News > Companies
Toys R Us to cut jobs
graphic January 28, 2002: 10:49 a.m. ET

Toy retailer to slash 1,900 jobs, shutter 64 stores to bolster bottom line.
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  • Toys 'R' Us reaffirms 2001 estimates -- Jan. 10, 2002
  • Remaking Toys R Us -- Dec. 21, 2001
    NEW YORK (CNN/Money) - Toys R Us Inc. is slashing 1,900 jobs and closing 64 stores as it continues a restructuring effort to focus on its core toy business, the company announced Monday.

    The nation's No. 2 toy retailer, behind Wal-Mart Stores Inc. (WMT: up $0.64 to $59.04, Research, Estimates), will take a $237 million pretax restructuring charge but expects the moves to save at least $30 million a year.

    The company is also consolidating five New Jersey support facilities into one, resulting in the elimination of some executive staff included among the 1,900 job cuts it announced.

    "Toys R Us is a bit of an enigma for me. I give (CEO John) Eyler a lot of credit," Morgan Stanley retail analyst Bruce Missett said. "He's done a lot of things that had to be done to this business ... I just don't know a year from now what kind of growth you're going to have."

    Analysts have generally been happy with the company's turnaround efforts and its focus on customer service as a way of competing against Wal-Mart rather than through low prices, but the sluggish economy and fierce competition has many concerned about future growth.

    "With the declining economy and September 11, we were concerned that the fourth quarter wouldn't be as well as we expected," said Diane Shand, an analyst at Standard & Poor's, which placed Toys R Us on credit watch on Oct. 15.

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      graphic CNNfn's Joya Dass takes a closer look at Toys R Us.

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    Toys R Us (TOY: up $1.30 to $20.05, Research, Estimates) shares were higher in Monday morning trade.

    The Paramus, N.J.-based retailer is upgrading many of its older stores as it faces growing competition from discount retailers such as Wal-Mart, Kmart (KM: up $0.05 to $0.90, Research, Estimates) and Target (TGT: up $0.92 to $43.16, Research, Estimates), which have expanded further into Toys R Us' key markets in New Jersey, New York and Boston in recent years.

    Additionally, retailers have been struggling to drive sales as the economy slipped toward recession during 2001, helped along by the Sept. 11 attacks, which caused consumers to turn cautious in their spending.

    Toys R Us said the jobs will be cut at headquarters and stores, as it closes 37 Kids R Us apparel stores and 27 Toys R Us stores that have not been renovated under its renovation program.

    During a conference call with analysts Monday, Eyler said the company is scheduled to complete its toy store renovations, which cost on average $600,000 a pop in 2002, helping to bring capital expenditures below $500 million -- a number Wall Street analysts have warily been eyeing as the company embarked on its restructuring.

    Toys R Us plans to convert 130-to-140 more stores to the new format this year. The "Mission Possible" format features toy stores with wider aisles and themed toy areas such as "Animal Alley" for stuffed animals, making them easier to navigate.

    "It is clear we have a significant number of unconverted stores that are not yet performing where we would like them to be," Eyler said.

    Eyler also told analysts that rival Kmart's Chapter 11 bankruptcy filing last week could free up to $250 million worth of toy inventory if the company shutters 500 stores as some analysts have speculated.

    "If that were the case, we certainly expect to compete for that market share," Eyler said. "There are two big market share players, us and Wal-Mart. Our combined market share is greater than Kmart and Target today. We would expect Wal-Mart to continue to increase its market share because they continue to build stores, and we expect to continue to grow our market share. Can we grow parallel to them? The answer is, absolutely."

    The company has also strengthened its Internet commerce division.

    In 2000, Toys R Us struck a partnership with in which the online retailer fills orders for the Toys R Us Web site. Since then, the Toys R Us online unit has been one of the top holiday season performers among Internet retailers.

    Eyler said the company currently operates 433 of its 1,213 toy stores in its new "Mission Possible" format. The company operates a total of 1,609 stores, including Toys R Us, Kids R Us, Babies R Us and Imaginarium.

    The company said it plans to add about 100 new stores in 2002. graphic


    Toys 'R' Us reaffirms 2001 estimates -- Jan. 10, 2002

    Remaking Toys R Us -- Dec. 21, 2001