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Consumer Products

Toys ‘R’ Us talks fast-paced transformation

At a presentation for analysts and investors yesterday, Antonio Urcelay, chairman of the board and CEO of Toys 'R' Us, along with company president Hank Mullany, outlined plans to transform the retailer's core business in the wake of another round of disappointing quarterly results.
March 27, 2014

At a presentation for analysts and investors yesterday, Antonio Urcelay, chairman of the board and CEO of Toys ‘R’ Us, along with company president Hank Mullany, outlined plans to transform the retailer’s core business in the wake of another round of disappointing quarterly results.

“They were no good,” Urcelay bluntly stated in reference to the reported net losses of US$210 million in its fourth quarter and US$1 billion for fiscal 2013. “You cannot be happy with them.”

The thrust of the presentation, however, concerned the “TRU Transformation” strategy. The broad-strokes of which were sketched out by Urcelay and Mullany.

The transformation will be focused on four areas: customer satisfaction, improved price perception, better and more efficient inventory management and right-sizing the cost base.

Mullany noted that the highest priority will be in improving customer satisfaction by “cleaning the stores,” offering less clutter, better store navigation, faster check-outs and a better online experience. He noted that the company will strive do a better job utilizing its vast customer loyalty program information to better serve individual customers. As well, he added that there will be increased in-store activities, quality – rather than quantity – in-store exclusives, less-confusing coupon offerings and refund policies, and an emphasis on improved training for staff.

“Our strategy is grounded in consumer research and customer insights,” he said. “We will deepen our focus on the customer.”

Mullany also noted that the company will work with its suppliers to create differentiation and value by creating globally coordinated brand statements that leverage TRU’s vast physical retail space.

Another point of emphasis will be in inventory management, an area that Urcelay admits has been lacking.

The strategy will “not tolerate slow merchandise” by moving out of slow movers at a quicker pace rather than to allow them to sit on store shelves.

“We would rather take small hits every day, than a big hit one day,” Urcelay said. Mullany, who has a background with Walmart, is expected to take the lead in rationalizing inventory logistics operations.

Both Urcelay and Mullany denied reports that the company is announcing multiple store closings and lay-offs, but did confirm that the “right-sizing the cost base” will mean layoffs in the future.

“There are not many alternatives,” says Urcelay. “The process will take time.”

The executives pointed to growth in China and TRU’s innate brand equity as two positives that will be leveraged throughout 2014, a year that they say will “be a year of stability and re-investment” that will pave the way for growth they are hoping for in 2015 and beyond.

Another one of TRU’s strength’s, noted by Urcelay and Mullany, is its debt structure, with no major commitment until 2016, when payments of US$1 billion are due, giving the company a “large window” to develop and implement its new strategic priorities.

About The Author
Gary Rusak is a freelance writer based in Toronto. He has covered the kids entertainment industry for the last decade with a special interest in licensing, retail and consumer products. You can reach him at garyrusak@gmail.com

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