At the end of March, international leading toy retailer, Toys R Us announced considerable changes to take place as an ongoing effort to boost company performance and promote growth in sales. The new plans initiated falls under the company’s “Tru Transformation” strategy—designed to enhance the multi-channel customer experience, increase online and in-store sales, expand and improve stores internationally, and pinpoint cost saving opportunities.
The two-year old strategy has led to significant progress within the first year of being introduced, reducing the numbers of declines in sales, creating a consistency in cash flow and refining company EBITDA according to the fiscal 2014 overview. Net sales for 2014 reached $12.4 billion, an increase of $61 million compared to fiscal 2013. “Our strategy remains the same, but will evolve in 2015 as we continue to strengthen the foundation of the company in order to achieve sustainable growth in the future,” says Antonio Urcelay, Chairman and CEO of Toys R Us. He also included that “aggressive steps in the months ahead” is expected to occur in order to cut down on operational costs and improve productivity in all stores worldwide.
This year, Toys R Us is putting more emphasis on becoming a customer-centric company, giving the retailer a competitive advantage over big-box discounters such as Walmart, Target and Amazon. Toys R Us will take customer insight into consideration to make the in-store and online services an exceptional experience for multichannel shoppers. Babies R Us specialists will receive proper education on products to better-inform customers with questions. Loyalty members can anticipate extra personalized offers and special events to occur yearlong—in effort to drive in-store traffic visits and sales. Select stores will undergo physical interior and exterior modifications, new lighting, and investments to make stores more appealing.
With more than $1.2 billion in e-commerce sales, Toys R Us is committed to further enhancing growth in online sales by fine-tuning its omni-channel services, such as in-store pickup and ship-from-store. More shoppers are purchasing items through their mobile devices, accounting for 57 percent of Toys R Us U.S. digital visits. Through the “Tru Transformation” strategy, Toys R Us plans to update and augment the shopping experience for mobile customers.
In conjunction with its Fit for Growth initiative, Toys R Us will focus on cutting operational costs and develop a more streamlined organization across all stores globally. In 2014, Toys R Us identified cost saving opportunities of $150-200 million in the U.S. and an additional $50-75 million of savings in oversea locations—all to be accomplished by fiscal 2016. “Right-sizing the cost structure of the Company and creating operational efficiencies across our global organization will continue to be a major focus as we move forward,” Urcelay reported during fiscal 2014 results. A third-party provider is set to manage its Operations Accounting and Fixed Assets functions in the U.S. and Canada—enabling the company to discover more ways to save on store and warehouse expenses this year. New management boards in each country will oversee performance in their stores to enrich the in-store experience for customers according to their respective location.
Although nearly a dozen U.S. locations have closed due to expirations of occupancy, Toys R Us has no plans to close any large amounts of U.S. stores this year. Stores will continue to expand throughout China and Southeast Asia. Under Urcelay’s leadership, Toys R Us has refinanced its $1.4 billion in debt with no payments to make for two years.
