete report on purchase.
Weakness
1. Lack of differentiated or unique offerings: Toys “R” Us lacks sustainable competitive advantage, other than the brand value. In the US, the company has lost its number one position as the largest toy retailer, to Wal-Mart offering attractive packages to its customers. Amazon's attractive discounts, slashed prices and global home delivery model is eating into the market share of major brick-and-mortar stores. In order to competently face Amazon, Target, Kmart and Walmart, Toys R Us will have to work out lower pocket friendly pricing models to rope in traffic to its stores. Being large is not enough when customers can go to another large retailer and buy the same or similar goods, sometimes getting a better deal.
2. Bankruptcy filing due to online competition: Toys “R” Us filed bankruptcy protection in 2017 after suffering losses since 2013. The bankruptcy filed in Richmond, Virginia, approximated the company to have over $5 billion in debt. The company was late in entering the e-commerce platform and could not stave off the onslaught of the major online player such as Amazon. The company is undertaking a financial restructuring to ensure the iconic Toy'R'Us and Babies'R'Us thrive. This has also resulted in loss of confidence in vendors who have become tight fisted on supplies to the company besides lowering credit cycles.
3. Heavy dependency on seasonal sales: Toys “R” Us is heavily dependent upon successful sales which in turn depends on the season. They aim to make profit from Christmas. In fact, it could be argued that since, toys are a key Christmas present product, so the Company is even more likely to be dependent upon seasonal sales. Their global business is highly seasonal as major revenue only comes in the 4th quarter, thus the financial performance heavily relies on the outcome of the last quarter which could adversely impact operating results if sales targets are not met as expected before and during the holiday season. This trend has been witnessed since 2010, wherein approximately 43% of Net sales happens in the last quarter of the financial year. This is met with challenges of meeting and delivering high sales volume, items sourcing and distribution and customer service during peak business periods.
4. Lesser flexibility with sponsors controlling ownership: As approximately 98% of the ownership is in the hands of sponsors which wield control of the organization in decision making and vetoing any transactions that requires the approval of stockholders, there might arise conflict of interest where decisions might be made which involve risks to the Company. Investment funds or groups affiliated to the Sponsors or the sponsors themselves might have personal interests and might also get involved in business of investing in their own accounts in companies and may acquire or withhold stakes in businesses that compete directly or indirectly with Toys R Us.
Opportunity
This section is available only in the Complete report on purchase.
Threat
This section is available only in the Complete report on purchase.
The PESTLE/PESTEL analysis essays in detail the key factors which influence the macro-environment of the media and entertainment industry for Toys R Us. Significant factors or influencers that comprise of political, environmental, social, economic, technological, legal and environmental aspects play an important role in determining a strategy that will help tide the Company through the current tough times. Find below the external analysis of Toys R Us presented in a matrix.
Political | Economical |
1. Impact of Brexit
2. High Labour Cost
3. Increasing tensions in US - China relations
| 1. Increase in Chinese Economy
2. Translation of Currency
3. Economy Health and Diversification |
Social | Technological |
1. Decline in target sector
2. Licensed products to increase profitability
3. Shifting of consumer preferences away from materialistic purchases
| 1. Need to Innovate
2. Video game segment sales is subject to volatility
3. Usage of predictive analysis
|
Legal | Environmental |
1. Stringent regulations and guidelines
2. Safety Measures
3. Rampant counterfeiting
| 1. Eco-friendly toys
|
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Detailed Pestle Analysis of Toys "R" Us
Political
1. Impact of Brexit: With UK exiting from Europe, trade agreements will be re-established. With this, it is expected that the import duties will spike, resulting in cost increase of toys. On the other hand, Toys R Us cannot raise prices immediately because of the printed prices in catalogues, etc. and even if prices are raised, volumes are bound to fall and the profile of consumer demand will move towards cheaper toys.
2. High Labor Cost:Labor Costs have risen in the US and Europe in recent years. Tight government mandated labor markets, increase in minimum wages and a higher proportion of full time employees are resulting in an increase in labor costs for employers in the U.S. The current federal minimum wage rate in the US is $7.25 per hour. Increase in labor wages increases the overall costs and affects the Company’s margins.
3. Increasing tensions in US - China relations: Lion's share of the products of Toys R Us are sourced internationally from suppliers in China. Apart from this a good number of Company stores are located in China and the business is increasingly dependent on revenues from China. Trade restrictions, political and financial unrests, unfriendly national laws, rising labor costs, labor unrest in China has direct adverse impacts on business. Prolonged tense relations between US and China and the added control of Chinese government over foreign investments and business operations in China poses great risks and uncertainties for US businesses.
Economic
This section is available only in the Complete report on purchase.
Social
This section is available only in the Complete report on purchase.
Technological
This section is available only in the Complete report on purchase.
Legal
This section is available only in the Complete report on purchase.
Environmental
This section is available only in the Complete report on purchase.
Major Brands :
- Toys “R” Us
- Babies “R” Us
- Toys "R" Us Express
Key Business Segments / Diversification :
Toys "R" Us
Retail E-commerce Toys Clothing Baby products Video games
Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :
Open Table Preview
Name | Business Segment | Year | Type | Objective/Synergy Achieved |
FAO Schwarz | IToy store | 2016 | Sale | The sale has been pressured by low-price competition from Amazon to Wal-Mart, and its outstanding debt made it difficult for the company to invest in the business. |
FAO Schwarz | Toy store | 2009 | Acquisition | This acquisition allowed Toys R US to grow its toy specialist market share and draw upon the unique strengths of both brands in developing quality products that differentiate it from its mass market competitors, |
eToys.com
( with BabyUniverse.com and ePregnancy.com)
| E-commerce | 2009 | Acquisition | The acquisition of eToys.com, advanced Toys r US’s leadership in the toy and baby products sectors and position the company for strong market share growth. |
Source: Company website and other reliable sources. The detailed table is available in the Complete Report.
On purchase the Toys “R” Us SWOT & PESTLE Analysis PDF report will reach you within minutes. At rare times, a slight delay not exceeding 1 hour might be caused.
TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
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References used in Toys "R" Us SWOT & PESTLE Analysis Report
https://www.toysrusinc.com/about-us
https://www.toysrusinc.com/press/toysrus-inc-acquires-fao-schwarz
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Toys "R" Us SWOT and PESTLE analysis has been conducted by Himani Wadhwa
and reviewed by senior analysts from Barakaat Consulting.
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