UPDATE: Toys “R” Us; A Shadow Over Dallas

6a0133ec87bd6d970b01bb08fe52c6970d Toys
OCTOBER 4, 2017-The below post was written in anticipation of the Dallas Fall Toy Preview. I am now in Dallas and want to provide you with an update.

I have spent a day at the show, attended a Toy Association meeting about the Toys "R" Us bankruptcy and the cocktail party last night. I have also spoken with a number of exhibitors and attendees.

In general, I am finding the mood here to be concerned, at times angry yet highly resilient. A large percentage of toy companies in attendance are owed money by Toys "R" Us. There is a great sense of frustration on the part of toy companies with what as seen as a lack of effective communication by Toys "R" Us. 

Having said that, their attitude is, yes Toys "R" Us Is a concern. They will, however, take whatever hits they have to take and keep moving forward. In fact, toy exhibitors with whom I have spoken are happy with the show and feel they are having very good meetings.

The Toy Association is taking action to assist toy companies. I have requested information about what they will be doing and will share it with you when I receive it.

 

SEPTEMBER 29, 2017 – We are on the cusp of the Dallas Fall Toy Preview and it is going to be a less than carefree crowd in attendance. Toy companies are worried as they assess their potentially damaging financial exposure from the Toys "R" Us bankruptcy filing.

Toys "R" Us owes a lot of toy companies a lot of money. In fact, it owes a total of $7.5 billion. That is a staggering amount to an industry that only has a few major players. The question in the air, going into Dallas, is therefore not about 2018 but about what kind of payment arrangements will Toys "R" Us make and what companies will survive much less thrive. 

Adding to the concern is that Toys "R" Us seems to have lost whatever retailing mojo it had. According to a disturbing Washington Post article, "Toymakers say there is ‘widespread panic’ following Toys R Us bankruptcy": 

  • Toys "R" Us Second quarters sales were down 5%
  • Toys "R" Us suffered a $165 million loss
  • Same store sales were down 4.4%

On the same day that the Washington Post ran the article, September 28, 2017, Toys “R” Us officially announced its new brand positioning: “Today we Play”.  The company wants children to play outside. The company will open 42 "Play Lab" outlets where children can try out toys prior to buying. In addition, they will also hire toy demonstrators for the coming Christmas season. Toys "R" Us also plans to unveil a giant Etch A Sketch in downtown Manhattan. 

Having demonstrators in the stores and erecting a giant Etch A Sketch are moves in a positive direction. They do, however, raise the question: Why only now, when they are relatively low cost and could have / should have been done a long time ago. It is long overdue and will require a continuing commitment by Toys "R" Us to make Toys "R" Us once again "The" toy destination.

Try reading the Washington Post article and the Toys "R" Us press release at the same time and see how off kilter it makes you feel. Toys R Us and the entire toy industry are in the midst of a very dangerous time. Talk about giant Etch A Sketches and demonstrators are a nice approach but seem out of sync with a moment that for some toy companies could challenge their very existence.

3 thoughts

  1. you don’t let a $11.3 Billion business go down the drain. Someone will bail them out. They will still be in business 20 years from now. They need someone at the Helm that knows the toy business and can bring them back as the Toy Store to visit. They need to increase their SKU base and make it a Destination Store not just a Toy Store.They have to become more competitive and increase their Import Selection. The Import Selection will give them the Margin to offset the competitive pricing of Amazon, Target, etc.

  2. Thank you for your comment. I got the information from the Washington Post article cited in my post. Here is the full quote from the Washington Post:
    “Toys R Us owes $14.06 million to Jakks, which last year posted a profit of $1.2 million, making the California-based toy supplier one of more than 100,000 creditors sideswiped by the toy chain’s bankruptcy in the run-up to the all-important holiday season. In total, Toys R Us owes $7.5 billion to a group that includes virtually every major toymaker in the country: Mattel (owed $136 million), Hasbro ($59 million), Spin Master ($33 million), Lego ($32 million), Radio Flyer ($12 million), Crayola ($2.6 million).”
    Please let us know where you got your information from so we can know what is accurate.
    Richard

  3. You incorrectly imply that TRU owes vendors $7.5 B. That figure includes all outstanding liabilities, the vast majority of which are loans, not trade payables.

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