Toys ‘R’ Us

Torrid Toy Hiring Despite Challenges

Toy industry hiring has started off at a torrid pace.  Here at Toyjobs we are currently on track to beat our best year ever (2000).  It’s still early, and we haven’t hit the summer slowdown yet so realistically we are unlikely to eclipse the old mark.  Frankly, we don’t even want to.  Having a year like that takes a heavy physical, mental and emotional toll.  Friends and family begin to get cranky – and I begin to get cranky too.  As long as we keep raising the bar on our second (2004) and third (2005) best year’s, I’m a happy camper.  It seems quite likely that we will be able to do that despite all the continued challenges facing the toy industry. 

Oil, resin, transportation, labor and Chinese electricity costs continue to be high and this is keeping pressure on margins even as retailers continue to play hard ball on pricing while buying less goods.  Toys ‘R’ Us store closures mean less shelves to fill and Walmart is actively cutting its inventory.

The results of this can be seen at some of the larger toy companies.  At Mattel, Barbie continues in her death spiral (down 8%) while Hot Wheels and Matchbox also slowed (down 4%).  Even American Girl which had been a star performer had sales weaken by 9%.  The only bright spot was Fisher Price where sales were up 12%.  I wonder if Neil Friedman is beginning to get all misty eyed while day dreaming about Buffalo winters.  Hasbro did marginally better but still lost money in the first quarter.  It looks like Rose Art sold out just in time with 5 Magnetix lawsuits to date.  Over the years, Larry Rosen has been described using many adjectives (not all of them printable here) but to be fair; shrewd should always be counted among them.

The tough industry climate is also reflected in the fact that the toy business is now homeless.  The TIA has to be viewed as the main villain here.  They took an exorbitant amount of time to come up with a single option that was acceptable to almost no one but themselves.  It was incredible to see that a working group consisting of mostly the same people as the TIA search group was able to come up with three or four new possibilities in the blink of an eye once they were free of TIA oversight.  Unfortunately, what I’m hearing (not confirmed) is that all of those options have slipped through the industry’s fingers because it took too long for everyone to get their act together.  It’s not easy herding cats.

The always opportunistic TIA in its seeming role as a for-profit trade show management firm, rather than that of the toy industry advocate that it should be is now charging an arm and a leg for Javits space that was made necessary by their own incompetence in finding a new home for the toy industry.  Also keep in mind that there will be additional costs of building an appealing and closed trade show booth unless you want to get knocked off by everyone with a cell phone camera and an Asian connection.  Once you have spent the money on that sleek new booth it will be easier for the TIA to overcharge you for space again next year…and the year after that…and the year after that…

Finally, we get to Walmart.  It’s always fun to throw a few rocks at the big bully as long as you can run away and hide before he beats you up.  According to CEO Lee Scott, “Walmart is making real changes.”  Let’s look at them in order:

  1. Walmart will increase surprise inspections at foreign factories in an effort to make sure that its suppliers uphold labor and environmental standards.  Gee, this is almost too easy.  Apparently, Walmart will NOT be conducting any inspections of its own stores which have been under severe publicity pressure due to its poor treatment of store employees and weak environmental record.
  2. Walmart will increase diversity in its workforce.  Yes, Walmart will constantly be on the lookout for any group of people it can employ at lower wages and with fewer benefits. 
  3. Walmart will expand its share of the Hispanic market.  Duh, Walmart will try to sell more goods to more people.  It will also try to employ more Hispanics at lower wages and then sell products to them at “everyday low prices.” 
  4. Walmart will sell more environmentally friendly products.  Apparently Walmart believes that gasoline price squeezed consumers will be more anxious to spend $2 on an energy efficient light bulb than 19 cents on a standard one. 
  5. Walmart will help competing local companies stay in business.  Uh-huh…and pigs will fly.

The only “real change” that I see at Walmart is that CEO Lee Scott is heading off on a one month paid vacation.  I would like to see any of Walmart’s store employees try to do that.  In a related (?) story, a Walmart customer who was experiencing difficulties with a self-checkout system not working properly was arrested for allegedly punching it out.  Always remember that a weaker Walmart, which still sells tons of goods but is less able to bully its suppliers, is not such a bad thing for the toy business.

All the best,

Tom Keoughan

By | May 2nd, 2006|ToyJobs Blog|Comments Off on Torrid Toy Hiring Despite Challenges

TRU Future: It Pays To Know Who The Owners Are

The purchase of Toys ‘R’ Us by a combination of two private equity firms and a big realty trust has lead to speculation on what the future of the unit might be.  The best speculation has to begin with identifying exactly who the buyers are.

Vornado Realty is obviously interested in the real estate sitting under the 150 to 200 money-losing and marginal stores which TRU is likely to close in order to boost profitability.  Most of these locations will likely be leased at high prices to fast-growing retailers like Lowe’s, Bed Bath & Beyond, Linens ‘n Things, etc.  In addition, realty trusts (REIT’s) must pay almost all of their earnings out to shareholders in order to qualify for their tax-free status. This means that it is difficult for them to use retained earnings in order to purchase new properties.  Some of the TRU stores that are in very bad locations, and there are many, will likely be sold outright to fuel Vornado’s war chest.

Private equity firms generally like to get their money out in a four to six year time frame.  As a growth vehicle, Babies ‘R’ Us will likely be taken public in three or four years at a high multiple to earnings.  Keep in mind that infant supplies are a high traffic driver and no one likes to drive traffic like Walmart.  They could decide to seriously enter the baby business at any time and a repeat of TRU’s toy business saga could easily follow.  The envisioned Babies ‘R’ Us offering to investors is likely to be a big windfall for KKR and Bain Capital, but a big mistake for investors.

Before discussing the toy division, it is time to give credit where credit is due.  Here at Toyjobs Monthly, we have frequently lambasted The Dude for his ineffectual management of TRU’s business.  While we still feel that this has been the case, he should be applauded for getting top dollar for TRU shareholders (including himself of course).  His legacy is likely to be that he was more successful at selling the company than he was at selling toys.  It is now time for him to ride into the sunset with saddlebags full and leave the business of management in more capable hands. 

We are hoping that those hands will continue to be those of John Barbour.  John has been successful at every job he’s ever had.  Of those, this will be the toughest.  Mr. Barbour has voiced a desire to see a return to innovation in the toy business.  He also has spent most of his career on the manufacturer’s side of the table and it is hoped that he will partner with, rather than pound, on his vendors.

Under private equity ownership, success is likely to be measured differently.  Walmart and Target are not going away.  But a leaner TRU, after shedding its weaker stores and with a sound retail strategy, should be able to become a cash cow.  As a public company, success was all about growth and growth is difficult in a mature business.  Under private equity ownership, the spinning off of large amounts of cash would be a very good thing indeed.  After the cash machine is streamlined in five or six years it could be either sold off to a major (foreign?)  retailer (not likely) or another private equity group (more likely) or even kept (less likely).  In any case, we envision current ownership and hopefully management being in place for five or six years. 

In other major retail news, Walmart critics are having a field day.  Did Tom Coughlin simply steal $500,000 from Big W or, as he claims, was the money used in a secret anti-union slush fund reminiscent of the Nixon era?  My take is that this is not necessarily an either/or situation and that it is quite possible that both are true.  We note with interest that Walmart froze approximately 30 million worth of Coughlin’s retirement benefits but only after he publicly stated that his defense would be that the bogus expenses and gift cards were reimbursement for Walmart’s secret anti-union campaign.  Is this an attempt to pressure Coughlin to take the hit to his reputation in order to regain what is likely the bulk of his fortune?

Walmart says that its internal review turned up no evidence that Coughlin had used the money in anti-union activities.  Well, duh, wasn’t that the point?  Coughlin used to be Walmart’s Chief of Security and it wouldn’t surprise me if he had documentation buried under a rock somewhere as an insurance policy.  I also find it deeply suspicious that a company famous for its systems and controls on everything let a half million dollars just walk out the door.  On the other hand, it is a little difficult to believe that Walmart and Coughlin paid off union spies with hunting rifles, dog fences on Coughlin’s property and cowboy boots custom made for Coughlin’s feet.  He will undoubtedly claim that this was part of some reimbursement scheme but it sounds a bit fishy to me.  At this point we are anxious to hear Coughlin’s defense and open to see if he has compelling evidence that he was doing black bag work at Walmart’s behest. 

As for Coughlin, in the end he will likely be viewed as a powerful person run amok for what, in the context of his position and net worth, was chump change.  It never ceases to amaze me how cheaply some people are willing to sell their integrity.  It can take twenty years to build a reputation and only a week or two to tear one down.  As this story unfolds, there are likely to be no winners and two losers. 

Most toy manufacturers that we have been talking to have voiced frustration (and worse) to retailers’ refusal to let them push through price increases despite higher costs for oil, resin, transportation, electricity in China, etc.  The retail attitude seems to be “We want OUR prices and OUR margins – take it out of your end!”  Charming.  This has lead manufacturers to take plastic and features out of products which curbs innovation, jeopardizes product quality and consumer safety.  Some have even cancelled orders as they have become unprofitable.

Here at Toyjobs Monthly, we may have stumbled onto a solution.  Walmart’s earnings have been increasing an average of 17% annually over the last five years and are forecasted to grow an annual average of 15% over the next five.  However, the company’s share price is actually less than it was in 2000.  For the last five years the company’s P/E ratio has been in the mid thirties but now stands at 18X 2005 estimated earnings.

Walmart’s stock is cheap and not likely to remain so over the long haul.  Our proposed solution is to take the nickels and dimes that you’re able to squeeze out of Big W and invest them in the company’s shares.  That may be the best way to make money from Walmart.

In this issue, we have provided comprehensive prognostication on the future of China’s economy and a Readers’ Digest version of what Sergio Zyman is likely to say at the coming Kid Power Conference for anyone who either won’t be in attendance or is looking for a way to slip out early for a round of golf.

All the best,

Tom Keoughan

By | April 27th, 2005|ToyJobs Blog|Comments Off on TRU Future: It Pays To Know Who The Owners Are

A Tale of Two Toy Fairs

Two toy fairs occurred in February of 2005.  At the Javits Toy Fair, most of the specialty manufacturers were very upbeat as some long absent retailers returned to sacrifice their feet to the world’s hardest floors.  Just as importantly, manufacturers were writing orders.  The majority of company presidents that I spoke with wrote enough business to more than pay for the show.

Back at the Toy Building (for now) there was mostly grousing along the lines of “what are we even doing here.  None of the majors are here.”  Upon closer questioning, however, it did turn out that most companies’ schedules were pretty full.  I don’t know about you, but with such a large percentage of the business being done by three or four majors at low profit margins, I’d be trying like hell to diversify my account base.  A company can live by Walmart one year but die by them the next.   With a well diversified account base (re: small, pesky accounts with higher margins) especially if you can sell them enough to cover your company SG&A, you can live to fight another day.  Also, although Walmart wasn’t at the show, some of the more aggressive manufacturers did make inroads by selling to Walmart.com.

What will become of the October and February Toy Fairs in the future?  There is so much rumor, insider gossip and white noise out there that at least at this point it’s safe to say that nobody really knows.  One thing we can all hope for is that we won’t have to schlep to Orlando – a completely artificial land made up entirely of bad food, plastic and foam.  I’ve lived my entire life without ever setting foot in Orlando and am not anxious to start now.  As for maintaining trade shows in Manhattan, I’m all for it – but it seems a shame that so much time and effort is being spent on a glimmer of a hope for a Toy Building over on the West Side which may be built by 2012, if New York gets the Olympics, or if there’s a new football stadium that no one needs, if, if, if…Such things are pipedreams and fiascos made of.  Manhattan supporters and the toy industry as a whole would be better supported by focusing this energy on finding a building that actually exists and isn’t in the middle of nowhere. 

Two of the major toy retailers had pretty good fourth quarters in 2004.  Target had strong same store sales growth while Walmart had 9% overall sales growth and a 16% profit surge.  Walmart’s same store sales were hurt by continuing to cannibalize their own sales by opening a flurry of new stores in the quarter.  Interestingly, Walmart’s CFO has at long last finally stated that the company should be judged by total sales and profits rather than same store comparisons.  Toys ‘R’ Us muddled along with a year that can best be described as “less bad.”  As for KB – gee, do we really still count KB?

In WALMART UNIONIZATION news it should come as no surprise that Walmart closed the Quebec store which had voted to unionize.  Walmart Canada spokesthingie Andrew Pelletier stated “we have been unable to reach an agreement with the union that in our view would allow the store to operate efficiently and profitably.”  No mention was made of how much Mr. Pelletier’s salary has cost the company or of how many productive employees might have been retained had Mr. Pelletier’s labors been judged on efficiency and profitability.  With regard to a second Quebec store whose employees are considering UNIONIZATION; the Quebec Government Labor Relations Board told Walmart Canada to stop intimidating employees who wished to unionize.  The Quebec Board apparently carries little weight in the great state of Colorado where Walmart successfully intimidated employees who had called for election into then voting down their opportunity to unionize. 

At Toys ‘R’ Us, The Dude and the board continue in their bungling ways.  It’s almost too incredible to believe that they thought they could sell off the sagging domestic toy division and then sneak off with the good stuff.  Apparently, they never considered that a sophisticated buyer might want to buy and hold Babies ‘R’ Us while disposing of the toy group and real estate to finance the deal.  This type of thing happens when you hire a very pretty tropical fish who believes, and then convinces you, that he can swim with the sharks.  Then again, the TRU share price has just about doubled so maybe he’s sharkier than he appears.

We applaud recent comments made by TRU toy group president John Barbour in which he calls for both greater innovation and less commodization in the toy business.  One can’t help but hope that he’s able to shake himself loose of The Dude and then walk the walk as well as get his computer jockeys (buyers) to do the same.  If he can pull it off, TRU and the toy industry as a whole just might stand a chance.

All the best,

Tom Keoughan

By | March 15th, 2005|ToyJobs Blog|Comments Off on A Tale of Two Toy Fairs

Turmoil in Toyland…So What Else is New?

Toy industry turmoil continues with KB Toys preparing to close over 200 stores.  The toy division of Toys R’ Us is up for sale and any buyer’s also likely to close somewhere near 200 stores.  Walmart had a Thanksgiving weekend mini-stumble, but lets not shed too many tears, they were quickly back with a vengeance.  Actually, it’s sort of nice to see that they’re not completely infallible.

On a brighter note, the Kmart-Sears tie up should create a stronger although still weak competitor and there is a very good possibility of much increased toy inventory on all those Sears shelves.  We can argue all night about geopolitics (come to think of it, we probably have) but in the retail space, anything that leads to a more multipolar world is good for everyone.

It seems likely that toy manufacturers will be able to push through some moderate price hikes for 2005.  That even as we can envision manufacturing costs coming down somewhat due to lower oil, resin and transportation prices.  This seems to add up to lower sales volume but wider margins for the coming year. 

Through all this, toy industry hiring has continued unabated.  Here at Toyjobs, we are in the process of posting our second best year out of twenty-three.  Going forward, successful companies will have to be nimble, smart and retain the very best people.

Here’s to a happy and profitable Holiday Season,

Tom Keoughan

By | December 15th, 2004|ToyJobs Blog|Comments Off on Turmoil in Toyland…So What Else is New?

Total Turmoil in Toyland

Let’s see, what hasn’t happened in the last four weeks? Toy shows always bring out plenty of news, rumor and innuendo but this time it’s a little hard to keep up.

We opened with the bankruptcy announcements by Applause, Fun 4 All, Hedstrom, and Huffy and from there moved on to poor earnings announcements at Mattel, Hasbro and Leapfrog. Then there was Hit Entertainment’s dismissal of CEO and chief architect Rob Lawes. Add to this KB Toys announcement that it will be shutting close to 200 stores after Christmas and the discovery that TRU’s toy division is being actively shopped (although TRU isn’t saying much, maybe they’ve gotten just a little bit smarter). Also, the Toy Building has been put up for sale – something they forgot to mention at their cocktail party.

Then there are the lawsuits. The World Wrestling suit against Jakks Pacific, Stanley Shenker, Bell Licensing et al looks particularly nasty. It will be interesting to see how that plays out. Allegations are easy to make especially when there are lots of big egos involved. They can be much more difficult to prove even if true. I certainly have no way of knowing what if anything happened, but it will be interesting to watch.

Then there is the lawsuit that Mattel has filed against Ron Brawer because he didn’t care to work for them any more and found himself another job. This appears to be a nuisance suit as apparently Mr. Brawer had no non-compete or confidentiality agreement with Mattel. Never in my life did I think I’d find myself on the same side of an argument as Isaac Larian, but Mattel is really screwing up here.

If a hypothetical company, let’s call it “Stalag El Segundo” were hypothetically to start having current and former employees followed by private detectives, were to submit their current employees to grillings by teams of attorneys, were to install security cameras in many of its offices, were to begin heavily monitoring employee phone bills, e-mail and computer activity; if a hypothetical company were hypothetically to do all that, my twenty three years experience as an executive recruiter tells me that they are likely to get results that they did not intend. That companies employees might be cowed for a month or two but in such a stifling environment would quickly decide to head for the exits. It’s the sort of thing that brings joy to a headhunter’s heart.

After rehashing all that, the following may seem counterintuitive but the October Toy Show was pretty upbeat. While some people complained about the lack of hall traffic, that’s not the type of show it is. Of the approximately thirty toy company presidents that I talked to, most felt that the show was very productive. Also surprising is that toy industry hiring continues at a torrid pace.

Too many things are happening too fast to have a fully developed thirty minute answer as to why this is so (sorry, sitcom watchers). It may be that we are finally at a tipping point. Much has been said in the last couple of years in this space and everywhere else about how Walmart’s drive to use toys as loss leaders has structurally changed the business. We may now be at the point where the market is choosing winners and losers. In the current environment it is very hard to be a winner, it is also very good to be a winner. Even more difficult than being a winner is to be average and still survive. In other words, it has started to get mean out there. Companies that are developing new and flexible strategies and successfully executing them and adapting to a rapidly changing reality are moving ahead. Companies that are unable to see the changes, plan for the changes or execute on their plans have begun to and will continue to fall by the wayside.

I know the message is not particularly cheery, but it’s definitely time to toughen up.

All the best,
Tom Keoughan

By | November 2nd, 2004|ToyJobs Blog|Comments Off on Total Turmoil in Toyland

Continued Turmoil in TRUland

Within just two weeks of laying their bombshell on the toy industry, Toys ‘R’ Us was staggering around like a drunken man. The Dude was making phone calls to toy executives and back pedaling furiously. At the August 24th meeting, he told analysts that talk of selling the toy division may be premature. This is a little confusing in that it was the Dude himself who started that talk. Clarification was not forthcoming because TRU cancelled its regular Q&A session with analysts. No one that I’ve talked to believes a word of this retraction and it is generally attributed to attempt at damage control by a management that is so inept, that they can’t even figure out how to time a major announcement.

There has been talk that the Dude is planning a master stroke of adding fast food and arcade games to their stores. This sounds like one of his already failed “we’re not a store, we’re an experience” strategies. To be sure this may attract ‘tweens and younger teens, but with kids “growing up earlier” this is not a crowd that is likely to be buying a lot of Barbies, Leapfrogs, or stuffed animals. It almost appears as if heavy drinking has been substituted for sound business strategy.

In addition to TRU’s downward spiral into madness, the toy industry has been hampered by both a shortage of chips and high oil prices which is fueling increased electricity costs in China, transportation costs everywhere and an over 30% rise in resin prices. Walmart will not eat these cost increases (at least not this year) thus sparking increased margin erosion.

Also looming is TRU’s announced 150 million in writedowns. For toy manufacturers total sales will most likely be better than last year, but margins could very easily be worse.

In terms of toy industry hiring, I am happy to announce that my predictions of last month were dead wrong. Coming out of the seasonal summer slowdown hiring has accelerated and is now quite robust. There is not a lot of wholesale hiring going on but everyone seems to need an extra pair of hands or two. The coming October toy fair should be interesting to say the least. I look forward to seeing you all there.

All the best,

Tom Keoughan

By | September 20th, 2004|ToyJobs Blog|Comments Off on Continued Turmoil in TRUland

TRU Board Wakes Up…Finally

The Toys ‘R’ Us board finally awoke from a deep five year slumber when one of their members suddenly came to and was heard to shout: “Dude, Where’s My Company?”  The Dude had spent the last year building a mega million dollar headquarters, buying pricey Stargates and awarding himself 5 million dollar bonuses while Walmart ate all of his lunch and a large portion of his dinner too.  This is the second toy retailing institution that…Well, you know.  None of this was able to rouse the board and they seem still to be a bit drowsy because The Dude is still around although we suspect that he’s no longer really at the helm. (Step up Mr. G.)

At this time, it’s difficult to say exactly how this will affect toy manufacturers, except that it won’t be good, because TRU has not provided very complete information and isn’t answering any questions.  Looking back over the last five years perhaps we shouldn’t assume that they know what they’re going to do at all.

It appears that the board, The Dude and several senior executives are going to jump ship and hop into the much smaller but much healthier lifeboat of Babies ‘R’ Us.  How the separation will be achieved is pretty much open to speculation.  Speculation at the expense of others can be a fun and stimulating pastime and so we’ll give it a go.

First, it seems fairly certain that TRU will shutter a significant number of unprofitable stores (100+) and either sell off the real estate or sell off long term low rent leases similar to what K-Mart recently did.  This would be a smart move and could raise significant capital.  The question is what will they do with the cash?  They could return it to shareholders – not very likely.  Since it is toy stores being sold they could give it to the remaining toy division to patch up and rebuild.  Perhaps, but I suspect that the toy division will mainly end up being recapitalized by selling off its international unit.  It could go to Babies ‘R’ Us along with the board, The Dude and the rest of the ship jumpers…hmm.  Babies ‘R’ Us could use the loot to fuel a long term growth strategy or it’s also likely that they may need a brand spanking new mega million dollar headquarters and perhaps their own Stargate or two.  As a registered cynic, I suspect that is where most of the money will go with just enough being given to the toy division to keep up appearances and satisfy the board’s liability insurance company.

The toy business could be sold to a strategic partner but I don’t think that they are exactly lining up and any strategic buyer would have to be so incredibly stupid that there would be very little chance that they could ever fix the damn thing.  It could be spun off to shareholders.  “Dear Shareholders, please accept this falling knife as a symbol of the esteem in which we hold you.”

What would seem to make the most sense would be for the toy business to be either taken private or sold to a private equity group. Without having to waste time, money and energy on the wacky growth strategies needed to please the equity investors who somehow never figured out that this was a mature business; a slimmed down, better operated toy division could be a real cash cow.  In these uncertain times there is nothing wrong with cash.  I like cash.  Please send ME your cash.

A possible silver lining in all of this is that the toy division will be run by John Barbour who recently ran Toys ‘R’ Us International.  John is a smart, honest, hardworking guy who very importantly has spent most of his career on the manufacturers side.  Hopefully, this might mean he will be more willing to “partner” with his vendors and less likely to pull the type of crap that Toys ‘R’ Us has become all too well known for over the last ten years.  This idea should be tempered though with the knowledge that Mr. Barbour will be performing emergency surgery and has an extremely tough job ahead of him (note: Mr. Markee opted to hop into the lifeboat.)

In the very short term our eyes are riveted on the words: “150 million dollars in writedowns.”  Toys ‘R’ Us is genetically incapable of swallowing this type of a thing and vendors had better watch out.  The company’s long term motto for vendors – “When we suck, you pay!” will certainly be in force.

How does all this affect toy industry hiring?  Hiring has continued to be robust through July.  In fact, at Toyjobs, July was our best single month in twenty three years of practice.  Most of this can be attributed to closing out searches which began in May and June.  New search starts in July slowed due to the usual seasonal fluctuations and the same appears to be happening in early August.

For the year, toy industry hiring has been way up with the exception of Mattel which seems to be desperately trying to manage earnings through layoffs rather than growth.  The economy has turned the corner, although as I’ve said before, the toy industry uptick has been much more muted.  This is likely because the industry’s problems are not caused by consumer demand but by retailers.  These troubles will continue until someone devises a new method if distribution which lessens dependence on Walmart, Toys ‘R’ Us and the like.  So far, I’m not smart enough to figure that out, but hopefully someone will be.  In the meantime, toy companies have been running so lean over the last couple of years, that even a modest upturn have left manufacturers scrambling to get the work done and every company seems to need a couple of extra pairs of hands.

Up until last week’s news, I was predicting that the summer recruiting slowdown would end in late August as it usually does and that hiring would be strong through the end of the year.  The TRU news throws a new uncertainty into the mix and I suspect that until there is more explicit information that toy companies will temporarily act like deer staring into headlights until they can figure out how all this affects them.  Ultimately, Walmart and Target will come a-knocking, looking for samples – faster, earlier, cheaper and with lots of changes and toy companies will be forced to hire people to get the job done.

While people are currently enjoying a slower, more relaxing summer pace; the combination of last weeks news and the fact that October Toy Fair is not as far away as it looks has prompted us to include the following article as a public service.  It provides some techniques purported to help us each to reduce stress in the workplace (toy business? stressful?).

Will they work?  I don’t know yet but I’m going to start practicing now.  By the time the September ramp up rolls around it will be way too late.

All the best,
Tom Keoughan

By | August 17th, 2004|ToyJobs Blog|Comments Off on TRU Board Wakes Up…Finally

Help Wanted: Major Toy Retailer Seeks Successful Strategy

The feedback that we’re getting on the mood in Hong Kong is that manufacturers are not so much cautiously optimistic as much relieved that 2003 is finally over. There seems to be an element of “It’s got to be better than the last three years.” Barring any unforeseen geopolitical normally be true but (and it’s a big but) Wal-Mart clearly has its eyes firmly fixed on competing toy retailers and is slowly squeezing the life out of them. Once that is accomplished it’s anybody’s guess as to who they’ll squeeze next.

Most retailers, excluding toy retailers, had a very strong holiday sales season with the flawed measure of comparable store sales at most of them up over 4%. Total sales for most were up well into the double digits. For toy retailers, on the other hand, the season was disastrous. FAO finally ground to a halt and will likely poke its head up with new ownership and an extremely scaled back presence. The KB situation smells a bit like a company that didn’t really have to declare Chapter 11 but is using bankruptcy laws as part of a corporate strategy to stiff their vendors and weasel out of leases. Total sales were down at Kmart, but that’s easily attributable to having fewer stores. More importantly, they were profitable so at least it appears that they are being managed properly.

The linchpin is Toys ‘R’ Us. While the reduced number of stores at FAO and KB should clearly benefit TRU, they have Wal-Mart camped at their front door like a big cat, well fed but still hungry for more. TRU had lousy sales numbers, weakening margins and their debt was cut to junk status by Standard and Poors. I would look for them to be very demanding on the markdown money department. “We’ve had a lousy year and you’re going to pay for it.” Of greater long term concern is that thus far, corporate strategy seems to be exactly wrong with little sign of any new clear thinking. Will management be able to come up with a new strategy that can succeed against big W? Or will the focus continue to be on new corporate headquarters and sculptural boondoggles. Is it better to have no strategy at all or to have a bad one and be driving hard down that wrong road? These philosophical questions will certainly be much discussed over late night cocktails in cold February New York. I can almost hear the fiddling even as I whiff the strong smell of smoke.

See you in New York,
Tom Keoughan

By | January 19th, 2004|ToyJobs Blog|Comments Off on Help Wanted: Major Toy Retailer Seeks Successful Strategy