“We’re currently finding out who’s the big person and who’s the little person at the dinner table.” Plus, its Dec. 20 conference call gets fiery.
Via facebook.com
Toys 'R' Us has had a tough go of it in recent years, battling against Wal-Mart, Target and Amazon for toy sales. Its other challenge? The drop in U.S. birth rates once the recession hit in 2008.
"We all know the birth rate hit a pretty big air pocket here several years ago, and the kids who weren't born in 2008 and 2009 are not buying 4th and 5th birthday toys and Christmas presents this year, so there is some overall pressure on (the toy) industry," Clay Creasey, the chain's chief financial officer, said on a Dec. 20 call discussing third-quarter earnings. "That mouse is entering the toy-buying part of the snake, if you will."
The U.S. birth rate declined in both 2008 and 2009 after hitting a record high in 2007, potentially driven by the nation's economic woes. Because Toys 'R' Us gets such a significant portion of its business from purchases for newborns and children up to four years old, that's affected sales. It's also caused vendors to cut the chain less slack on items it's forced to sell at a discount.
"It's kind of like kids at the dinner table," Creasey said of the company's cut in what's known as vendor allowances. "When there's enough to eat, everybody eats, and when there's not quite enough to eat, then the big people get to eat and the little people don't. So we're currently finding out who's the big person and who's the little person at the dinner table... the final analysis is eveybody's going to fall a little short of what they wish they could get, and vis-a-vis vendors that often manifests itself in changes in allowance."
That adds extra pressure on Toys 'R' Us to knock it out of the park in the fourth quarter, which is incredibly important for its business —43% of its annual sales occur in the period. The chain is small relative to its discount competitors, with about $13.5 billion in annual revenue last year, though it says it's still the world's biggest standalone seller of toys. Less than 10% of its sales come from the internet, according to the latest call.
via IFTTT
No comments:
Post a Comment