Wall Street Journal writer, Ann Zimmerman, has an interesting article on what appears to be a delay in plans by Toys R Us to go public. The August 26, 2011 article entitled: “Toys R Us IPO: Still Withering on the Vine,” looks at why the plan to go public, which was announced 15 months ago, has still not taken place.
Among reasons given are the challenging stock market and less impressive sales increases than a year ago. The challenging stock market is a given but I think analysts may be missing some key points in evaluating Toys R Us:
- Wal-Mart’s time as the toy industry dominator may be over. They lost their way two years ago when they made cuts to the department and it doesn’t look like they are getting it back any time soon. That only benefits Toys R Us.
- Toys R Us’s progress over the last year has to be seen in terms of a toy industry that is currently limping along. Virtually every sales rep I speak to complains of very slow sales and very little action.
- Toys R Us is a far better place to shop than it was before Jerry Storch took over; clerks are helpful, stores are clean and product is more interesting. It is simply a much better shopping experience and that means far stronger brand equity.
- Most importantly, Toys R Us is beginning to see that it is ultimately more about play than toys. The inclusion of iPad and iPod departments in the stores means that childre lost to age compression as well as teens and young adults still have a home at Toys R Us.
It is this last point that I think gives Toys R Us its true advantage. The company fully realizes that it is in the play and entertainment business; not the toy business. I am not so sure that its rivals have fully figured that out yet.
Advantage Toys R Us; bring on the IPO.