Toys ‘R’ Us outlined its strategy for improving the company’s operational performance and driving profitability following a disappointing 2013 performance.
At presentations Wednesday for investors, industry analysts and the media, Antonio Urcelay, chairman of the board and chief executive officer, Toys ‘R’ Us, and Hank Mullany, president, Toys ‘R’ Us U.S., provided a comprehensive assessment of the company’s fiscal 2013 performance and discussed their TRU Transformation strategy.
“As we look to the future, our strategy will establish a path to sustainable business growth, building upon the company’s unique strengths. Toys ‘R’ Us is one of the most recognized brands in the world with a strong international presence and a large and loyal customer base,” says Urcelay. “Our 2013 performance was, no doubt, disappointing. While this was partly driven by macro conditions, such as the decline in birth rates since 2007, which has contributed to stagnating overall toy and baby industry sales, and the rapid growth of online shopping, we cannot blame these factors. We believe that several execution issues also impacted these results. Over the past several months, we have undertaken a comprehensive analysis and diagnosis of the business. We are encouraged that all of these foundational issues are firmly within our own control to fix, and our strategy will address these to improve the business over the short-term and put the company on track for the future.”
In 2014, the retailer’s objective will be to slow sales decline, stabilize cash flow and improve EBITDA to effectively position the business to grow revenue and profits in 2015 and beyond. This transformation plan highlights four key priorities:
- Transform the shopping experience in-store and online–To improve the customer experience in-store and online and become a customer-centric business, the company has already begun to implement initiatives such as cleaning up existing stores, improving the speed of checkout, solidifying customer relationships through strengthened loyalty and targeted marketing programs, improving price perception by developing a clear pricing strategy and simplifying promotional offers and optimizing the e-commerce experience. Mullany also unveiled a new customer promise to provide the broadest selection of products to help kids and babies develop, learn, have fun and be safe, to be the easiest place to research and to find solutions throughout the journey of parenthood and the best resource for children’s gift-giving occasions all at fair prices in an environment that offers expert service and unique services with the ability to shop whenever, wherever and however they want.
- Collaborate with business partners to drive differentiation, innovation and value–As part of TRU Transformation, Toys ‘R’ Us will leverage business partner relationships in the U.S. and abroad to drive category leadership and effective differentiation in products, events and services and create exciting shops and product statements in-store.
- Develop high-performing, highly engaged and diverse talent–Internally, priorities will include reviewing the organizational structure, creating an infrastructure that promotes talent development, maintaining a culture of productivity and accountability, driving training in the areas that matter most for customers, cultivating a culture of engagement and enhancing the ability to hire and retain great talent.
- Become fit for growth–The company will focus on improving operational and financial performance, while positioning the business to capitalize on future growth opportunities through the implementation of a right-sized cost structure, a strong focus on disciplined inventory management and the deployment of capital to key growth initiatives.
Overall, the company is in the midst of a renewed assessment of its operations and business structure to determine where greater efficiencies can be created and where additional resources can be allocated to help best serve customers. As part of this evaluation, TRU has now eliminated more than 500 positions across all functions, but has no plans to close a “significant” number of stores (with the exception of some stores where leases are expiring). The company has decided to close the McCarran Distribution Center in Storey County, Nev., June 1.
The company ended the year with a strong liquidity position of approximately $1.8 billion and reduced its total long-term debt by $322 million to $5 billion. In addition, it successfully refinanced its $1.85 billion senior secured revolving credit facility last week. The company has no material outstanding debt repayments due until 2016, providing a large window to grow and develop new strategic initiatives.
“Our TRU Transformation strategy is grounded in consumer research and customer insights, and is anchored by three guiding principles–easy, expert, fair,” says Mullany. “Among our highest priorities will be to deepen our focus on the customer, build meaningful relationships through loyalty and targeted marketing programs, and improve the shopping experience both in-store and online. We are committed to delivering on our mission to bring joy into the lives of our customers by being the toy and juvenile products authority and definitive destination for kid fun, gift-giving solutions and parenting services.”