Toys R Us: Struggles in its domestic market

Toys R Us: Struggles in its domestic market

Code: ML-ML00022-014 | Published: May-2016 | Pages: 25 | MarketLine
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Toys R Us (TRU) has long been seen as the go-to for parents, toddlers and infants for toys and games. However, in recent years the company has struggled in an increasingly competitive marketplace and this has been evident by fluctuating levels of revenue growth. This case study analyzes TRUs recent financial position and assesses the opportunities and threats facing the company.

Key Findings
Understand the reasons for Toys r Us recent struggles and how it is changing its operations in a bid to turn its performance around

Assess the companys best growth opportunities

Analyze the threats facing Toys r Us

Reasons To Buy
How has Toys r Us performed in recent years and what has driven its results?

What strategies is Toys r Us adopting in a bid to boost revenue and profits?

What are the opportunities and threats facing Toys r Us?

Key Highlights
TRU Inc. is a specialty retailer in toys and baby products. The company operates through two business segments: domestic and international and has established its position through a number of acquisitions and mergers. In recent years the company has experienced mixed fortunes with falling revenues particularly in its domestic markets, which accounted for 60.9% of the companys revenues in 2015.

To combat declining revenues and net income the company has been proactive in its approach. TRU is diversifying its offering in order to increase its consumer base and whilst the US remains its key market, TRU has increased its presence in emerging markets. In addition to this, TRU is actively expanding in the growing online retail market which will in turn increase the companys revenues.

Although the company is looking for opportunities in international markets, TRU still generates the majority of its revenues from the US. The demand for private label products has been growing in the US in recent years which could adversely affect TRU revenues further. TRU operates and competes in one of the toughest competitive environments. The company competes with national and local discount stores, consumer electronics retailers, supermarkets and warehouse clubs, as well as internet and catalog businesses, such as Amazon. In recent times, price wars have been the most prominent of the competitive strategies. Moreover, the toys and games market is becoming increasingly digitalized and this poses a risk to traditional toy retailers such as TRU.

Table of Contents

Toys r us struggles in recent years
Toys R Us: a brief history
Acquisitions and entering into partnership has helped establish the company position in the toys market
Toys R Us struggles in its domestic market as well as some international markets
Growth opportunities for Toys R US
Product diversification increases TRUs consumer base
TRU teams up with a number of designers to drive sales in the childrenswear and maternity wear market
Pop-up stores increase customer spending during holiday season
TRU expands in the growing Chinese market
TRU increases its online presence
Threats facing TRU
Growth in private label toys could damage revenues of traditional toy retailers such as TRU
Intensified competition from non-specialists and new entrants leads to price wars
The growing digital gaming market affects TRU revenues
TRU must find its way in a competitive marketplace and return the company to growth
Further Reading
Ask the analyst
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List of Tables

Table 1: Revenues split by geographical markets ($) (%)
Table 2: TRU revenues, net income and growth FY 2010-2016

List of Figures

Figure 1: Global toys and games market growth compared to TRUs revenues (2011-2016) (%)
Figure 2: Heidi Klum and the Kardashians clothing range
Figure 3: Kardashian clothing range
Figure 4: Supermarkets Wal-Mart, Asda, Sainsbury and Tesco
Figure 5: Year on year growth of TRU and competitors Amazon, Wal-Mart, 2010-2015 (%)

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