Toys R Us Sold

Toys R Us is the world's largest children's specialty retailer. The company operates toy stores throughout the world and is publicly traded on the New York Stock Exchange. In this paper I will give a brief company history, cite where the competitive environment is coming from, strategies that were attempted, and where they stand today.

Toys R Us founder Charles Lazarus opened the first Toys R Us store in Rockville in 1957. The company went public in 1978 and evolved into a powerful international toy vendor, with Kids R Us, Babies R Us and Toyrus.com. It operated 638 stores in the United States and 579 outside the country.

Although Toys R Us participates in the Specialty Retail industry, it has identified its major competitors not as other specialty toy retailers, but as department and discount stores, including Wal-Mart, Kmart and Target. Within the specialty retail segment, Toys R Us competes against FAO Schwartz and K-B Toys.

The discount and department stores against which Toys R Us competes do not break down their revenue by product segment, so it difficult to gauge the market share of toys that these stores generate. However, as the company moves into additional segments, including children's apparel, it will be competing against these retailers in other segments, as well. In the specialty toy retail segment, Toys "R" Us enjoys a significant market share over both K-B Toys and FAO Schwartz.

Toys R Us Inc. revolutionized the toy industry more than four decades ago with its big-box, low-price stores. Toys R Us may be synonymous with toys, but also has its fastest-growing business in Babies R Us, which sells children's clothes, furniture and accessories. The company opened new stores and planned to build new additional Babies R Us stores.

Toys R Us ventured into a partnership with Amazon.com to improve the e-commerce division of their business. Internet retailing was cutting into the profits and the market share of Toys R Us. This financial effect was the reason they the needed to improve and establish themselves in the Internet market. This Internet market was clearly the way the trend was going, as indicated by the growth of retailers such as eToys.com and SmarterKids.com. Toys R Us needed to establish itself in this market, since bricks and mortar retailing seemed like a dying trend.

Toys R Us has enjoyed strong performance during the late 1970s and 1980s. The 1990s, however, have been characterized by increased competition and an erosion of the company's market share. This has been reflected in the stock's performance, which has been lackluster during the early and mid-1990s. Toys R Us began to struggle with fierce competition. The discounters had made it a price game which Toys R Us could not compete in. Other large toy chains have suffered even more. FAO Schwartz Inc. and KB Toys Inc. have filed for Chapter 11 bankruptcy protection, both citing competition from discounters. Toys R US came to the realization that it may have to sell off its toy business.

Before small toy retailers feared Wal-Mart, Toys R Us used low prices and wide selection to wipe out hundreds of specialty stores throughout the 1960s and 1970s. Now competition from discounters Wal-Mart and Target Corp. has left Toys R Us struggling for profit and searching for ways to cut costs. The chain's profits began to fall and sales have remained flat.

Toys R Us' financial troubles are not new. As part of a broad reorganization, the Wayne, N.J. company, who at one time was the nation's second-biggest toy retailer, decided to close their Kids R Us stores and sell of its Imaginarium stores, which sell educational products and be left with Toys R Us and Babies R Us. By doing this Toys R Us has planned that over the next year it would reduce operating expenses and cut capital spending. In addition, it planned to mark down prices throughout its U.S. stores to quickly sell inventory and raise cash. Things did not improve so they had decided to separate Toys R Us from Babies R Us. Babies R Us. The Plan was for the two remaining groups would begin operating as separate companies in 2005.

After all attempts to turn the business around and faced with failure and the fact they can't go it alone, in March 2005, Toys R Us announced that it has concluded its strategic review and reached a definitive agreement to sell the entirety of its worldwide operations, including Babies "R" Us to an investment group consisting of affiliates of Kohlberg Kravis Roberts