Tuesday, January 30, 2018

After Weak Sales, Future in Doubt at Toys ‘R’ Us

A source connected to Toys ‘R’ Us told a reporter at CNBC that holiday season sales at the bankrupt toy giant were so poor that its bankruptcy financing is being called into question.

We already knew that stock, traffic, and revenue were down during the holiday shopping season at Toys ‘R’ Us, but prices too were lower than planned as the retailer “discounted roughly 10 percent more of its products in holiday 2017 compared with the prior year.”

Deeper in the story is the hint that the two largest toy manufacturers, Mattel and Hasbro, might not support an exit from bankruptcy for Toys ‘R’ Us. These two manufacturers supply most of the products sold in Toys ‘R’ Us despite having a smaller market share in every other distribution channel, so they would lose a significant amount of market presence if Toys ‘R’ Us were to close. Analysts had previously assumed these two manufacturers would support Toys ‘R’ Us no matter what happened, but with the whole toy industry in decline, toy manufacturers are not financially strong enough to prop up a perpetually struggling retailer. The planned liquidation of 20 percent of Toys ‘R’ Us U.S. stores and dozens more at the U.K. subsidiary already put unusual financial pressure on the toy manufacturers.