I-Executive Summary
The company Toys R Us has filed for bankruptcy in September. The company has officially announced its liquidation process to initiate from 22nd March 2018. The company is looking for shutting down its US operations. The company Toys R Us, once a well-established multinational company is going to try to save its international segments from liquidation. It can only be done if sales in the coming two years are more than the debt payments. It would need the company to reassess its mistakes and try to regain its market in the international and online channels.
II-Vision Statement
The Toys “R” Us is an American corporation which operates in the retail industry of Toys segment. It specializes in toy store chains by also selling baby products. The company has a short slogan which is very catchy and is used to recognize the company in advertising and marketing. The slogan is;
“Toys ‘R’ Us”
The company Vision Statement is;
“Our Vision is to put joy in kids’ hearts and a smile on parents’ faces.”
Mission Statement:
The Mission statement of the company Toys “R” Us is;
“Our Goal is to be the Worldwide Authority on Kids, Families and Fun.”
Value Proposition Statement
The company value proposition includes providing value to its customers by;
Its reputed industry is standing; the company has established its position by being the most well regarded and largest retailers of toys in the world. It has a track record of providing quality services and goods to the customers. The company also fulfills its value proposition by broadening its portfolio of services and products. The company offers an extensive range of products like toys, games, sports equipment, action figures and catering services for parties and children of all interests and ages. The company also provides value by extending its international reach. The company serves a large local customer base in the US. Other than this, the company also operates some retail stores in the Asia Pacific, Europe, Middle East, and Africa. The company also provides value through its accessibility. The company operates a broad network of outlets and online channels, making it possible for the company to reach its base with ease across all of its active markets. The company’s brand strength also provides value by being a well-known brand and well-recognized toy retailer in the world.
Company Description & Business Model Description
The company is considered as the globally leading specialty retail company for toys and products for baby regarding the Net Sales. The company reports in its annual 10K filing that it believes that the company toys and baby products are the authority of the world toys and baby products. The company sells a variety of toys from learning, entertainment, seasonal and core baby toy categories. The company offers these through Omni channel offerings which help it leverage the synergies among the e-commerce and brick and mortar stores. As of 2017, January 28, the company owned 1691 owned stores and 257 licensed stores in 38 countries around the world (Toys R Us, 2017). In September 2018 the company has filed for bankruptcy and is starting liquidating its US retail stores.
The company business model is based on conventional brick and mortar retail stores; however it has started to focus on the e-commerce channels as well. The company classifies its operations in two business segments; International and Domestic. The domestic business segment includes the 879 stores in the US, Puerto Rico and Guam. The international segment of the company operates 812 owned and 257 licensed stores in 37 countries. On March 15, 2018, the company has announced its official plans for liquidation of the inventory in all of its 735 US stores including the ones in Puerto Rico. The company is pursuing a “going concern” reorganization as well as sale process and is trying to find buyers for its Canadian operations and also for the businesses operating in Central Europe, Asia, including Switzerland, Austria, and Germany (Toys R Us Inc, 2018).
III-Industry Analysis and Trends
Five Forces Analysis:
| Threats of New Entrants: Low
The industry business model is a high capital intensive model which makes the entrance to the new businesses potentially expensive. Moreover, the high cost of start-up is also a barrier to the new entrants. The company also enjoys a well-established reputation in the market, which is not easily achievable for the new entrants. The high competition from retail stores, discount stores, and e-commerce retailers has also raised the bars for the new entrants. |
Bargaining Power of Suppliers: Low
With the long-established partnership with the suppliers, the suppliers do not enjoy much liberty in their bargaining powers. There are only a few larger distributors in the industry, and the retailers tend to buy in bulk, making the bargaining power of Toys R Us higher. |
| Bargaining Power of Buyers: High
The industry is very price sensitive which makes the customers shift and switch easily among brands The competition is primarily for the low-cost leadership. |
The threat for Substitutes: Low
The threat of substitutes is low because of the few comparable substitutes available in the market. In the Toy industry, it is important to look at the preference of the children who are very particular about their wants. |
|
Rivalry among the competitors: High Many discount stores have started to target the same market as the Toy R Us; Then the e-commerce giant Amazon has also provided high competition to the retailers pursuing the conventional business model of brick and mortar. |
|
PESTLE Analysis
| Political
Tensions in the China-US relationship Higher labor costs The impact of BREXIT |
Economical
The loss or gain from the translation of the foreign currencies The improvement in the Chinese economy The growth in economic diversification |
| Social
The decrease in the market The increase of profitability of the licensed products The change in preference of the market from the materialistic purchases |
Technological
The innovation requirement The volatility of the video game industry segment sales The use of technology and business intelligence for predictive analysis |
| Legal
The safety measures needed The stringent guidelines and regulations The rampant counterfeiting problems |
Environmental
The trend towards environment-friendly toys |
Strategic Mapping
| Financial | Reduce Costs | Increase Profits | Increase Revenue | |
| Customer | Improve Customer Experience | Retain Customer Loyalty | ||
| Internal Business Processes | Improving Internal Efficiency | Shutting Down of Loss-making Stores | Investing in Consulting Knowledge | Improving Baby R Us and e-commerce offerings |
| Learning and Growth | Increase Expertise | Increase Technology Efficiency | Optimize Human Resource | Provide Leadership |
Benchmarking:
| Previous Year % Change | |
| L Brands | 4.9 |
| Cabala’s | N/A |
| O’Reilly Auto Parts | N/A |
| Barnes & Noble | 0.0 |
| Menards | 1.3 |
| Bed Bath & Beyond | 1.3 |
| TJX | 0.0 |
| All Others | 0.0 |
| Specialty Retail Stores | -1.3 |
| Advance Auto Parts | 0.0 |
| Abercrombie & Fitch | 3.9 |
| Ascena | 1.3 |
| PetSmart | 1.3 |
| Dick’s Sporting Goods | -1.3 |
| Staples | -2.5 |
| Foot Locker | N/A |
| Toys R Us | 1.3 |
| Michaels | N/A |
| Lowe’s | -1.3 |
| Best Buy | 1.3 |
| AutoZone | -2.5 |
| Burlington | -2.5 |
| Petco | -1.3 |
| GameStop | -3.8 |
| Gap | -2.5 |
| Office Depot | -2.5 |
| Home Depot | -5.0 |
| Borders | N/A |
| Circuit City Stores | N/A |
| Office Max | N/A |
(American Customer Satisfaction Index, 2014)
IV-Business Goals/Objectives
Balanced Score Card Approaches and SMART goals
|
Financial Perspective |
|||||||||||||||||||||||
| Objective | Measures | Target | Initiatives/SMART goals | ||||||||||||||||||||
| Increase Revenue/Assets | Revenue/Assets | Increase by 10% in next year | Making more efficient use of assets and shedding of inefficient assets | ||||||||||||||||||||
| Improve Revenue/Employee | Revenue/Employee | Improve this by 5% in next year | Use training and technology competence | ||||||||||||||||||||
Improve Return on Investment |
Return on Investment | Increase by 2% in next year | Decrease Operating costs, and use the economies of scale | ||||||||||||||||||||
|
Internal Business Processes Perspective |
|||
| Objective | Measures | Target | Initiatives/SMART goals |
| Reduce Admin Expense/Revenue | Admin Expense/Revenue | Decrease by 5% in next year | Employee training |
| Decrease the lead time to delivery of online orders | Mean lead time | Decline this by 10% in next year | Use technology for automatic packing |
| Decrease waiting time for counters | Mean waiting time | decrease by 10% in next year | Layout Change and add more checkout counters |
|
Learning & Growth Perspective |
|||
| Objective | Measures | Target | Initiatives/SMART goals |
| Increase hours of training per employee | Mean training hours for each employee | Increase by 5% in next year | Use consultancy |
| Decrease the turnover rate | Turnover rate | Decline this by 10% in next year | Job rotation and employee participation in decision making |
| Increasing use of view of employees | Empowerment Index | Increase by 10% in next year | Increase feedback mechanism and inclusion of views in decisions |
V-The Competition
One of the arguments which were put forward by the analysts for the bankruptcy of the company Toys R Us is the increasing trend of the market to buy toys online. The toy industry, its buyers, and target segment are quite distinct. The industry targets the children while the actual buyers of their products are adults who prefer discounts and lower prices. I have led the competitors like Amazon, Target, and Wal-Mart to attract these customers by providing discounts and the ease of their shopping experience. Even though Toys R Us has an online forum as well for the sale of toys, the company was unable to make sales as high as Amazon and Wal-Mart. The notable growing trend of the online shoppers has changed the structural preferences for the industry and has led to affect the retail industry as a whole. Payless Inc, Kmart, and Gymboree Inc have also become the prey of these preferences changes of the market-leading these to file for bankruptcy (Foadmin, 2018).
VI-Marketing Plans and Strategies
Marketing Mix
| Product
· The company is offering a product which is not frequently bought and is compared by price, style, and quality. Selective distribution channels are used The quality of the product is an important attribute Branding and packaging is attractive Private label Babies R Us can be expanded |
Price
The company uses competitive prices for its products The lower cost of supply gives it the edge at a lower cost of the product Pricing adjustment strategy is used for seasonal pricing Promotional pricing for special events is used Market penetration pricing is used |
| Promotion
Promotion targeted on holiday seasons Emails, postal service, social networks, banners, and electronic forums are used for advertising Personal Selling is used Free wrapping service, delivery service, and refund and exchange service are used |
Place
Physical stores and online store are used Omni channel distribution channels are used Selling direct strategies is being used |
VII-Target Market
Toys R Us target market is recognized by the age and gender of the customer; the market of 15 years to 64 years old. Their target market is children from age five to twelve years. The company has long believed in focusing on the everyday shopper. Thus the company targeted the parents looking for the perfect birthday gift for their child or the boy or girl looking to spend their allowance. Thus the target market also includes the parents as well, most noticeably the young parents. The products from the private label baby’s r we are targeted towards the young parents as well.
VIII-Strategic Position and Risk Assessment
SWOT Analysis
| Strengths
The company has reached across a wide spectrum of merchandise. The popularity and efficiency of the distribution network of the company are evident The company owns the Baby brand which has been popular among the market The company caters to toys for differently-abled kids as well |
Weaknesses
The company has a lack of unique offerings and differentiation strategy The company had to file for bankruptcy because of the online competition it faced The company is heavily dependent on the seasonal sales and holiday seasons The company does not have wide flexibility with the ownership controlling sponsors The company has not invested in its stores |
| Opportunities
The strategic alliances and joint ventures can provide with an opportunity The expansion of the private labels can benefit the company. The expansion into the emerging economies like India can aid as well The associations with charitable organizations The reorganization of the company after the liquidation and sale of the stores can lead to new doors |
Threats
The high competition of the retail industry has always been a threat The online retailers specifically are dominating the retail market The lack of fining of buyers for the international segments can lead to the liquidation of these remaining segments as well |
Description of Business Risk and Plan for Reducing These Risks
The company is moving ahead with its plan of shutting down the stores by starting to close 180 stores in the US. It is expected to be a starting phase of a more robust real estate cleans up by the company. The company has 880 stores in the US and shutting down of the stores which made losses will save its money. However, the company needs to become more relevant to the market (Thomas, 2018).
The company was carrying a lot of debt. Furthermore, the company was unable to invest and analyze its stores potential. The company did not prune the loss-making stores and also did not invest in the ones who were making money. It lost in making its stores cleaner, nicer and a destination for events. The company was unable to translate the joy of having a toy into tangible. The company also did not work hard on making a connection with the parents, its real market (Hirsch, 2018). These all problems and mistakes should be considered after reorganization.
IX-Keys to Success
Currently, the company is dedicated to engaging in settlement of its debts and for finding solutions to the coming payments. The company has been managing its payments for decades, but it seems that this might be a difficult time for the company to make these payments as the interest payments have consumed a huge portion of the EBITDA. The company has to make huge debt payments in the coming years, which seem to be equal to the potential sales of the company. The comparison showed that the company has to pay about one-fourth of its total debt in the coming two years. The profit, however, is not increasing as it should have. Thus, the key to success would be if the company is successful in its operations while adding new stores internationally, as the international revenue has been growing steadily in the past trends. It can lead the company to improve its balance sheet (Foadmin, 2018).
X-Operations Plan
Even though the company has filed for liquidation and it is going to shut down its stores in the US, it can still work on improving its profits and redeeming its position. The international company segment has been showing substantial growth in the past, even with its US segment reporting losses. The company believes it can grow its international presence specifically in the emerging markets who are witnessing growth in GDP. The company has doubled its store counts in 2017 and has expanded its store portfolio by 22% since 2012. The company has generated over $18 million of revenue in the licensed stores internationally.
|
|
Percentage of Net sales |
||||||||||||||||||||
| ($ In millions) | Fiscal 2016 |
Fiscal 2015 |
$ Change | Fiscal 2016 |
Fiscal 2015 |
Change | |||||||||||||||
| Domestic | $ | 2,393 | $ | 2,521 | $ | (128 | ) | 33.6 | % | 34.3 | % | (0.7 | )% | ||||||||
| International | 1,715 | 1,705 | 10 | 38.9 | % | 38.3 | % | 0.6 | % | ||||||||||||
| Toys “R” Us – Consolidated | $ | 4,108 | $ | 4,226 | $ | (118 | ) | 35.6 | % | 35.8 | % | (0.2 | )% | ||||||||
Even though the company showed immense downgrading in the domestic sales, its international segment has not been impacted as such. It shows that the company can use the international segments to achieve operational excellence.
XI-Technology Plan
It is also evident that the company has not been able to translate the online trend in the toy industry into its sales success until now. Even with having an online platform, the company has not yielded sales from the online medium greater than its competitors like Amazon, Wal-Mart. The company now needs to focus on the online channel for reaping the benefits of the opportunity provided by the new online trend of the market.
By strengthening its online channel, the company can make use of the coming holiday seasons to increase its sales and create a new reputation. Furthermore, the company should also work on incorporating technology for reducing its lead time and waiting time at the counters. The employees and staff should be well rehearsed and trained for the adopted technology.
XII-Management and Organization:
| Name | Title | Age |
| David Allen Brandon | Chairman and Chief Executive Officer | 65 |
| Andre A. Javes | President | — |
| Michael J. Short | Chief Financial Officer and Executive Vice President | 56 |
| Wolfgang Link | President of Europe | 49 |
| Kevin Macnab | President of International | 56 |
| Name | Primary Company | Age |
| David Allen Brandon | Toys “R” Us, Inc. | 65 |
| Richard A. Goodman | Adient plc | 69 |
| Wendy A. Silverstein | New York REIT, Inc. | 56 |
| Matthew S. Levin | Bain Capital Private Equity, LP | 51 |
| Joshua Bekenstein | Bain Capital, LP | 58 |
|
Committee Name |
Chairperson | Members |
| Audit Committee | Richard A. Goodman | 2 Executives |
(Bloomberg, 2018)
XIII- Community Involvement and Social Responsibility
The company believes that with global operations comes the global responsibility. The citizenship initiatives of the company are focused on the use of resources as a global retailer of making a substantial impact on the communities they serve and continuing to deliver joy through its products.
The company is focused on areas of diversity and inclusion, charitable giving, responsible sourcing, disaster aid and response, and product safety practices and standards (Toysrusinc.com, 2018).
The company responded to the challenge of retail building enlarged greenhouse emissions is well notable in the community. By facing this challenge, the company partnered with KKR Green Solutions platform for reducing its energy use in the facilities and aid in cost reduction and Greenhouse gas emissions (Green Solutions Platform, 2015).
XIV-Development
The company is focused on developing its online channel and putting major resources in this segment. It has not been able to reap the profits in this industry segment as like its competitors and is willing to go all-in this time to raise its revenues before the forthcoming debt payment.
| Measures | Target |
| Revenue/Assets | Increase by 10% in next year |
| Revenue/Employee | Improve this by 5% in next year |
| Return on Investment | Increase by 2% in next year |
| Revenue-International Segment | |
| Revenue-Online Segment |
XV-The Financials
Financial Objectives
Sales and Expense Forecast
| Sales & Expense Forecast | |||||
| 2017 | 2018 | 2019 | 2020 | ||
| Sales from International Segment | $ 4,409 | $ 4,850 | $ 5,335 | $ 5,868 | |
| Selling, general and administrative expenses | $ 3,480 | $ 1,330 | $ 1,463 | $ 1,609 | |
| Depreciation and amortization | $ 317 | $ 121 | $ 133 | $ 147 | |
| Other income, net | $ (149) | $ (57) | $ (63) | $ (69) | |
| Total operating expenses | $ 3,648 | $ 1,394 | $ 1,533 | $ 1,686 | |
Break-even Analysis
| Break-Even Analysis | |||
| 2018 | 2019 | 2020 | |
| Sales | $ 4,849.90 | $ 5,334.89 | $ 5,868.38 |
| Variable Cost | $ 2,839.49 | $ 3,123.44 | $ 3,435.78 |
| Contribution Margin | $ 2,010.41 | $ 2,211.45 | $ 2,432.60 |
| Fixed Cost | $ 1,393.76 | $ 1,533.14 | $ 1,686.45 |
| Net Income | $ 616.65 | $ 678.31 | $ 746.14 |
(Reuters, 2018)
Financial Statements and Ratios
| 2017 | 2018 | 2019 | 2020 | |
| Current Assets | $ 3,389 | $ 3,728 | $ 4,101 | $ 4,511 |
| Current Liabilities | $ 2,738 | $ 3,012 | $ 3,313 | $ 3,644 |
| Current Ratio | 1.24 | 1.24 | 1.24 | 1.24 |
| 2017 | 2018 | 2019 | 2020 | |
| Net Income | $ (29) | $ 126 | $ 188 | $ 255 |
| Total Assets | $ 6,908 | $ 7,599 | $ 8,359 | $ 9,195 |
| Return on Assets | (0.00) | 0.02 | 0.02 | 0.03 |
| 2017 | 2018 | 2019 | 2020 | |
| Total Debt | $ 8,068 | $ 8,875 | $ 9,762 | $ 10,739 |
| Total Equity | $ (1,292) | $ (1,421) | $ (1,563) | $ (1,720) |
| Debt to Equity Ratio | (6.24) | (6.24) | (6.24) | (6.24) |
| 2017 | 2018 | 2019 | 2020 | |
| Total Debt | $ 8,068 | $ 8,875 | $ 9,762 | $ 10,739 |
| Total Assets | $ 6,908 | $ 7,599 | $ 8,359 | $ 9,195 |
| D to A Ratio | 1.17 | 1.17 | 1.17 | 1.17 |
| 2017 | 2018 | 2019 | 2020 | |
| Interest Expense | $ (457) | $ (457) | $ (457) | $ (457) |
| Net Income | $ (29) | $ 126 | $ 188 | $ 255 |
| Interest Coverage Ratio | 0.06 | (0.28) | (0.41) | (0.56) |
| 2017 | 2018 | 2019 | 2020 | |
| Sales | $ 11,540 | $ 4,850 | $ 5,335 | $ 5,868 |
| Account Receivables | $ 255 | $ 281 | $ 309 | $ 339 |
| Receivable Turnover | 45.25 | 17.29 | 17.29 | 17.29 |
| 2017 | 2018 | 2019 | 2020 | |
| Cost of Goods Sold | $ 7,432 | $ 2,839 | $ 3,123 | $ 3,436 |
| Average Inventory | $ 2,476 | $ 2,724 | $ 2,996 | $ 3,296 |
| Inventory Turnover | 3.00 | 1.04 | 1.04 | 1.04 |
| 2017 | 2018 | 2019 | 2020 | |
| Net Income | $ (29) | $ 126 | $ 188 | $ 255 |
| Net Sales | $ 11,540 | $ 4,850 | $ 5,335 | $ 5,868 |
| Net Margin | (0.00) | 0.03 | 0.04 | 0.04 |
| 2017 | 2018 | 2019 | 2020 | |
| Total Long Term Debt | $ 4,642 | $ 5,106 | $ 5,617 | $ 6,179 |
| Total Assets | $ 6,908 | $ 7,599 | $ 8,359 | $ 9,195 |
| D to A Ratio | 67% | 67% | 67% | 67% |
Income Statement: Annual
Toys “R” Us, Inc. and Subsidiaries
Consolidated Statements of Operations
| Fiscal Years Ended | ||||||||||||
| (In millions) | January 28, 2017 |
January 30, 2016 |
January 31, 2015 |
|||||||||
| Net sales | $ | 11,540 | $ | 11,802 | $ | 12,361 | ||||||
| Cost of sales | 7,432 | 7,576 | 7,931 | |||||||||
| Gross margin | 4,108 | 4,226 | 4,430 | |||||||||
| Selling, general and administrative expenses | 3,480 | 3,593 | 3,915 | |||||||||
| Depreciation and amortization | 317 | 343 | 377 | |||||||||
| Other income, net | (149 | ) | (88 | ) | (53 | ) | ||||||
| Total operating expenses | 3,648 | 3,848 | 4,239 | |||||||||
| Operating earnings | 460 | 378 | 191 | |||||||||
| Interest expense | (457 | ) | (429 | ) | (451 | ) | ||||||
| Interest income | 2 | 3 | 4 | |||||||||
| Earnings (loss) before income taxes | 5 | (48 | ) | (256 | ) | |||||||
| Income tax expense | 34 | 76 | 32 | |||||||||
| Net loss | (29 | ) | (124 | ) | (288 | ) | ||||||
| Less: Net earnings attributable to non-controlling interest | 7 | 6 | 4 | |||||||||
| Net loss attributable to Toys “R” Us, Inc. | $ | (36 | ) | $ | (130 | ) | $ | (292 | ) | |||
Income Statement: Three-Year Projection
| Toys “R” Us, Inc. and Subsidiaries | |||||
| Consolidated Statements of Operations | |||||
| (In millions) | 2017 | Column1 | 2018 | 2019 | 2020 |
| Net sales | $ 11,540 | ||||
| Domestic | $ 7,131 | 62% | $ 4,850 | $ 5,335 | $ 5,868 |
| International | $ 4,409 | 38% | |||
| Cost of sales | $ 7,432 | $ 2,839 | $ 3,123 | $ 3,436 | |
| Gross margin | $ 4,108 | $ 2,010 | $ 2,211 | $ 2,433 | |
| Selling, general and administrative expenses | $ 3,480 | $ 1,330 | $ 1,463 | $ 1,609 | |
| Depreciation and amortization | $ 317 | $ 121 | $ 133 | $ 147 | |
| Other income, net | $ (149) | $ (57) | $ (63) | $ (69) | |
| Total operating expenses | $ 3,648 | $ 1,394 | $ 1,533 | $ 1,686 | |
| Operating earnings | $ 460 | $ 617 | $ 678 | $ 746 | |
| Interest expense | $ (457) | $ (457) | $ (457) | $ (457) | |
| Interest income | $ 2 | $ 1 | $ 1 | $ 1 | |
| Earnings (loss) before income taxes | $ 5 | $ 160 | $ 222 | $ 290 | |
| Income tax expense | $ 34 | $ 34 | $ 34 | $ 35 | |
| Net loss/Income | $ (29) | $ 126 | $ 188 | $ 255 | |
| Less: Net earnings attributable to non-controlling interest | $ 7 | $ 7 | $ 7 | $ 8 | |
| Net loss attributable to Toys “R” Us, Inc. | $ (36) | $ 119 | $ 181 | $ 247 | |
Cash-Flow Projection: Monthly
| Projections for Cash Flow Statement | 2018 | ||||||||||||
| (In millions) | 2017 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec |
| Net cash (used in) provided by operating activities | -1 | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) | (0.09) |
| Net cash used in investing activities | -210 | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) | (19.25) |
| Net cash provided by (used in) financing activities | 81 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 | 7.43 |
| Effect of exchange rate changes on Cash and cash equivalents | 16 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 | 1.47 |
| Net (decrease) increase during the period in Cash and cash equivalents | -114 | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) | (10.45) |
Cash Flow: One-Year Projection
| Projections for Cash Flow Statement | ||
| (In millions) | 2017 | 2018 |
| Net cash (used in) provided by operating activities | -1 | -1.1 |
| Net cash used in investing activities | -210 | -231 |
| Net cash provided by (used in) financing activities | 81 | 89.1 |
| Effect of exchange rate changes on Cash and cash equivalents | 16 | 17.6 |
| Net (decrease) increase during the period in Cash and cash equivalents | -114 | -125.4 |
Balance Sheet: Annual
Toys “R” Us, Inc. and Subsidiaries
Consolidated Balance Sheets
| (In millions – except share amounts) | January 28, 2017 |
January 30, 2016 |
||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 566 | $ | 680 | ||||
| Accounts and other receivables | 255 | 225 | ||||||
| Merchandise inventories | 2,476 | 2,270 | ||||||
| Prepaid expenses and other current assets | 92 | 113 | ||||||
| Total current assets | 3,389 | 3,288 | ||||||
| Property and equipment, net | 3,067 | 3,163 | ||||||
| Goodwill | 64 | 64 | ||||||
| Deferred tax assets | 129 | 96 | ||||||
| Restricted cash | 54 | 52 | ||||||
| Other assets | 205 | 247 | ||||||
| Total Assets | $ | 6,908 | $ | 6,910 | ||||
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 1,695 | $ | 1,699 | ||||
| Accrued expenses and other current liabilities | 897 | 994 | ||||||
| Income taxes payable | 27 | 32 | ||||||
| Current portion of long-term debt | 119 | 73 | ||||||
| Total current liabilities | 2,738 | 2,798 | ||||||
| Long-term debt | 4,642 | 4,612 | ||||||
| Deferred tax liabilities | 75 | 64 | ||||||
| Deferred rent liabilities | 342 | 345 | ||||||
| Other non-current liabilities | 271 | 245 | ||||||
| Temporary Equity | 132 | 111 | ||||||
| Stockholders’ Deficit: | ||||||||
| Common stock (par value $0.001 and $0.001; shares authorized 65,000,000 and 60,000,000; shares outstanding 49,353,943 and 49,347,672 at January 28, 2017 and January 30, 2016, respectively) | — | — | ||||||
| Treasury stock | — | — | ||||||
| Additional paid-in capital | 72 | 67 | ||||||
| Accumulated deficit | (1,124 | ) | (1,062 | ) | ||||
| Accumulated other comprehensive loss | (240 | ) | (270 | ) | ||||
| Total Stockholders’ Deficit | (1,292 | ) | (1,265 | ) | ||||
| Total Liabilities, Temporary Equity, and Stockholders’ Deficit | $ | 6,908 | $ | 6,910 | ||||
Balance Sheet: One-Year Projection
| Toys “R” Us, Inc. and Subsidiaries | |||||
| Consolidated Balance Sheets | |||||
| (In millions – except share amounts) | 2017 | 2018 | 2019 | 2020 | 2021 |
| ASSETS | |||||
| Current Assets: | |||||
| Cash and cash equivalents | $ 566 | $ 623 | $ 685 | $ 753 | $ 829 |
| Accounts and other receivables | $ 255 | $ 281 | $ 309 | $ 339 | $ 373 |
| Merchandise inventories | $ 2,476 | $ 2,724 | $ 2,996 | $ 3,296 | $ 3,625 |
| Prepaid expenses and other current assets | $ 92 | $ 101 | $ 111 | $ 122 | $ 135 |
| Total current assets | $ 3,389 | $ 3,728 | $ 4,101 | $ 4,511 | $ 4,962 |
| Property and equipment, net | $ 3,067 | $ 3,374 | $ 3,711 | $ 4,082 | $ 4,490 |
| Goodwill | $ 64 | $ 70 | $ 77 | $ 85 | $ 94 |
| Deferred tax assets | $ 129 | $ 142 | $ 156 | $ 172 | $ 189 |
| Restricted cash | $ 54 | $ 59 | $ 65 | $ 72 | $ 79 |
| Other assets | $ 205 | $ 226 | $ 248 | $ 273 | $ 300 |
| Total Assets | $ 6,908 | $ 7,599 | $ 8,359 | $ 9,195 | $ 10,114 |
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT | |||||
| Current Liabilities: | |||||
| Accounts payable | $ 1,695 | $ 1,865 | $ 2,051 | $ 2,256 | $ 2,482 |
| Accrued expenses and other current liabilities | $ 897 | $ 987 | $ 1,085 | $ 1,194 | $ 1,313 |
| Income taxes payable | $ 27 | $ 30 | $ 33 | $ 36 | $ 40 |
| Current portion of long-term debt | $ 119 | $ 131 | $ 144 | $ 158 | $ 174 |
| Total current liabilities | $ 2,738 | $ 3,012 | $ 3,313 | $ 3,644 | $ 4,009 |
| Long-term debt | $ 4,642 | $ 5,106 | $ 5,617 | $ 6,179 | $ 6,796 |
| Deferred tax liabilities | $ 75 | $ 83 | $ 91 | $ 100 | $ 110 |
| Deferred rent liabilities | $ 342 | $ 376 | $ 414 | $ 455 | $ 501 |
| Other non-current liabilities | $ 271 | $ 298 | $ 328 | $ 361 | $ 397 |
| Temporary Equity | $ 132 | $ 145 | $ 160 | $ 176 | $ 193 |
| Stockholders’ Deficit: | |||||
| Common stock (par value $0.001 and $0.001; shares authorized 65,000,000 and 60,000,000; shares outstanding 49,353,943 and 49,347,672 at January 28, 2017 and January 30, 2016, respectively) | — | ||||
| Treasury stock | — | ||||
| Additional paid-in capital | $ 72 | $ 79 | $ 87 | $ 96 | $ 105 |
| Accumulated deficit | $ (1,124) | $ (1,236) | $ (1,360) | $ (1,496) | $ (1,646) |
| Accumulated other comprehensive loss | $ (240) | $ (264) | $ (290) | $ (319) | $ (351) |
| Total Stockholders’ Deficit | $ (1,292) | $ (1,421) | $ (1,563) | $ (1,720) | $ (1,892) |
| Total Liabilities, Temporary Equity and Stockholders’ Deficit | $ 6,908 | $ 7,599 | $ 8,359 | $ 9,195 | $ 10,114 |
List and Sources of Funds
| Payments Due By Period | |||||||||||||||||||||
| (In millions) | Fiscal 2017 | Fiscals
2018 & 2019 |
Fiscals
2020 & 2021 |
Fiscals
2022 and thereafter |
Total | ||||||||||||||||
| Operating leases (1) | $ | 507 | $ | 842 | $ | 598 | $ | 793 | $ | 2,740 | |||||||||||
| Less: sub-leases to third parties | 12 | 21 | 14 | 15 | 62 | ||||||||||||||||
| Net operating lease obligations | 495 | 821 | 584 | 778 | 2,678 | ||||||||||||||||
| Capital lease and financing obligations | 31 | 49 | 34 | 46 | 160 | ||||||||||||||||
| Long-term debt (2) | 109 | 2,148 | 2,402 | — | 4,659 | ||||||||||||||||
| Interest payments (2)(3)(4) | 366 | 627 | 248 | — | 1,241 | ||||||||||||||||
| Purchase obligations (5) | 1,282 | — | — | — | 1,282 | ||||||||||||||||
| Other (6) | 211 | 249 | 76 | 39 | 575 | ||||||||||||||||
| Total contractual obligations (7) | $ | 2,494 | $ | 3,894 | $ | 3,344 | $ | 863 | $ | 10,595 | |||||||||||
(Toys R Us, 2017)
Assumptions Sheet
| Assumptions | Impact |
| The Projections are based on buying of the stores | High |
| The sales and expenses are projected at 10% increment in the international segment | Mild |
| It is assumed that the international segment will not liquidate | High |
References:
American Customer Satisfaction Index. (2014). Benchmarks By Company. Retrieved May 19, 2018, from https://www.theacsi.org/index.php?option=com_content&view=article&id=149&catid=&Itemid=214&c=Toys+R+Us
Bloomberg. (2018, May 19). Company Overview of Toys “R” Us, Inc. Retrieved May 19, 2018, from https://www.bloomberg.com/research/stocks/private/people.asp?privcapId=190358
Foadmin. (2018, May 1). Toys“R”Us, re-birth or last breath? Retrieved May 19, 2018, from https://benchmark.televisory.com/blogs/-/blogs/toys-r-us-re-birth-or-last-breath-
Green Solutions Platform. (2015). Enhancing Lighting Efficiency, Lowering Operating Costs. Retrieved May 19, 2018, from https://green.kkr.com/results/toys-r-us/
Hirsch, L. (2018, Match 16). Toys R Us built a kingdom and the world’s biggest toy store. Then, they lost it. Retrieved May 19, 2018, from https://www.cnbc.com/2019/01/26/toys-r-us-built-a-kingdom-and-the-worlds-biggest-toy-store-then-they-lost-it.html
Reuters. (2018, May 18). Toys R Us. Retrieved May 19, 2018, from https://www.reuters.com/finance/stocks/overview/IPO-TOYS.N
Thomas, L. (2018, January 24). The road ahead for Toys R Us likely includes even more store closures. Retrieved May 19, 2018, from https://www.cnbc.com/2018/01/24/the-road-ahead-for-toys-r-us-likely-includes-even-more-store-closures.html
Toys R Us. (2017). Annual Report 10K 2017. Retrieved May 18, 2018, from https://www.toysrusinc.com/investors/financial-reports/report-detail/financial-document-detail?id=11525623&vid=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTExNTI1NjIzJkRTRV
E9MSZTRVE9JlNRREVTQz1TRUNUSU9OX0JPRFkmZXhwPSZzdWJzaWQ9NTc%3D
Toys R Us Inc. (2018, March 15). Restructuring Information. Retrieved May 18, 2018, from https://www.toysrusinc.com/restructuring
Toysrusinc.com. (2018, May 18). Corporate Responsibility. Retrieved May 19, 2018, from https://www.toysrusinc.com/corporate-responsibility
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